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Weekly FX Outlook August 2nd



GB Pound


Sterling had a strong week.


Movements

GBPUSD opened at 1.3748 and strengthened throughout the week. There was some weakness on Friday as USD rallied but it closed higher at 1.3911 (+1.19%).


GBPEUR opened at 1.1670 and had a fairly steady week closing slightly up at 1.1715 (+0.38%).


Movement rationale

It was a strong week for the pound as USD struggled (Bloomberg USD Index fell 0.8%) while the UK economic outlook continued to strengthen as COVID cases appear under control and the UK eases travel restrictions for vaccinated US and EU travellers. This should help the airlines as well as UK tourism and retail sectors.



Week ahead

The UK economic data calendar includes the following:


Calendar

Thursday 11.00am | BoE meeting and Monetary Policy Report

Thursday 11.30am | Governor Bailey’s speech


US Dollar


The Dollar had a soft week.


Movements

EURUSD began the week at 1.1787 and like the Pound, despite USD strength on Friday, closed up at 1.1873 (+0.73%).


GBPUSD opened at 1.3748 and strengthened throughout the week. There was some weakness on Friday as USD rallied but it closed higher at 1.3911 (+1.19%).


Movement rationale

USD was weak - US new home sales and durable goods orders disappointed, as did US GDP which was up 6.5% QoQ but below market expectations. On Thursday, FOMC minutes suggest tapering is on the horizon, potentially as soon as Q4 this year, hitting the Dollar hard. It showed some strength on Friday as risk sentiment waned slightly but over the week USD was significantly down.


Week ahead

The US economic calendar including the following:


Calendar

Monday 2:00pm | ISM Manufacturing PMI (Jul)

Tuesday 2:00pm | ISM Services PMI (Jul)

Thursday 12:30pm | Initial Jobless Claims (Jul 30)

Friday 12.30pm | Nonfarm Payrolls (Jul)


Euro


The Euro had a decent week.


Movements

EURUSD began the week at 1.1787 and like the Pound, despite USD strength on Friday, closed up at 1.1873 (+0.73%).


GBPEUR opened at 1.1670 and had a fairly steady week closing slightly up at 1.1715 (+0.38%).


Movement rationale

News wise it was a fairly light week for the Euro, although a preliminary Q2 EU GDP estimate of 2% QoQ was released Friday, beating expectations of 1.5% (note that YoY GDP is up 13.7%). This data point wasn’t enough to offset USD strength on Friday as risk-off sentiment caused Dollar buying, perhaps it was already price in. Other news included a slight reduction in Euro area unemployment from 8% to 7.7%.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Wednesday 9:00am | Retail Sales (Jun)


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