• Audere Research

Weekly FX Outlook November 1st


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GB Pound


Sterling had a volatile week.


Movements

GBPUSD opened at 1.3777 and traded rangebound throughout the week, before falling 1% on Friday. It closed the week with a loss of 0.74% at 1.3675.


GBPEUR had a volatile week, opening at 1.1831 and initially moving higher to hit a fresh 20-month high at 1.1901 on Tuesday. It then sharply corrected down, falling by 0.85% and briefly touching 1.18 on Thursday. It finally closed broadly unchanged at 1.1820 (-0.10%).


Movement rationale

Sterling gradually made gains through the first half of the week as Brexit talks between UK and EU appeared to make progress. The currency was also supported by recent Covid data, which revealed a significative fall in new infections, suggesting the latest wave may have peaked. Also, a greater-than-expected increase in the UK’s retail sales supported GBP. However, mid-week the Pound dropped as market participants digested Chancellor Sunak’s autumn budget. Whilst the economy is forecasted to return to pre-COVID levels by 2022, much faster than previously estimated, investors were focusing on the increased tax burden on UK households, reducing GBP sentiment. Further, toward the end of the week the Pound seemed to be negatively affected by rising tension between Britain and France over fishing rights.


Week ahead

All eyes will be on this Thursday, with the BoE delivering its interest rate announcement and provide its latest monetary policy report.


Calendar

Thursday 12pm | BoE Interest Rate Decision


US Dollar


The Dollar finished the week on a positive tone.


Movements

EURUSD began at 1.1645 and traded in a tight range during the first part of the week. It then sharply moved up on Thursday, on the back of the ECB meeting, before sharply reversing the movement the next day and closing lower at 1.1570 (-0.64%).


GBPUSD opened at 1.3777 and traded rangebound throughout the week, before falling 1% on Friday. It closed the week with a loss of 0.74% at 1.3675.


Movement rationale

The Dollar broadly underperformed rival currencies during the first part of the week, following faltering US data. Downbeat US GDP (growing at only a 2% annualized rate in the Q3, versus a forecast of 2.7%), together with disappointing US consumer spending and durable goods sales, are starting to cast doubt on whether the Federal Reserve will start the QE tapering process this year. An improved risk sentiment, as stagflation risks may be peaking, also contributed to the Dollar's downward move. All changed on Friday, when the Dollar was heavily in demand, as risk sentiment dampened amid worse than expected US Q3 corporate earnings and concerns about rising US wages and inflation. The Greenback reacted by sharply appreciating against G10 peers to finish the week with a positive performance.


Week ahead

A heavy US economic calendar Fed meeting on Thursday and job data report on Friday:


Calendar

Monday 2pm | ISM Manufacturing PMI (Oct)

Wednesday 2pm-6pm | ADP Employment Change (Oct), ISM Services PMI (Oct), Fed Interest Rate Decision

Friday 2:30pm | Nonfarm Payrolls (Oct)


Euro


The Euro was volatile.


Movements

EURUSD began the week at 1.1645 and traded in a tight range during the first part of the week. It then sharply moved up on Thursday, on the back of the ECB meeting, before sharply reversing the movement the following day and closing lower at 1.1570 (-0.64%).


GBPEUR had a volatile week, opening at 1.1831 and initially moving higher to hit a fresh 20-month high at 1.1901 on Tuesday. It then sharply corrected down, falling by 0.85% and briefly touching 1.18 on Thursday. It finally closed broadly unchanged at 1.1820 (-0.10%).


Movement rationale

The Euro was relatively stable during the first part of the week, with investors waiting for the ECB meeting to adjust their bets on the currency. Mixed data was published, with a disappointing German IFO business climate survey being offset by strong economic sentiment in the Eurozone. Whilst the ECB maintained rates on Thursday, President Lagarde failed to convince market participants that a rate hike next year was off the table, triggering a sharp appreciation of the Euro, which recorded the strongest daily performance in recent months, although most of the move was reversed the following day. Eurozone GDP data was published on Friday, with the economy expanded by a quicker-than-forecast 2.2% in the third quarter, while inflation rising to 4.1% in October from 3.4% a month earlier, an all time high for the economic area,


Week ahead

The Eurozone economic calendar includes the following:


Calendar

Wednesday 9am | Unemployment Rate (Sep)

Thursday 9am | Markit PMI Composite (Oct)

Friday 10am | Retail Sales ((Sep)


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