• Audere Research

Weekly FX Outlook September 20th


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GB Pound


Sterling ended the week on a negative note.


Movements

GBPUSD opened at 1.3805 and briefly spiked up to reach 1.3910 on Tuesday, before moving down and closing the week with a negative return of -0.91% at 1.3680.


GBPEUR opened at 1.1720 and traded rangebound all week to close slightly lower at 1.1679 (-0.35%).


Movement rationale

Sterling started the week on the right foot. Strong employment data and a big upside surprise in the UK August inflation print (headline CPI came in at 3.2%, the highest reading since March 2012) is putting growing pressure on the BoE to hike interest rates next year, pushing the Pound up. Also, a generally risk-on mood in the market boosted GBP, which hit a 1-month high versus USD and EUR. However, a deterioration in risk sentiment on Thursday triggered a sharp correction, exacerbated by disappointing UK retail sales data, which showed an unexpected decline. Further, the recent rise in oil and gas is causing disruption in the UK energy market, with potential negative consequences in the supply chain and the future path of the economic recovery. Sterling therefore lost more than 1% against major rivals, giving back all previous gains and closing the week with a loss.


Week ahead

The UK economic data calendar includes the following, with all eyes on BoE meeting on Thursday:


Calendar

Thursday 12pm | BoE Interest Rate Decision, Markit Services PMI(Sep)

Friday 7am | GfK Consumer Confidence (Sep)


US Dollar


The Dollar moved higher during the second part of the week.


Movements

EURUSD began the week at 1.1779 and tried to recover some ground during the first part of the week, reaching 1.1845 on Tuesday. It then began to fall on and finally closed lower (-0.57%) at 1.1712.


GBPUSD opened at 1.3805 and briefly spiked-up to reach 1.3910 on Tuesday, before moving down and closing the week with a negative return of -0.91% at 1.3680.


Movement rationale

The Dollar traded broadly lower at the beginning of the week, amid positive risk sentiment. Also, inflation data missed expectations for the first time since November 2020 on Tuesday, sitting at 5.3%, down from 5.4% last month. Still, a drop-off in global risk appetite in the second part of the week, based on rising concerns regarding energy supply chains, triggered USD demand and a market correction. Additionally, some strong US data, led by better-than-expected retail sales, added to confidence that the US recovery is continuing well, pushing further up the Greenback, and extending gains into Friday.


Week ahead

The US economic calendar will be centred on Federal Reserve’s meeting, and will also includes the following:


Calendar

Wednesday 7pm | Fed Interest Rate Decision

Thursday 1:30pm | Initial Jobless Claims (Sep 17), Markit PMI Composite (Sep)


Euro


The Euro was stable.


Movements

EURUSD began the week at 1.1779 and tried to recover some ground during the first part of the week, reaching 1.1845 on Tuesday. It then began to fall on Thursday to finally close lower (-0.57%) at 1.1712.


GBPEUR opened at 1.1720 and traded rangebound all week to close slightly lower at 1.1679 (-0.35%).


Movement rationale

Some positive economic data in the Eurozone supported the single currency, with the Bloc’s industrial production recovering strongly in July after two months of contraction, and final inflation figures for August confirmed at 3%, a decade high. However, the Euro couldn’t capitalise too much on the positive data front. Pressure on the Euro is coming from German election uncertainty, with Chancellor Angela Merkel stepping down after 16 years, likely leading to a fragmented parliament.


Week ahead

A heavy Eurozone economic calendar this week includes the following:


Calendar

Wednesday 3pm | Consumer Confidence (Sep)

Thursday 9am | Markit PMI Composite (Sep)

Friday 9am | IFO – Business Climate (Sep)


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