GB Pound
Sterling had another strong week.
Movements
GBPUSD opened at 1.3670 and initially depreciated, finding support around 1.3570. It then recovered strongly during the second half of the week to reach a 1-month high (1.3769), closing with a weekly gain of 0.50% at 1.3739.
GBPEUR opened at 1.1800 and traded rangebound for most of the week before moving higher on Friday to reach a 15-month high at 1.1770. It closed with a gain of 0.48% at 1.1857.
Movement rationale
It was another solid week for Sterling, which recouped most of the losses sustained earlier this month. The currency rallied to a multi year high against the Euro and 1-month high against the Dollar on speculation that the Bank of England will increase interest rates earlier than previously thought, in an effort to curb rapidly rising inflation in the UK. Also, likely to have contributed to the Pound appreciation was the EU’s willingness to compromise on the Northern Ireland protocol, offering last week a cut in the amount of customs checks required for goods entering Northern Ireland. In terms of data, UK GDP data for August came in at 0.4%, slightly worse than expected, while the level of unemployment was shown to be 4.5%, causing little currency impact overall.
Week ahead
The UK economic data calendar includes Wednesday’s CPI print:
Calendar
Wednesday 7am | Consumer Price Index (Sep)
Friday 9:30am | Markit Services PMI (Oct), GfK Consumer Confidence (Oct), Retail Sales (Sep)
US Dollar
The Dollar hit another multi-year high against the Euro before retracing.
Movements
EURUSD began the week at 1.1584 and at first continued to move lower to touch a new 14-month low on Tuesday at 1.1522. Since then, it paired all losses to close broadly unchanged at 1.1587.
GBPUSD opened at 1.3670 and initially depreciated, finding support around 1.3570. It then recovered strongly during the second half of the week to reach a 1-month high (1.3769), closing with a weekly gain of 0.50% at 1.3739.
Movement rationale
After a quiet start of the week, with US enjoying a long weekend due the Columbus Day, the Dollar resumed its rally reaching a new high against the Euro on Tuesday, before starting to retrace. Inflation data released on Wednesday brought extra volatility to the currency, with the Greenback initially moving higher after the US inflation rate hit a fresh 13-year high of 5.3%, with the consumer price index rising 0.4% last month, versus a +0.3% anticipated. However, it then started to edge lower along with longer-dated bond yields, in what appeared to be a classic case of “buy the rumour, sell the fact”. Minutes from the last Federal Open Market Committee meeting were published on Wednesday, with the pace of tapering broadly in line with most estimates. Dollar weakness continued into Thursday, with the currency finding some support on better-than-expected unemployment numbers, with weekly claims posting 293k, its first reading below 300k since the start of the pandemic, and strong retail sales.
Week ahead
A light US economic calendar includes the following:
Calendar
Thursday 1:30pm | Initial Jobless Claims (Oct 15)
Friday 2:45pm | Markit PMI Composite (Oct)
Euro
The Euro is still targeted by downward pressure.
Movements
EURUSD began the week at 1.1584 and at first continued to move lower to touch a new 14-month low on Tuesday at 1.1522. Since then, it paired all losses to close broadly unchanged at 1.1587.
GBPEUR opened at 1.1800 and traded rangebound for most of the week before moving higher on Friday to reach a 15-month high at 1.1770. It closed with a gain of 0.48% at 1.1857.
Movement rationale
It was still another complicated week for the single currency, as it reached new multi-year lows against Sterling and Dollar. In addition to a broad negative sentiment for the Euro, disappointing economic data triggered additional pressure on the currency, with the Eurozone industrial output falling in August, raising concerns that the bloc’s economic rebound may run out of steam. Also, the German ZEW economic sentiment worsened unexpectedly.
Week ahead
The Eurozone economic calendar this week includes the following:
Calendar
Wednesday 10am | Consumer Price Index (Sep)
Thursday 3pm | Consumer Confidence (Oct)
Friday 9am | Markit PMI Composite (Oct)
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