• Audere Research

Weekly FX Outlook January 10th


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GB Pound


Sterling maintains momentum against the Euro, hitting a new multi-year high.


Movements

GBPUSD opened at 1.3487 and traded with a volatile but positive bias to close the week near a 2-month high at 1.3590, for a weekly gain of 0.76%.


GBPEUR opened at 1.1942 and had a strong start of the week, hitting a new multi-year record of 1.1997 on Wednesday. It then consolidated near the highs, trading in a tight range in the second half of the week, closing with a gain of 0.41% at 1.1991.


Movement rationale

Sterling recorded its third straight weekly gain against major peers, buoyed by the restriction free stance adopted by the UK government despite the rapid spread of the Omicron variant. Combined with growing expectations that the BoE will raise interest rates next month, this has pushed the Pound on Wednesday close to a 2-year high against the Euro, testing the 1.20 level, and a 2-month high versus the Dollar. GBP momentum remained strong later in the week despite a mixed picture emerging for Britain's economy, with UK's services sector suffering its biggest growth reduction last month since the country was last in lockdown, with hospitality and travel particularly hit by Omicron.

Week ahead

With a no economic data until Friday, Sterling is likely to remain affected by investor sentiment and Covid news.


Calendar

Friday 7am | Gross Domestic Product (Nov), Industrial Production (Nov)


US Dollar


The Dollar fell on a poor labour report.


Movements

EURUSD opened at 1.1293 and traded in a narrow range all week (1.1270-1.1360) to close slightly higher (+0.34%) at 1.1332.


GBPUSD opened at 1.3487 and traded with a volatile but positive bias to close the week near a 2-month high at 1.3590, for a weekly gain of 0.76%.

Movement rationale

After the previous week’s light economic agenda, and with less concerns regarding the effect of the Omicron variant on the global economic recovery, investors were paying particular attention to FOMC minutes from the Federal Reserve, as well as labour releases. A hawkish message from US policymakers, committing to balance sheet normalization soon after the first rate hike, pushed US Treasury yields higher, and the Greenback albeit briefly. However, disappointing US job data on Friday saw US payrolls rising by only 199k in December, well short of the 400k estimate. This caused the Dollar to fall and resulting in its closing the week slightly lower.

Week ahead

The USD is expected to show some volatility after the release of inflation data on Wednesday and Retail Sales on Friday.


Calendar

Wednesday 3:30pm | Consumer Price Index (Dec)

Thursday 1:30pm | Initial Jobless Claims (Jan 7)

Friday 1:30pm | Retail Sales (Dec), Michigan Consumer Sentiment Index (Jan)


Euro


The Euro was calm.


Movements

EURUSD opened at 1.1293 and traded in a narrow range all week (1.1270-1.1360) to close slightly higher (+0.34%) at 1.1332.

GBPEUR opened at 1.1942 and had a strong start of the week, hitting a new multi-year record of 1.1997 on Wednesday. It then consolidated near the highs, trading in a tight range in the second half of the week, closing with a gain of 0.41% at 1.1991.


Movement rationale

Despite several European countries last week recording a big spike in COVID-cases (France reaching more than 300k new daily cases), the fact that some countries such as Germany, France and Belgium have decided to ease quarantine rules have been supporting the single currency, which managed to recover some ground versus the Dollar. Some mixed economic data was released during the week, which overall caused little reaction to the Euro. German industrial production fell 0.2% compared to the previous month while Eurozone retail sales surged more than expected, boosted by in-store non-food purchases. Last but not least, Eurozone inflation rose to 5% in December, hitting a new record high as energy and food prices soar.

Week ahead

With a light EU economic calendar ahead, the single currency is expected to remain quiet during the week


Calendar

Monday 10am | Unemployment Rate (Nov)

Wednesday 9am | Industrial Production (Nov)




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