• Audere Research

Weekly FX Outlook July 12th


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GB Pound


Sterling had a volatile week.


Movements

GBPUSD opened at 1.3842 and traded in a wide range (1.3740-1.3900), ending the week largely unchanged (+0.23%) at 1.3874.


GBPEUR opened at 1.1663 and moved sideways all week, trading in a defined range (1.1610-1.1710), to finally close slightly higher at 1.1686 (+0.20%).


Movement rationale

Sterling, together with other risk currencies, came under pressure last week as investors curbed their bets on risky assets, fuelled by some poor economic data from many countries that fell short of the market's expectations. Also, concerns over the Delta variant weighed on the GBP which lost 1% against both EUR and USD. The UK currency slipped as low as 1.3740 against the Dollar on Thursday, a level not seen since mid-April. The Pound was eventually able to recoup all losses on Friday, despite disappointing UK growth figures for May (which showed an increase of only 0.8%, roughly half the early expectations), with the currency recovery mostly fuelled by risk-on flows.



Week ahead

The UK economic data calendar includes the following:


Calendar

Wednesday 7am | Consumer Price Index (Jun)

Thursday 7am | ILO Unemployment Rate (May)


US Dollar


The Dollar was sensitive to market sentiment.


Movements

EURUSD began the week at 1.1868 and initially continued the recent downtrend, reaching a 3-month low on Wednesday (1.1780). It then recovered to pair all losses and closed unchanged at 1.1870.


GBPUSD opened at 1.3842 and traded in a wide range (1.3740-1.3900), ending the week largely unchanged (+0.23%) at 1.3874.


Movement rationale

Market sentiment was once again the key driver of currency movements, with the Dollar being the main beneficiary during the first part of the week. Concerns regarding the ongoing global recovery and the spread of the Delta variant, combined with fears that China’s economic rebound may be peaking, contributed to a deterioration in risk appetite, driving the currency to a 3-month high against Sterling and Euro. The Greenback eventually gave back all gains on Friday as negative market sentiment eased, with a new record high on Wall Street and news of monetary policy easing in China helping to calm some of the recent concerns on global economic growth.



Week ahead

The US economic calendar including the following:


Calendar

Tuesday 1:30pm | Consumer Price Index (Jun)

Thursday 1:30pm | Initial Jobless Claims (Jul 9)


Euro


The Euro traded sideways.


Movements

EURUSD began the week at 1.1868 and initially continued the recent downtrend, reaching a 9-week low on Wednesday (1.1780). It then recovered to pair all weekly losses and closed unchanged at 1.1870.


GBPEUR opened at 1.1663 and moved sideways all week, trading in a defined range (1.1610-1.1710), to finally close slightly higher at 1.1686 (+0.20%).


Movement rationale

The Euro, like its peers, was sensitive to investor mood shifts, although to a lower extent. The single currency weakened during the first part of the week, in synchrony with a global market sell-off, while recovering some ground later as investor sentiment improved. The market also somewhat favoured the Euro as the ECB announced the results of its strategy review, shifting their inflation target to 2%, in a sign that investors are expecting the central bank to be more aggressive in their pursuit of higher inflation. Economic data in the Eurozone was mixed, with retail sales and business activity expanding more than expected in May while economic expectations (ZEW Survey) declined in Germany for a second consecutive month (albeit at historically high levels).


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Wednesday 10am | Industrial Production (May)

Friday 10am | Consumer Price Index (Jun)



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