• Audere Research

Weekly FX Outlook March 1st



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GB Pound

Sterling had a very volatile week.


Movements

GBPUSD opened at 1.3985 and initially traded higher, recording a new high since April 2018 at 1.4237. The pair was then aggressively sold-off, moving down to 1.3890 on Friday morning and ended the week at 1.3935 with a loss of 0.36%.


GBPEUR opened at 1.1549 and steadily moved higher during the first half of the week, touching a new 1-year high at 1.1695 before triggering a sharp market correction, trading down to 1.1460. If finally closed broadly unchanged at 1.1561.


Movement rationale

Sterling continued to move higher during the first half of the week, climbing to a new 2-year high versus the USD and a 1-year high versus the EUR, supported by the global recovery and optimism about the plan to ease lockdown restrictions released last Monday by PM Johnson. The objective is to fully restart the economy from the 21st of June while schools would reopen from 8th March and stores and outdoor hospitality from mid-April. However, Sterling’s rise abruptly stopped on Thursday, with the currency experiencing large swings and being aggressively sold-off, dropping more than 1.5% against Euro and Dollar in 24 hours. This movement was driven by deterioration in risk sentiment and sharp sell-off in global stock markets and commodities.


Week ahead

The UK economic data calendar includes the following, with the key event being the announcement of the government budget on Wednesday.


Calendar

Monday 9:30am | Markit Manufacturing PMI (Feb)

US Dollar


The US Dollar had a volatile week.


Movements

EURUSD was relatively quiet during the first half of the week before being hit by market volatility. The pair appreciated on Thursday, trading briefly back above 1.22 before strong USD demand pushed the pair lower on Friday, ending the week with a loss of 0.47% at 1.2052.


GBPUSD opened at 1.3985 and initially traded higher, recording a new high since April 2018 at 1.4237. The pair was then aggressively sold-off, moving down to 1.3890 on Friday morning and ended the week at 1.3935 with a loss of 0.36%.


Movement rationale

The Dollar had a relatively quiet start of the week, where it broadly traded lower against most of its peers on expectations of a global recovery. Dovish comments by the FED, which pushed back concerns on inflation and reaffirmed that rates would remain low and bond buying would endure for some time, also put some pressure on USD. Strong risk appetite was also visible in the bond market, which experienced its strongest sell-off since the pandemic started, with US 10-year yield rising to 1.41%. However, later in the week growing concerns that the economic recovery might generate inflationary pressures, forcing central banks to tighten their monetary stance, triggered on Thursday an equity market sell-off. This caused the Dollar to trade higher and recover all weekly losses against major currencies as demand for safe heaven asset rose.


Week ahead

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


Calendar

Monday 3pm | ISM Manufacturing PMI(Feb)

Wednesday 1:15pm | ADP Employment Change (Feb), ISM Services PMI(Feb)

Thursday 1:30pm | Initial Jobless Claims (Feb 26)

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


Euro


The Euro was relatively firm.


Movements

EURUSD was relatively quiet during the first half of the week before being hit by market volatility. The pair appreciated on Thursday, trading briefly back above 1.22 before strong USD demand pushed the pair lower on Friday, ending the week with a loss of 0.47% at 1.2052.


GBPEUR opened at 1.1549 and steadily moved higher during the first half of the week, touching a new 1-year high at 1.1695 before triggering a sharp market correction, trading down to 1.1460. If finally closed broadly unchanged at 1.1561.


Movement rationale

In absence of major economic data, Euro remained resilient, reflecting a lower level of sensitivity than other currencies to the turbulence experienced last week in the markets - first the sharp rise in government yields; secondly the equity market sell-off. On the data front some more promising news arrived from the Euro zone sentiment index, which rose more than expected in February, helped by an improved optimism in industry, services and by consumers.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 10am | Consumer Price Index ((Feb)

Wednesday 9am | Markit PMI Composite (Feb)

Thursday 10am | Retail Sales (Jan), Unemployment Rate (Jan)


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