• Audere Research

Weekly FX Outlook November 8th


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GB Pound


Sterling dropped heavily after the Bank of England’s announcement


Movements

GBPUSD opened at 1.3675 and after a quiet start, it sharply declined on Thursday and Friday, to close the week near a 1-year low, for a heavy loss of 1.56% at 1.3461.


GBPEUR opened at 1.1820 and was mixed during the first half of the week. It then lost more than 1% after the BoE interest rate announcement on Thursday, to eventually settle at 1.1646, for a weekly loss of -1.46%.


Movement rationale

After a relatively quiet start, volatility began to pick up toward mid-week as attention turned to the Bank of England interest rate policy announcement on Thursday afternoon. In a somewhat surprising move, rates were kept on hold and asset purchasing measures left unchanged, disappointing the market which expected a 15bp hike for the meeting. It appears that the BoE still considerers the recent pick-up in inflation as transitory, and that recent positive UK data isn’t sufficient for a change. The Pound fell heavily as a consequence, losing more than 1% after the announcement, the largest one-day decline since September 28th. It remained weak for the rest of the week, as investors readjusted their monetary policy expectations. In terms of Brexit development, a third meeting between the EU and UK over Northern Ireland ended last week, with no further progress announced.


Week ahead

The UK economic calendar includes the following:


Calendar

Thursday 7am | Gross Domestic Product (Q3), Industrial Production (Sep)


US Dollar


The Dollar was mixed.


Movements

EURUSD began at 1.1570 and traded in a volatile range all week (1.1520-1.1610) to finally close relatively unchanged (-0.13%) at 1.1556.


GBPUSD opened at 1.3675 and after a quiet start, it sharply declined on Thursday and Friday, to close the week near a 1-year low, for a heavy loss of 1.56% at 1.3461.


Movement rationale

Investors started the week exercising caution ahead of the Federal Reserve monetary policy meeting on Wednesday, with little impact on the US currency caused by the release of positive US ISM manufacturing data on Monday. As expected, the Fed decided to reduce the pace of asset purchases by $15bn per month, which will likely end by mid-2022. However, the central bank maintained the transitory inflation narrative, raising investors’ concerns that it may not tighten the monetary policy as quickly as first thought, eventually causing some FX volatility and slightly weakening the Dollar. The Greenback then recovered some ground on Thursday and Friday to close the week relatively unchanged, helped by better-than-expected US payrolls report, with the unemployment rate declining 0.2% to 4.6%, the lowest since the lockdowns.


Week ahead

The focus in the US for this week is on the US inflation report on Wednesday


Calendar

Wednesday 1:30pm | Consumer Price Index (Oct)

Friday 3pm | Michigan Consumer Sentiment Index (Nov)


Euro


The Euro recorded a new multi-year low against the Dollar.


Movements

EURUSD began at 1.1570 and traded in a volatile range all week (1.1520-1.1610) to finally close relatively unchanged (-0.13%) at 1.1556.


GBPEUR opened at 1.1820 and was mixed during the first half of the week. It then lost more than 1% after the BoE interest rate announcement on Thursday, to eventually settle at 1.1646, for a weekly loss of -1.46%.



Movement rationale

The Single currency remains under pressure, trending broadly lower against most of its peers as the ECB remains committed to maintaining its ultra-loose policy, forming a policy divergence between the Eurozone and other major central banks, hence penalising the single currency. Whilst recovering some ground versus Sterling as the BoE disappointed the market, on Friday the Euro reached a new low since July 2020 versus the Dollar, at 1.1514. Some negative economic data released during the week also reinforced the dovish stance adopted by the European central bank. Eurozone retail sales surprisingly dropped in September, adding to concerns over the recovery.


Week ahead

The Eurozone economic calendar includes the following:


Calendar

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

Friday 10am | Industrial Production (Sep)



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