• Audere Research

Weekly FX Outlook February 1st



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GB Pound

Sterling achieved new highs against Euro and Dollar.


Movements

GBPUSD opened at 1.3698 and traded broadly sideways near its two and a half year high, moving within a tight range (1.3610-1.3750) before closing at 1.3737 for a little gain of 0.28%.


GBPEUR opened at 1.1251 and gradually moved higher to reach a new 8-month high (1.1346). It ended the week with a positive performance of 0.66% to close at 1.1325.


Movement rationale

Despite the UK being the first country in Europe to pass the 100,000 COVID-19 death toll, Sterling remained well supported and advanced against all major rivals currencies. This was probably driven by the UK’s leading vaccination campaign of G10 countries and a rapid fall in COVID cases registered last week, suggesting COVID infections have likely peaked. Positive GBP sentiment drove the currency to new highs against major currencies. On the data front, UK employment data was released last Monday, with the unemployment rate hitting its highest level in nearly 5 years as the country plunged into a second national lockdown. Nevertheless, the figures, at 5% were lower than expected.

Week ahead

Market participants will mainly be focused on the BoE’s meeting on Thursday, with the UK economic data calendar including the following:


Calendar

Monday 9:30am | Markit Manufacturing PMI (Jan)

Wednesday 9:30am | Markit Services PMI(Jan)

Thursday 12pm | BoE Interest Rate Decision

US Dollar


The US Dollar traded firmed.


Movements

EURUSD opened at 1.2173 and traded lower during the first half of the week to reach 1.2060 on Wednesday. It then recovered most of the losses and closed with a modest loss of 0.36% at 1.2129.


GBPUSD opened at 1.3698 and traded broadly sideways all week, moving in a tight range (1.3610-1.3750) and closed at 1.3737 for a small gain of 0.28%.


Movement rationale

The Dollar started the week on a positive tone, strengthening amid concerns around potential blockades to the Biden administration’s $1.9trn stimulus plan. Poor corporate earning’s reports, growing concerns around new variants of the Coronavirus and delays with distributions of the vaccine in US and Europe pushed the Dollar Index to a 5-week high on Wednesday. A deterioration of the global risk environment, which saw Asian and European equities experiencing four days of losses, also favoured the Greenback. Meanwhile, U.S. COVID cases and hospitalizations continued to drop, improving the U.S. economic outlook. As expected, the FOMC made no changes to its monetary policy.


Week ahead

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


Calendar

Monday 3pm | ISM Manufacturing PMI (Jan)

Wednesday 1:15pm | ADP Employment Change (Jan), ISM Services PMI (Jan)

Thursday 1:30pm | Initial Jobless Claims (Jan 29)

Friday 1:30pm | Nonfarm Payrolls (Jan)


Euro


The Euro traded broadly lower.


Movements

EURUSD opened at 1.2173 and traded lower during the first half of the week to reach 1.2060 on Wednesday. It then recovered most of the losses and closed with a limited loss of 0.36% at 1.2129.


GBPEUR opened at 1.1251 and gradually moved higher to reach a new 8-month high (1.1346). It ended the week with a positive performance of 0.66% at 1.1325.


Movement rationale

The Euro remains under pressure, with its FX price actions reflecting the growing disparity in vaccine rollout in EU against US and the UK. Europe is lagging on vaccinations after problems at the Belgium-based facilities undermined production. The EU/AstraZeneca dispute further weighted on the Euro. Some ECB policy makers also delivered a dovish speech last week, expressing some levels of discomfort with the pace and extent of the recent Euro rally which could undermine inflation.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Monday 7am | Retail Sales (Dec), Unemployment Rate (Dec)

Tuesday 10 am | Gross Domestic Product (Q4)

Wednesday 10 am | Consumer Price Index (Jan), Markit PMI Composite (Jan)

Thursday 10am | Retail Sales (Dec)


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