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Weekly FX Outlook February 22nd




GB Pound

Sterling keeps the positive momentum, reaching 1.40 against the Dollar.


Movements

GBPUSD opened at 1.3898 and after losing some ground during the first half of the week, headed higher, breaking the 1.40 barrier on Friday. It ended the week with a gain of 0.63% at 1.3985.


GBPEUR opened at 1.1447 and steadily moved higher, touching a new 11-month high at 1.1578 before closing the week at 1.1549 (+0.89%)


Movement rationale

The COVID vaccination campaign continues to prove a barometer for sterling's movements, with the UK currency hitting new highs versus the Dollar (breaking the important level of 1.40) and the Euro (moving back above 1.15 for the first time since April last year). On the data front, UK inflation moved slightly higher, with rising prices for food, transport and household goods helping to push inflation up 0.7% on a yearly basis. Sterling’s rally also continued Friday, despite weaker than expected retail sales data, with the figures showing an 8% contraction last month as UK’s third lockdown hit the economy.


Week ahead

The UK economic data calendar includes the following:


Calendar

Tuesday 7am | ILO Unemployment Rate (Dec)

US Dollar


The US Dollar has a choppy week.


Movements

EURUSD remains relatively trendless, having opened at 1.2141 and first moving down to 1.2020 on Wednesday before recovering and closing the week broadly unchanged at 1.2109 (-0.27%).


GBPUSD opened at 1.3898 and after losing some ground during the first half of the week, headed higher, breaking the 1.40 barrier on Friday. It ended the week with a gain of 0.63% at 1.3985.


Movement rationale

The USD started the week on a positive note, supported by higher bond yields (10-year US Treasury has risen to a one year high) and positive data from the Retails Sales activity in US, with the figures decisively beating market estimates, showing an impressive growth of 5.3% m/m versus 1.1% projected. This will likely be boosting inflationary expectations and raising questions as to whether $1.9 trillion of fiscal stimulus is required. However, the positive USD trend was short-lived, with the Greenback giving back all gains during the second half of the week, likely caused by the FOMC minutes, which reiterated Fed’s stance of keeping interest rates low (and continuing bond purchases at the same pace for “some time”) and negative weekly US job figures on Thursday.


Week ahead

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


Calendar

Tuesday 3pm | Consumer Confidence (Feb)

Thursday 1:30pm | Initial Jobless Claims (Feb 19), Durable Goods Orders (Jan), GDP Annualized (Q4)

Friday 2:45pm | Michigan Consumer Sentiment Index (Feb)


Euro


The Euro remains under pressure despite some positive economic data.


Movements

EURUSD remains relatively trendless, having opened at 1.2141 and first moving down to 1.2020 on Wednesday before recovering are closing the week broadly unchanged at 1.2109 (-0.27%).


GBPEUR opened at 1.1447 and steadily moved higher, touching a new 11-month high at 1.1578 before closing the week at 1.1549 (+0.89%)


Movement rationale

The Euro continues its current trend, hitting new lows versus the Pound, while range-trading versus the Dollar. This was despite some positive news in the Eurozone, with the ZEW Economic Sentiment survey rising sharply in February and a strong manufacturing recovery. Also, Eurozone Q4 GDP contracted less than expected at 0.6% on lockdown measures, falling nearly 7% last year.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Monday 9amm | IFO – Business Climate (Feb), ECB's President Lagarde speech

Tuesday 10am | Consumer Price Index (Jan)

Thursday 3pm | Consumer Confidence (Feb)


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