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Weekly FX Outlook December 14th



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GB Pound

Sterling had another volatile week.


Movements

GBPUSD started the week at 1.3282 and initially moved lower before recovering and touching a high of 1.3480 on Wednesday. It then restarted the downward movement to reach 1.3140 on Friday prior to recovering once again to close with a weekly gain of 0.76% at 1.3383.


GBPEUR opened at 1.0978 and traded in a wide range, touching a high of 1.1130 and a low at 1.0835 before closing the week with a small gain of 0.32 % at 1.1013.


Movement rationale

It was another volatile week for Sterling, which reached an implied volatility of 25% on Wednesday, the highest since March. After starting on a soft tone, with no progress on Brexit reported over the previous weekend, GBP moved higher during the first half of the week amid news that controversial Brexit clauses had been dropped, raising hopes of a deal. However, with no further progress and PM Johnson stating that there is “a strong possibility” that there might not be a deal, the UK currency came once again under pressure, losing ground on Thursday-Friday before it rallied toward the end of the week as EU and UK agreed to continue talks this week.


Week ahead

Sterling volatility is likely to be remain high with the currency responsive to Brexit news and the following main economic events:


Calendar

Tuesday 8am | ILO Unemployment Rate (Oct)

Wednesday 8am | Consumer Price Index (Nov), Markit Services PMI (Dec)

Thursday 8am | BoE Interest Rate Decision

Friday 8am | Retail Sales (Nov)


US Dollar

The US Dollar had a choppy week.


Movements

EURUSD traded sideways, it opened at 1.2099 and moved in a tight range (1.2060-1.2160) to close slightly higher at 1.2151 (+0.43%).


GBPUSD started the week at 1.3282 and initially moved lower before recovering and touching a high of 1.3480 on Wednesday. It then restarted the downward movement to reach 1.3140 on Friday prior to recovering once again to close with a weekly gain of 0.76% at 1.3383.


Movement rationale

After a good start, with rising demand for safe havens following headlines of US sanctioning Chinese officials, the USD later lost some ground. Positive news on COVID vaccines and hopes for more fiscal stimulus, with the Trump administration proposing a $916 billion package after Democrats rejected a smaller plan, weighed on the currency. The USD then turned higher again on Wednesday as negative risk sentiment hit the market, but the movement was short lived. The greenback edged lower again toward the end of the week as US jobless claims were better than expected and vaccine progress boosted risk appetite.


Week ahead

With US fiscal discussions driving USD movements, the currency is expected to have a relatively volatile week ahead. The following main events having the potential to influence financial markets:


Calendar

Tuesday 3:15pm | Industrial Production (Nov)

Wednesday 2:30pm | Retail Sales (Nov), 8pm | Fed Interest Rate Decision

Thursday 2:30pm | Initial Jobless Claims (Dec 11)


Euro

The Euro had a firm week.


Movements

EURUSD traded sideways, opened at 1.2099 and moved in a tight range (1.2060-1.2160) to close slightly higher at 1.2151 (+0.43%).


GBPEUR opened at 1.0978 and traded in a wide range, touching a high of 1.1130 and a low at 1.0835 before closing the week with a modest gain of 0.32 % at 1.1013.


Movement rationale

The Euro consolidated previous gains, especially versus the Dollar, recording a relatively quiet week. Key news was the approval by EU leaders of a $2.2 trillion budget and stimulus package, with Hungary and Poland finally removing the veto on the plan. ECB met for its monthly policy meeting on Thursday and agreed on expanding and extending its bond buying programme as the second wave of lockdown measures weighs on the Bloc’s recovery. Eurozone GDP rose 12.5% in Q3 as demand rebounded after the first lockdown measures were eased over the summer. GDP is now 4.4% below the pre-coronavirus peak.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Monday 11am | Industrial Production (Oct)

Wednesday 10am | Markit PMI Composite (Dec)

Thursday 11am | Consumer Price Index (Nov)

Friday 10am | IFO – Business Climate (Dec)


Call +44 (0) 203 884 992 to discuss further with an advisor.

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