• Audere Research

Weekly FX Outlook March 22nd



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GB Pound

Sterling had a choppy week.


Movements

GBPUSD opened at 1.3931 and mainly traded in a defined range (1.3980-1.3840) to close with a loss (-0.52%) at 1.3859.


GBPEUR opened at 1.1674 and briefly moved down to 1.1580 before recovering and closing broadly unchanged at 1.1655.


Movement rationale

After a quiet start, the Pound entered some mid-week volatility with the currency first falling as much as 0.7% against its major peers on Tuesday morning amid tensions related to Brexit. The trigger was the EU launching a legal action against the UK, following Britain ‘s decision to delay the implementation of a key part of the Northern Ireland trade protocol. Also, safety concerns over the AstraZeneca vaccine and the subsequent suspension of its shot by several EU countries contributed to the Pound sell-off on Tuesday. The currency then quickly paired losses and even started to make gains running into the mid-week session, as concerns over the AstraZeneca vaccine started to ease. The BoE met on Thursday and kept rates on hold and hinted it would not raise rates until inflation picks up significantly, triggering a modest negative GBP reaction. Positive data form UK consumer confidence were realised on Friday, boosted by the successful vaccine roll-out and the government's plan to end lockdown.


Week ahead

A busy week in term of UK economic data calendar includes the following:


Calendar

Tuesday 7am | ILO Unemployment Rate (Jan)

Wednesday 7am | Consumer Price Index (Feb), Markit Services PMI (Mar)

Friday 7am | Retail Sales ((Feb)

US Dollar


The US Dollar remains supported by higher US yields.


Movements

EURUSD began the week at 1.1932 and mainly traded in a narrow range (1.1880-1.1980) to close little changed at 1.1890 (-0.36%).


GBPUSD opened at 1.3931 and mainly traded in a defined range (1.3980-1.3840) to close with a loss (-0.52%) at 1.3859.


Movement rationale

The USD remained supported throughout the week, buoyed by US Treasury yields which hold onto gains after the approval of Biden’s $1.9 trillion stimulus plan the week before. The spread between 2-year and 10-year U.S. yields rose to the highest level since September 2015, while inflation expectations reached levels not seen since January 2014. The positive tone on USD was somewhat undermined by negative data from retail sales in US, which fell more than expected in February. Also, dovish comments from the Fed on Wednesday, which stay committed to an accommodative monetary policy, provoked a temporary sell-off in the Dollar. The currency quickly recovered on Thursday, as higher US yields helped it retrace all its losses from the previous session before ending the week relatively unchanged.


Week ahead

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


Calendar

Wednesday 12:30pm | Durable Goods Orders (Feb), Markit Services PMI (Mar)

Thursday 1:30pm | Initial Jobless Claims (Mar 19), Gross Domestic Product (Q4)

Friday 2pm | Michigan Consumer Sentiment Index (Mar)


Euro


The Euro was quiet.


Movements

EURUSD began the week at 1.1932 and mainly traded in a defined range (1.1880-1.1980) to close little changed at 1.1890 (-0.36%).


GBPEUR opened at 1.1674 and briefly moved down to 1.1580 before recovering and closing broadly unchanged at 1.1655.


Movement rationale

With a relatively quiet economic calendar through last week, all attention was on German and Eurozone economic sentiment figures, which came out on Tuesday better than expected, delivering some EUR support. Also, the inflation rate, published on Wednesday, held steady at 0.6%. However, the single currency currently remains in a low volatile environment, with limited movements across the week and investors hesitant to buy the Euro on lack of progress in the EU vaccination campaign.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Wednesday 10am | Markit PMI Composite (Mar), Consumer Confidence (Mar)

Friday 9am | IFO – Business Climate (Mar)


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