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Weekly FX Outlook January 11th



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GB Pound

Sterling had a weak week.


Movements

GBPUSD opened at 1.3679, initially dropped down to 1.3540 on Monday before bouncing back to recover all losses by Wednesday morning. It then restarted the downward movement to close at 1.3492 for a weekly loss of 1.37%.


GBPEUR opened at 1.1150 and gradually depreciated during the first half of the week, reaching a low of 1.1005. After that the currency pair started trading in a tight range to close with a depreciation of 0.7% at 1.1072.


Movement rationale

Sterling started off the week with a sharp fall of more than 1% against rival currencies on Monday, caused by fears that a third UK lockdown would be implemented across England. The Pound then started a timid recovery on Tuesday, on news of a new package worth £4.6bn to support UK businesses announced by the UK Chancellor. Meanwhile, the UK reported over 1,000 daily virus deaths, the highest daily death toll since April. During the second half of the week some downward pressure resumed on GBP on rumours that the BoE might step in and cut interest rates as soon as the February 04 meeting. Also, investor’s optimism for Brexit seems to be fading over concerns that the trade deal does not extend (yet) to financial services for the City.

Week ahead

The UK economic data calendar includes the following:


Calendar

Monday 3pm | BoE's Governor Bailey speech

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


US Dollar


The US Dollar bounced back.


Movements

EURUSD opened at 1.2267 and after a strong start of the week, which has seen the pair recording a new high since April 2018 (1.2346) on Wednesday, started gradually to erase the gains and closed with a loss of 0.67% at 1.2185.


GBPUSD opened at 1.3679, initially dropped down to 1.3540 on Monday before bouncing back to recover all losses by Wednesday morning. It then restarted the downward movement to close at 1.3492 for a weekly loss of 1.37%.


Movement rationale

It was a volatile week for the Dollar, driven by uncertainty surrounding the Senate run-offs in Georgia. News that the elections result would put the Democrats in control, facilitating the ability of President-Elect Joe Biden’s to implement his preferred economic agenda and fiscal stimulus, initially moved the Dollar lower, with the USD Spot Index hitting new 2yr lows on Wednesday. Meanwhile Trump supporters stormed the US Capitol building, delaying Biden’s certification and representing an unprecedented moment in the history of US democracy. In the second half of the week the trend reversed with the Greenback making strong gains as USD demand was driven by a rise in US Treasury yields (which hit a 10-month high) and a deterioration of risk on sentiment among investors. On the data front, the US new jobs figures dropped significantly in December as Covid cases soared again across US.


Week ahead

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


Calendar

Wednesday 1:30pm | Consumer Price Index (Dec)

Thursday 4pm | Initial Jobless Claims (Jan 8)

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


Euro

The Euro remains well supported.


Movements

EURUSD opened at 1.2267 and after a strong start of the week, which has seen the pair recording a new high since April 2018 (1.2346) on Wednesday, started gradually to erase the gains and closed with a loss of 0.67% at 1.2185.


GBPEUR opened at 1.1150 and gradually depreciated during the first half of the week, reaching a low of 1.1005. After that the currency pair started trading in a tight range to close with a depreciation of 0.7% at 1.1072.


Movement rationale

The Euro struggled to remain in demand last week, despite an improvement in the unemployment data in the Eurozone which recorded a slight decline from 8.4% to 8.3% in December. Some negative numbers came out from Retails Sales, which contracted more than expected in November, and inflation data, which registered the fifth consecutive negative month.


The Eurozone economic data calendar includes the following:


Calendar

Monday 2:40pm | ECB's President Lagarde speech

Wednesday 10am | Industrial Production (Nov)


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

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