• Audere Research

Weekly FX Outlook October 11th


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GB Pound


Sterling had a strong week, benefiting from improved risk sentiment


Movements

GBPUSD opened at 1.3542 and recovered the ground lost the previous week, to close with a weekly gain of 0.95% at 1.3670.


GBPEUR opened at 1.1675 and steadily appreciated during the week to close the week on a 2-month high at 1.1800, for a strong weekly performance of +1.07%.


Movement rationale

After slumping last week, Sterling rebounded, reaching a two-month high against the Euro at 1.18 while recovering 1% against the Dollar with support above 1.36. A lack of significant UK data led the UK currency to take its main cues from broader market drivers and investor sentiment. As the gas market imbalances have started (at least partially) to ease, and with fuel shortages and delivery disruption headlines fading from memory, global risk sentiment improved, allowing the Pound to regain its footing. Also, inflation is gaining more and more attention in the UK given recent dramatic rise in energy prices, sparking hawkish comments from BoE officials, which are preparing the ground for earlier interest rate rises.


Week ahead

The UK economic data calendar includes the following:


Calendar

Tuesday 7am | ILO Unemployment Rate (Aug)

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


US Dollar


The Dollar reached a new multi-year high against the Euro.


Movements

EURUSD began the week at 1.1598 and continued to move down during the first half of the week to touch a new 14-month low on Thursday at 1.1522. Since then, it paired most of the losses to close only slightly lower at 1.1584 (-0.12%).


GBPUSD opened at 1.3542 and recovered the ground lost the previous week, to close with a weekly gain of 0.95% at 1.3670.


Movement rationale

The Dollar remained well supported, particularly during the first part of the week, as shaky financial markets, concerns around Evergrande, the Chinese property market, and surging energy prices established the best suited market conditions for buying USD, which traded near 14-month highs vs. Euro on Wednesday. Despite concerns around US debt, and with a market that switched towards a more ‘risk on’ sentiment during the second half of the week, the Greenback retraced only marginally as concerns about inflation and interest rate hikes keeps supporting the USD currency. Investors’ eyes than focused on Friday’s job figures, which missed expectations, with payrolls registering the smallest gain of the year (194k versus a market expectation of 500k), pushing the Dollar lower before it retraced these losses later in the day.


Week ahead

A heavy US economic calendar includes inflation data and FOMC minutes on Wednesday, closing with Retail Sales on Friday:


Calendar

Wednesday 1:30pm | Consumer Price Index (Sep), FOMC Minutes

Thursday 1:30pm | Initial Jobless Claims (Oct 8)

Friday 1:30pm | Retail Sales (Sep), Michigan Consumer Sentiment Index (Oct)


Euro


The Euro remains under pressure.


Movements

EURUSD began the week at 1.1598 and continued to move down during the first half of the week to touch a new 14-month low on Thursday at 1.1522. Since then, it paired most of the losses to close only slightly lower at 1.1584 (-0.12%).


GBPEUR opened at 1.1675 and steadily appreciated during the week to close the week on a 2-month high at 1.1800, for a strong weekly performance of +1.07%.


Movement rationale

The Euro again faced some selling pressure as it appeared to be the most vulnerable currency to surging energy prices, with consumers in the Eurozone facing steep rises in energy bills. Also, whilst many major central banks are considering reducing their stimulus packages, the ECB is maintaining an accommodative stance, and reportedly considering a new bond-buying programme to avoid any market distress when emergency purchases are phased out next year. On the data front, the

Eurozone Producer Price Index was more or less in line with estimate at 1.1% MoM, generating little impact in the currency markets.


Week ahead

The Eurozone economic calendar this week includes the following:


Calendar

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

Wednesday 10am | Industrial Production (Aug)


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