• Audere Research

Weekly FX Outlook November 22nd


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GB Pound


Sterling remained supported on better-than-expected economic data.


Movements

GBPUSD opened at 1.3414 and traded with a positive bias most of the week, reaching 1.35 on Thursday before erasing all gains on Friday. It finally ended the week broadly where it started.


GBPEUR opened at 1.1716 and continued to move higher, breaking the 1.19 resistance level and hitting a new high since February 2020 on Thursday (1.1930). The pair closed with a strong gain of 1.61% at 1.1905.


Movement rationale

A combination of strong economic data bolstered Sterling, starting with the release of September's jobs figures on Tuesday which surprised to the upside, with the UK's unemployment rate falling to 4.3%, its lowest level in more than a year. This seems to support the evidence that most workers previously furloughed have remained in employment. The Pound then climbed to a 1-week high against the USD and a 21-month high versus the EUR after inflation figures posted a rise of 4.2% in October, far higher than the 3.1% rise in September, boosting expectations of a rate hike by the BoE potentially as early as next month. Friday then saw another better-than-expected posting of UK data, with retail sales beating expectations, providing a further boost to the currency. Finally, consumer sentiment in the UK has also improved this month, having declined in the past three months.



Week ahead

A light UK economic calendar should have a limited impact of the Pound:


Calendar

Tuesday 9:30am | Markit Services PMI (Nov)


US Dollar


The Dollar reached a 16-month high versus the Euro on strong Retail sales.


Movements

EURUSD maintained the bearish outlook, having opened at 1.1448 and progressively losing ground, touching a new 16-month low on Friday (1.1250). It closed with another heavy loss of 1.5% at 1.1276.


GBPUSD opened at 1.3414 and traded with a positive bias most of the week, reaching 1.35 on Thursday before erasing all gains on Friday. It finally ended the week broadly where it started.



Movement rationale

The Dollar remained in demand, being supported by expectations that the Federal Reserve will raise rates as earlier as beginning of next year due to the sharp increase in inflation. Strong retail sales further boosted the Greenback, with the data released on Tuesday recording the largest gain since March this year. To add additional support to the US currency, two Federal Reserve officials made some bullish comments on Friday, suggesting that a faster pace of stimulus tapering may be appropriate amid a strong economic recovery and a rising inflation, pushing the Dollar Index to the highest level since July 2020.



Week ahead

The main event on the US economic calendar this week will be Wednesday’s minutes on the last Federal Reserve meeting.


Calendar

Tuesday 2:45pm | Markit PMI Composite (Nov)

Wednesday 1:30pm | Durable Goods Orders (Oct), Gross Domestic Product (Q3), 7pm | FOMC Minutes


Euro


The Euro continues to lose ground against peers.


Movements

EURUSD maintained the bearish outlook, having opened at 1.1448 and progressively losing ground, touching a new 16-month low on Friday (1.1250). It closed with another heavy loss of 1.5% at 1.1276.


GBPEUR opened at 1.1716 and continued to move higher, breaking the 1.19 resistance level and hitting a new high since February 2020 on Thursday (1.1930). The pair closed with a strong gain of 1.61% at 1.1905.


Movement rationale

The single currency was severely hit by negative sentiment last week, as the EUR outlook deteriorates. Investors’ anxiety is growing over the impact of surging Covid-19 infections in Europe, which once again has become the epicentre of the pandemic, accounting for half of global cases and deaths. Austria will be the first country in Western Europe to reimpose a full lockdown, with Germany considering following suit, pushing the Euro lower. Further, the ECB is maintaining a dovish stance, with President Lagarde of the European Central Bank stressing that the current rise in inflation will likely wane across Europe next year, meaning the ECB is likely to remain one of the last central banks to raise its interest rates in the near term. The accommodative monetary stance in the Eurozone, combined with the impact of the resurgence of COVID-19 cases, could keep the Euro under pressure for a while to come.


Week ahead

The Eurozone economic calendar includes the following:


Calendar

Monday 3pm | Consumer Confidence (Nov)

Tuesday 9am | Markit PMI Composite (Nov)

Wednesday 9am | IFO – Business Climate (Nov)


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