• Audere Research

Weekly FX Outlook February 15th



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GB Pound

Sterling continues the move higher.


Movements

GBPUSD opened at 1.3707 and steadily moved higher during the first part of the week. It then temporary gave back part of the gain before resuming the upward movement on Friday and hitting a new multi-year high at 1.3898, closing the week with a strong performance (+1.39%) at 1.3898.


GBPEUR opened at 1.1395 and remained relatively quiet during the first part of the week, trading in a tight range (1.1370-1.1420). It then appreciated toward the end of the week, touching a new 9-month high at 1.1460 and closed at 1.1447 (+0.45%).


Movement rationale

Sterling keeps gaining ground versus rival currencies, amid a positive risk environment, with the currency maintaining high regard to investor sentiment and the equity market. Furthermore, the improved outlook for the UK economy, which grew above expectations in December at 1.2% (avoiding registering a technical recession at the end of last year), supported the Pound. While Britain and its currency benefited for signing of the UK-EU trade deal in December, a more recent boost is driven by the UK leading the race to vaccination, which could give the country a major economic advantage compared to other countries.


Week ahead

The UK economic data calendar includes the following:


Calendar

Wednesday 7am | Consumer Price Index (Jan)

Friday 9:30am | Markit Services PMI (Feb), Retail Sales (Jan)

US Dollar


The US Dollar resumed a declining trend.


Movements

EURUSD opened at 1.2028 and regained some ground from recent losses, gradually rising back above 1.21 in the first half of the week. It then consolidated to close with a decisive gain of 0.94% at 1.2141.


GBPUSD opened at 1.3707 and steadily moved higher during the first part of the week. It then temporary gave back part of the gain before resuming the upward movement on Friday and hitting a new multi-year high at 1.3914, closing the week with a strong performance (+1.39%) at 1.3898.


Movement rationale

The Dollar resumed its downtrend against major rival currencies, declining for four-straight sessions before finding some support on Friday. The broad-based weakness was in part driven by expectations surrounding the global recovery that eases demand for haven assets like the USD, as well as increased US stimulus hopes. Moreover, a dovish tone by Fed Chair Powell, stressing that US rates will stay low for a while due to the gloomy employment outlook and lower inflation concerns further weighed on the Greenback. On the data front, after several weeks of encouraging figures, jobless claims disappointed the market, with a rise to 793k.


Week ahead

USD is expected to have a relatively volatile week ahead, with a following economic agenda:


Calendar

Wednesday 7pm | FOMC Minutes, Retail Sales (Jan)

Thursday 1:30pm | Initial Jobless Claims (Feb 12)

Friday 2:45pm | Markit PMI Composite (Feb)


Euro


The Euro had a quiet week.


Movements

EURUSD opened at 1.2028 and regained some ground from recent losses, gradually rising back above 1.21 in the first half of the week. It then consolidated to close with a decisive gain of 0.94% at 1.2141.


GBPEUR opened at 1.1395 and remained relatively quiet during the first part of the week, trading in a tight range (1.1370-1.1420). It then appreciated toward the end of the week, touching a new 9-month high at 1.1460 and closed at 1.1447 (+0.45%).


Movement rationale

With a light economic agenda, the single currency was relatively calm last week, regaining some ground versus the Dollar but hitting new lows to the Pound. While the Euro has been under pressure in the past few weeks due to a slow rollout of the COVID vaccine, there are now signs the European countries are starting to ramp up their respective vaccination programmes, offering some support to the currency. In a report published last Thursday the European commission said there was “light at the end of the tunnel”, lowering the Euro zone growth forecast to 3.8% this year as coronavirus restrictions drag, but turning more positive for the 2022 outlook.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Monday 10am | Industrial Production (Dec)

Tuesday 10am | Gross Domestic Product (Q4), ZEW Survey – Economic Sentiment (Feb)

Thursday 3pm | Consumer Confidence (Feb)

Friday 9am | Markit PMI Composite (Feb)


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