• Audere Research

Weekly FX Outlook March 8th



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GB Pound

Sterling remains supported versus the Euro.


Movements

GBPUSD opened at 1.3935 and traded in a volatile range during the first half of the week (1.3860-1.40) before starting to move lower on Thursday, reaching a low of 1.3780 and finally closing at 1.3840 with a loss of 0.68%.


GBPEUR opened at 1.1561 and traded with a slight positive bias, to close at 1.1637, a weekly gain of +0.65%.


Movement rationale

Sterling once again showed sustained levels of intra-day volatility, losing more ground to the Dollar while making gains and approaching a 1-year high versus the Euro. The currency was somewhat helped by the Budget on Wednesday as the UK’s Chancellor extended support to the economy by prolonging the furlough scheme, raised corporation tax to 25% for larger firms but not until 2023 (as expected), while maintaining temporary sales-tax and business rates cuts. On the data front, UK businesses reported broadly stable activity after a steep deterioration the previous month, with the UK construction industry recording a rebound in February.

Week ahead

The UK economic data calendar includes the following:


Calendar

Friday 7am | Industrial Production (Jan), Gross Domestic Product (Jan)

US Dollar


The US Dollar had a strong week.


Movements

EURUSD began the week at 1.2052, once more breaking the 1.20 barrier and firmly continued to trade lower to close at 1.1892, the lowest level seen since November last year, for a weekly loss of 1.33%.


GBPUSD opened at 1.3935 and traded in a volatile range during the first half of the week (1.3860-1.40) before starting to move lower on Thursday, reaching a low of 1.3780 and finally closing at 1.3840 with a loss of 0.68%.


Movement rationale

The sentiment around the Dollar keeps improving among investors, mainly fuelled by rising bond yields and inflation expectations. Market participants are now concerned that the $1.9tn US stimulus bill (which was passed by the US Senate last Thursday on a modified version of President Joe Biden’s coronavirus relief package) might not only boost economic growth but also consumer prices, moving up US yields. To reinforce the US economy outperformance narrative, better than expected nonfarm payrolls last Friday and a solid pace of the vaccine rollout in the States added to the Dollar’s momentum. Fed Chair Powell sent mixed messages stating that the central bank would be ‘patient’ in withdrawing its support to the economy, as it remains far from full employment. However, he added that it would take greater market turmoil and tighter financial conditions to trigger further central bank intervention.



Week ahead

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


Calendar

Wednesday 12:30am | Consumer Price Index (Feb)

Thursday 1:30pm | Initial Jobless Claims (Mar 5)

Friday 3pm | Michigan Consumer Sentiment Index (Mar), Industrial Production (Jan)


Euro


The Euro was weak versus both Dollar and Sterling.


Movements

EURUSD began the week at 1.2052, once more breaking the 1.20 barrier and firmly continued to trade lower to close at 1.1892, the lowest level seen since November last year, for a weekly loss of 1.33%.


GBPEUR opened at 1.1561 and traded with a slight positive bias, to close at 1.1637, a weekly gain of +0.65%.


Movement rationale

The single currency remains under pressure, losing ground to both USD and GBP amid a continued slow vaccination campaign and some weak Eurozone economic data. The block’s retail sales declined by 5.9% in January vs. -1.1% expected by the market and German industrial output also missed estimates with a fall of 2.5% in January. The Eurozone economy is now expected to enter in a double-dip recession. Some solace to the currency came from the Sentix Investor Confidence gauge for March, which beat expectations. Tension with the UK reappeared as the EU accused Britain of breaching the Brexit deal following the UK’s move to delay border checks on goods entering Northern Ireland.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 10am | Gross Domestic Product (Q4)

Thursday 12:45am | ECB Interest Rate Decision

Friday 10am | Industrial Production (Jan)


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