• Audere Research

Weekly FX Outlook January 18th



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GB Pound

Sterling remains well supported.


Movements

GBPUSD opened at 1.3492 and over the course of the week moved higher to briefly trade above 1.3700 (highest level since May 2018) on Thursday. It then retraced most of the movement toward the end of the week to close at 1.3541 for a modest gain of 0.36%.


GBPEUR opened at 1.1072 and traded with a positive bias, hitting a 2-month high at 1.1275 and closing with a solid gain of 1.29% at 1.1215.


Movement rationale

After a timid start of the week, which saw Sterling moving lower on Monday morning amid concerns around tougher lockdown rules, the currency headed higher, appreciating more than 1% against rival currencies over the next three trading sessions. The rally came after comments from BOE’s governor Bailey, that pushed back expectations for a rate cut this year. The currency also likely benefitted from prospects that UK Covid cases may have peaked and the vaccination roll-out is going relatively faster in UK compared to most of the countries. It lost some momentum towards the end of the week, possibly due to disappointing UK Industrial output, which showed a small contraction in November (vs expectation of +0.5%).

Week ahead

The UK economic data calendar includes the following:


Calendar

Wednesday 7am | Consumer Price Index (Dec)

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


US Dollar


The US Dollar moved higher versus the Euro.


Movements

EURUSD opened at 1.2185 and gradually moved lower to close with a loss of 0.89% at 1.2076.


GBPUSD opened at 1.3492 and over the course of the week moved higher to briefly trade above 1.3700 (highest level since May 2018) on Thursday. It then retraced most of the movement toward the end of the week to close at 1.3541 for a modest gain of 0.36%.


Movement rationale

The Dollar showed for the second week in a row some resilience, especially versus the Euro, as Treasury yields reached their highest levels since March, as hopes for a global rebound increased. Trump’s impeachment last Tuesday, making him the first US President in history to be impeached twice, also likely contributed to the positive USD movement. The currency remained relatively muted on Fed chair Powell’s comments, which eased market concerns around raising interest rates or changing its asset purchasing programme any time soon. The currency was relatively muted on the day Biden’s $1.9 trillion relief proposal was announced. Over the weekend headlines reported that Yellen, US Treasury Secretary-designate, does not seek a weak Dollar for competitive trade advantages - this also helps the USD.



Week ahead

USD is expected to have a relatively calm week ahead, with a light economic agenda:


Calendar

Thursday 4pm | Initial Jobless Claims (Jan 15)

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


Euro

The Euro was weak.


Movements

EURUSD opened at 1.2185 and gradually moved lower to close with a loss of 0.89% at 1.2076.


GBPEUR opened at 1.1072 and traded with a positive bias, hitting a 2-month high at 1.1275 and closing with a solid gain of 1.29% at 1.1215.


Movement rationale

The Euro weakened against most of its rival currencies, trading at levels not seen since November versus GBP. Tightening lockdowns and slower vaccination roll-out in the Eurozone area are currently weighting on the currency. In addition, a political crisis in Italy, triggered by Matteo Renzi, former PM and a crucial coalition partner, which decided to withdraw support for the government last Wednesday, negatively impacted the European currency.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 10am | ZEW Survey – Economic Sentiment (Jan)

Wednesday 10am | Consumer Price Index (Dec)

Thursday 12:45pm | ECB Interest Rate Decision

Friday 9am | Markit Manufacturing PMI (Jan)


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

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