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Weekly FX Outlook October 12th



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GB Pound

Sterling had a relatively volatile week.

Movements

GBPUSD opened at 1.2933 and moved sideways for most of the week before breaking the 1.30 level on Friday and closing at a month-high of 1.3040, with a weekly gain of 0.83%.

GBPEUR traded in a limited range, opening at 1.1020 and initially moving down to 1.0920 before recovering during the second half of the week and ending little changed at 1.1038 (+0.17%).

Movement rationale

Sterling endured notable intraday volatility as some unofficial Brexit headlines reached the market suggesting compromises could be in the pipeline, although concrete progress has yet to be achieved. While headlines reported that UK is ready to walk away if no deal is agreed by 15th October, EU officials said that negotiation with the UK will probably carry over into the second half of October. On the economic front mixed data were released, with better than expected PMI data on Monday being offset by Friday’s GBP data showing the UK economy expanded by 2.1% in August, less than expected.

Week ahead

GBP should have a relatively quiet week ahead, with any Brexit development likely to only come after this week’s EU Summit. The UK’s domestic data calendar is led by the publication of labour market figures for August.

Calendar

Tuesday 7am | ILO Unemployment Rate (Aug)

US Dollar

The US Dollar had a soft week.

Movements

EURUSD opened at 1.1736 and mostly traded in a tight range (1.1720-1.1800) and closed the week with a positive move of 1.1813 (+0.65%).

GBPUSD opened at 1.2933 and moved sideways for most of the week before breaking the 1.30 level on Friday and closing at a month-high of 1.3040, with a weekly gain of 0.83%.

Movement rationale

The Dollar lost some ground this past week as a revival in fiscal stimulus hopes boosted investors’ risk sentiment. After initially calling off talks on a stimulus package (until after the November election) sending the USD higher versus its peers, President Trump made a significant U-turn, signalling its desire for a larger package than either party has proposed. The news that U.S. politicians were closing in on a stimulus deal triggered a broad-based dollar sell-off on Friday. FOMC minutes were released last week with not much more details on its asset purchase programme and interest rate policy compared to September’s statement, causing little impact on the Dollar.

Week ahead

USD is expected to have a relatively volatile week ahead, with the currency likely remain prone to developments concerning the fiscal stimulus package.

Calendar

Tuesday 1:30pm | Consumer Price Index ((Sep)

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

Friday 1:30 pm | Retail Sales (Sep), Industrial Production (Sep)


Euro

The Euro had a quiet week.

Movements

EURUSD opened at 1.1736 and mostly traded in a tight range (1.1720-1.1800) and closed the week with a positive move of 1.1813 (+0.65%).

GBPEUR traded again in a limited range, opening at 1.1020 and initially moving down to 1.0920 before recovering during the second half of the week and ending little changed at 1.1038 (+0.17%).

Movement rationale

With a lack of notable news to influence the currency (with the exception of disappointing Eurozone PMI data), Euro movements were mainly related to volatility over rival currencies, with EURUSD trading back above 1.18 amid some USD weaknesses. However, rising concerns about the Eurozone’s coronavirus situation are steadily worsening, especially due to a surge in infections in Germany and Spain. On Thursday, Spanish Prime Minister Pedro Sanchez declared a state of emergency in Madrid.

Week ahead

The Eurozone economic data calendar includes the following:

Calendar

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

Wednesday 10am | Industrial Production (Aug)

Thursday-Friday | European Council Meeting

Friday 10am | Consumer Price Index (Sep)


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