• Audere Research

Weekly FX Outlook June 21st


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GB Pound

Sterling lost ground versus the Dollar.


Movements

GBPUSD opened at 1.4097 and traded sideways during the first half of the week before initiating a sharp downward correction on Wednesday. The pair lost more than 2% in the following three sessions, triggering a 7-week low (1.3788). It finally closed at 1.3828, with a heavy loss of -1.91%.


GBPEUR opened at 1.1635 and after a quiet start of the week it moved higher to touch 1.17 on Thursday. It then gave back all gains to close unchanged.


Movement rationale

During the first part of the week Sterling remained firm, showing a mute reaction to an extension to the UK’s lockdown relaxation plan, as investors stayed optimistic following upbeat labour market data, which continues to suggest a good UK recovery. The currency slightly advanced against major peers on Wednesday when the UK inflation data came in above consensus at 2.1%. GBP then fell below $1.40 and briefly broke below 1.38 on Friday as a surprise hawkish statement from the US Federal Reserve prompted a sharp Dollar rise against other major currencies. The change in tone by the Fed triggered some initial GBP strength versus the EUR, with the pair temporarily hitting a 10-week high at 1.1705 on Thursday as investors bet the Bank of England could follow the Fed. The market is now fully pricing in a 25 basis point rate hike in the US by the end of next year. The Pound then came under minor selling pressure ahead of the weekend as the May retail sales figures disappointed.



Week ahead

In the UK the focus will be on the BoE meeting, with the economic calendar including the following:


Calendar

Wednesday 9:30am | Markit Services PMI(Jun)

Thursday 12pm | BoE Interest Rate Decision

Friday 7am | GfK Consumer Confidence (Jun)


US Dollar


The US Dollar had its best performing week in nine months.


Movements

EURUSD began the week at 1.2146 and showed little volatility until Wednesday evening, when the hawkish Fed statement triggered a sharp USD rise, leading to a strong depreciation of the pair, which lost 2.2% in the following 3 trading sessions. It eventually closed with a loss of 1.92% at 1.1884.


GBPUSD opened at 1.4097 and traded sideways during the first half of the week before initiating a sharp downward correction on Wednesday. The pair lost more than 2% in the following three sessions, triggering a 7-week low (1.3788). It finally closed at 1.3828, with a heavy loss of -1.91%.


Movement rationale

It was a week at two speeds in the FX market, with a quiet first half dominated by little movements in USD-cross currencies. A decline in May US retail sales on Tuesday did little to change the currency dynamics, as the negative report was somewhat offset by sizeable upward revisions to the April data. All changed on Wednesday, when Fed officials raised their forecasts for US GDP growth this year and signalled that they could raise interest rates and end emergency bond-buying sooner than expected. The hawkish statement prompted a sharp Dollar appreciation, with the currency continuing to rise until the end of the week, leading to the best week in nine months for the Greenback.


Week ahead

The US economic data calendar includes the following:


Calendar

Wednesday 2:45pm | Markit PMI Composite (Jun)

Thursday 1:30pm | Durable Goods Orders (May), Gross Domestic Product (Q1), Initial Jobless Claims (Jun 18)

Friday 3pm | Michigan Consumer Sentiment Index (Jun)


Euro


The Euro came under pressure.


Movements

EURUSD began the week at 1.2146 and showed little volatility until Wednesday evening, when a hawkish FED statement triggered a sharp USD rise, leading to a strong depreciation of the pair, which lost 2.2% in the following 3 trading sessions. It eventually closed with a loss of 1.92% at 1.1884.


GBPEUR opened at 1.1635 and after a quiet start of the week it moved higher to touch 1.17 on Thursday. It then gave back all gains to close unchanged.


Movement rationale

A broad-based risk-off environment, following the Fed shift of tone toward a faster tightening of monetary policy, penalised the Euro last week. With a dovish European Central Bank which seems far behind the Fed (and the BoE to a lesser extent) in the monetary policy cycle, the single currency was under increasing pressure, hitting a 10-week low versus Sterling and Dollar. Mixed Eurozone CPI figures on Thursday did little to change investors’ behaviour, with risk sentiment continuing to dictate price movements for the rest of the week.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 3pm | Consumer Confidence (Jun)

Wednesday 9am | Markit PMI Composite (Jun)

Thursday 10am | IFO – Business Climate (Jun)



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