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Weekly FX Outlook November 16th



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GB Pound

Sterling had a choppy week.


Movements

GBPUSD started the week at 1.3179 and initially hit a new high since early September (1.3310) before erasing all gains on Wednesday and Thursday to drop down to 1.31. It finally recovered ground on Friday to close little changed at 1.3212.


GBPEUR opened at 1.1080 and sharply rallied to reach 1.1280 (highest level since mid-May) before reversing the movement during the second half of the week to close slightly higher at 1.1139 (+0.53%).


Movement rationale

Promising news of a Covid vaccine by Pfizer and BioNTech was released last Monday, boosting market confidence and pushing up risk-on currencies such as Sterling, which recorded respectively a 6-month and 2-month high versus EUR and USD on Wednesday. However, as investor optimism over the prospect of a vaccine showed signs of fading in the second half of the week, Sterling erased its weekly gains. In UK data, GDP rebounded in Q3 recording a 15.5% growth, in-line with market expectations. The UK economy is still 9.6% smaller on a y/y basis. On the Brexit front, another round of negotiation ended with little progress, while the Government’s plan to overrule parts of the EU withdrawal agreement with the Internal Market Bill was rejected by the House of Lords.


Week ahead

GBP is expected to be driven by risk sentiment and Brexit headlines, with the following other events having the potential to influence the markets:


Calendar

Tuesday 3pm | BoE's Governor Bailey speech

Wednesday 8am | Consumer Price Index (Oct)

Friday 8am | Retail Sales (Oct)


US Dollar

The US Dollar had a relatively volatile week.


Movements

EURUSD opened at 1.1894 and at first hit a new high since early September (1.1920) before starting to depreciate and closing with a limited loss of 0.29% at 1.1860.


GBPUSD started the week at 1.3179 and initially hit a new high since early September (1.3310) before erasing all gains on Wednesday and Thursday to drop down to 1.31. It finally recovered ground on Friday to close little changed at 1.3212.


Movement rationale

The Dollar started the week on a weak footing, as positive vaccine developments pushed safe haven assets such as USD lower. However, a shift in market sentiment, also caused by comments from Federal Reserve and the ECB which stressed that the economic outlook remains uncertain, triggered a Dollar recovery later in the week. Better than expected U.S. initial jobless claims also helped support the Dollar during the second half of the week.


Week ahead

USD is expected to have another volatile week ahead, with the currency still vulnerable to US Covid developments. Economic data includes:


Calendar

Tuesday 2:30 pm | Retail Sales (Oct), Industrial Production (Oct)

Thursday 2:30pm | Initial Jobless Claims (Nov 13)


Euro

The Euro had a relatively quiet week.


Movements

EURUSD opened at 1.1894 and at first hit a new high since early September (1.1920) before starting to depreciate and closing with a limited loss of 0.29% at 1.1860.


GBPEUR opened at 1.1080 and sharply rallied to reach 1.1280 (highest level since mid-May) before reversing the movement during the second half of the week to close slightly higher at 1.1139 (+0.53%).


Movement rationale

The European currency moved sideways last week, only marginally profiting from the initial enthusiasm about a possible vaccine. Investors are still worried about surging cases in the Euro area which could trigger a new round of dovishness by the ECB. Some flows of negative economic data, with German Economic sentiment dropping further in November, Eurozone GDP growth revised slightly down from its initial estimate and the block’s Industrial production dropping -0.4% in September, also weighed on the currency.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Wednesday 11am | Consumer Price Index (Oct)

Friday 4pm | Consumer Confidence (Nov)


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