• Audere Research

Weekly FX Outlook August 16th


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GB Pound


Sterling had a choppy week.


Movements

GBPUSD opened at 1.3852 and traded with a negative bias until Friday. It then recovered to close broadly unchanged at 1.3840 (-0.09%).


GBPEUR opened at 1.1787 and traded higher during the first part of the week, hitting an 18-month high at 1.1836 on Wednesday. It then gave back all gains and closed lower at 1.1743 (-0.37%).


Movement rationale

Despite a quiet week on the data front for Sterling, the currency remained on the front foot, particularly against the Euro, during the first part of the week. Britain's GDP figures released last Tuesday showed 4.8% QoQ growth and helped Sterling make gains versus rival currencies. Further, optimism over the vaccination programme and the latest comments from the BoE, “some modest tightening of monetary policy is likely to be necessary” over the next 2 years to keep inflation under control, supported the currency. However, Brexit and COVID-19 weighed on the Pound toward the end of the week, as Brexit implications continue to impact British trade while rising UK infections (33k new cases were reported on Thursday, the highest level in almost a month) worried investors.


Week ahead

The UK economic data calendar includes the following:


Calendar

Tuesday 7am | ILO Unemployment Rate (Jun)

Wednesday 7am | Consumer Price Index (Jul)

Friday 7am | Retail Sales (Jul)


US Dollar


The Dollar had a volatile week.


Movements

EURUSD began the week at 1.1751 and moved in a narrow range most of the week, closing slightly higher at 1.1785 (+0.29%).


GBPUSD opened at 1.3852 and traded with a negative bias until Friday. It then recovered to close broadly unchanged at 1.3840 (-0.09%).


Movement rationale

The Dollar started the week moving higher, partly due to ongoing rising inflation in the US and expectations that the Federal Reserve will taper its asset purchasing programme sooner rather than later. The US currency then traded in line with the flow of economic data and retreated from recent highs, as soft CPI figures and disappointing US consumer confidence (sliding to the lowest level since 2011 amid an acceleration in COVID-19 infections) seems to be cooling inflation pressure and giving the Fed room to remain accommodative for longer.


Week ahead

The US economic calendar includes the Fed minutes of its last policy meeting as main event, while also reporting the following:


Calendar

Tuesday 1:30pm | Retail Sales (Jul)

Wednesday 7pm | FOMC Minutes

Thursday 1:30pm | Initial Jobless Claims (Aug 13)


Euro


The Euro recorded new multi-month lows against Sterling and Dollar.


Movements

EURUSD began the week at 1.1751 and moved in a narrow range most of the week, closing slightly higher at 1.1785 (+0.29%).


GBPEUR opened at 1.1787 and traded higher during the first part of the week, hitting an 18-month high at 1.1836 on Wednesday. It then gave back all gains and closed lower at 1.1743 (-0.37%).


Movement rationale

Concerns about the impact of the Delta variant and whether further lockdowns may be imposed in some European countries negatively affected the single currency last week, with GBP/EUR hitting its highest level in in 18 months (1.1836) and EUR/USD reaching a 4-month low (1.1720). The Euro was also penalised by a sharp fall in German investor confidence, with the ZEW indicator falling for the third month in a row. Concerns for the German economy include a possible fourth wave this autumn and an economic slowdown in China.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 10am | Gross Domestic Product (Q2)

Wednesday 10am | Consumer Price Index (Jul)


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