• Audere Research

Weekly FX Outlook January 4th


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GB Pound


Sterling hit a 23-month high against Euro.


Movements

GBPUSD opened at 1.3439 and traded with a positive bias to reach a 6-week high at 1.3550 on Friday. It then gave back part of the gains to close at 1.3487, for a gain of 0.36%.


GBPEUR opened at 1.1862 and steadily moved up, to close near its highest level since February 2020 at 1.1942, for a weekly performance of +0.67%.


Movement rationale

Sterling ended the year on a strong footing, advancing against rival currencies and reaching its highest versus Euro since February 2020. Despite coronavirus cases hitting record highs in Britain, easing concerns about the economic impact of the pandemic boosted the Pound in a week of few economic data release. The currency is also benefitting for a more hawkish monetary policy in UK compared to US and EU, with the BoE expecting to raise rates by 1% or more in 2022.


Week ahead

With a light economic calendar ahead, Sterling should be more affected by investor sentiment and Covid news.


Calendar

Tuesday 9:30am | Markit Manufacturing PMI (Dec) 

Thursday 9:30pm | Markit Services PMI (Dec)


US Dollar


The Dollar had a mixed week.


Movements

EURUSD opened at 1.1326 and had a few quiet trading sessions, before starting to display some volatility and trading in a wide range (1.120-1.1380). It finally ended the week slightly lower at 1.1293 (-0.29%).


GBPUSD opened at 1.3439 and traded with a positive bias to reach a 6-week high at 1.3550 on Friday. It then gave back part of the gains to close at 1.3487, for a gain of 0.36%.


Movement rationale

After the strong gains in November and more generally a 6-month rally which started in June, the Dollar has seemingly taken a breather in December, with some end of year profit-taking causing the USD to close the last two weeks of 2021 in negative territory. It nevertheless had its best year since 2015, advancing respectively 8% and 1% against EUR and GBP, supported by an improving U.S. economic outlook and persistent inflation that is persuading the Federal Reserve to turn more hawkish in its monetary stance.


Week ahead

The USD is expected to be in focus this week, with the minutes from the last Federal Reserve meeting published on Wednesday, and employment data released on Friday.


Calendar

Tuesday 3pm | ISM Manufacturing PMI (Dec)

Wednesday 1:15pm | ADP Employment Change (Dec), 7pm | FOMC Minutes

Thursday 3pm | ISM Services PMI (Dec)

Friday 1:30pm | Nonfarm Payrolls (Dec), Unemployment Rate (Dec)


Euro


The Euro was calm.


Movements

EURUSD opened at 1.1326 and had a few quiet trading sessions, before starting to display some volatility and trading in a wide range (1.120-1.1380). It finally ended the week slightly lower at 1.1293 (-0.29%).


GBPEUR opened at 1.1862 and steadily moved up, to close near its highest level since February 2020 at 1.1942, for a weekly performance of +0.67%.

Movement rationale

In a week dominated by thin liquidity and Christmas-market random walks, the Euro was relatively quiet, with fluctuations mainly driven by a buoyant sentiment as Omicron seems to pose a lesser threat to public health than its predecessors, and therefore a minor headwind to economies compared to the past year. Euro’s outlook for 2022 remains weak, with analysts expecting the European Central Bank to stick to its ultra-dovish monetary policy, while the BoE and Fed are set to accelerate bond purchase tapering and rate increases.


Week ahead

The EU economic calendar includes key inflation data and Retail Sales released on Friday, with the potential to cause some currency volatility.


Calendar

Tuesday 7am | German Retail Sales (Nov)

Wednesday 9am | Markit PMI Composite (Dec)

Friday 10am | Consumer Price Index (Dec), Retail Sales (Nov)




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