• Audere Research

Weekly FX Outlook May 10th


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GB Pound

Sterling has a strong week.


Movements

GBPUSD opened at 1.3853 and traded sideways during the first part of the week before starting to move higher on Friday and ending at 1.4066, its highest level since February (+1.54%)


GBPEUR opened at 1.1529 and initially moved higher to reach 1.1593 before giving away all gains on Thursday. It then rallied again this morning to close at 1.1582 (+0.46%).


Movement rationale

After a relatively stable first part of the week, Sterling was in focus with two major events, the BoE and local elections, which positively affected the currency evolution. Whilst the central bank kept its policy settings on hold, it said it would reduce the amount of assets it buys under its QE programme and upgraded its 2021 recovery projection to 7.25%, the fastest UK growth rate in over 70 years, albeit from a pandemic induced low level. Also, it suggested that rates may begin to rise in 2022. The second (and most important) source of GBP appreciation came with results from the UK election which were announced over the weekend, with the Conservative party gaining control of councils that were previously Labour ones and as the SNP falling short of an outright majority. This prompted a GBP rally as the outcome of the Scottish election eased the political risk associated with another independence referendum.


Week ahead

The UK economic calendar includes the following:


Calendar

Wednesday 7am | Industrial Production (Mar), Gross Domestic Product (Mar)


US Dollar


The US Dollar was weak.


Movements

EURUSD began the week at 1.2016 and, after consolidating around the 1.20 level, it started to rally on Friday to reach 1.2178 early this morning (10-week high). It closed at 1.2144 (+1.07%).


GBPUSD opened at 1.3853 and traded sideways during the first part of the week before starting to move higher on Friday and ending at 1.4066, its highest level since February (+1.54%)


Movement rationale

In absence of meaningful data during the first half of the week, the market focused on Treasury Secretary Yellen’s comments last Tuesday, where she initially stated that ‘interest rates will have to rise’ to prevent the US economy from overheating, before backtracking on her remarks later in the session, causing some market volatility. The Dollar then started trading on the defensive in the second part of the week and plummeted more than 1% on Friday, reaching its lowest level in more than two months, on poor U.S. jobs data. April Nonfarm Payrolls increased by only 266k jobs last month after rising by 770k in March, disappointing the market, and triggering a sharp USD sell-off as investors reassess the risk of an early removal of the accommodative monetary policy by the Fed.


Week ahead

The US economic calendar includes the following:


Calendar

Wednesday 1:15pm | Consumer Price Index (Apr)

Thursday 2:30pm | Initial Jobless Claims (May 7)

Friday 1:30 pm | Retail Sales (Apr), Michigan Consumer Sentiment Index (May)


Euro


The Euro had a calm week.


Movements

EURUSD began the week at 1.2016 and, after consolidating around the 1.20 level, it started to rally on Friday and reached 1.2178 early this morning (10-week high). It closed at 1.2144 (+1.07%).


GBPEUR opened at 1.1529 and initially moved higher to reach 1.1593 before giving away all gains on Thursday. It then rallied again this morning to close at 1.1582 (+0.46%).


Movement rationale

It was another quiet weekly session for the Euro, with a lack of news relating to the single currency. The EU vaccination campaign continues to gain traction with lockdowns being gradually lifted throughout Europe. Some support came from the publication of the latest Eurozone retail sales figures for March, which beat forecasts with a 12% year-on-year rise, pushing the currency slightly higher.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 10am | ZEW Survey – Economic Sentiment (May)

Wednesday 10am | Industrial Production (Mar)


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