GB Pound
Sterling had a volatile week.
Movements
GBPUSD opened at 1.3680 and initially moved down, hitting a 1-month low on Wednesday (1.1607). It then sharply recovered on Thursday, appreciating 1% to 1.3750 before finally closing nearly unchanged at 1.3671.
GBPEUR opened at 1.1679 and during the first part of the week edged lower, down to 1.1610. It then bounced back on Thursday and briefly went back above 1.17 before finishing the week where it started (1.1669).
Movement rationale
Sterling was under pressure during the first part of the week, as Europe’s worsening energy crisis is starting to outline a less stable economic outlook for the UK, with five small energy suppliers having already gone bust over the last six weeks and another four expected to follow soon. Rising UK energy prices and supply disruptions caused by a lorry driver shortage negatively affected the currency in the first half of the week. The momentum changed on Thursday, as a somewhat hawkish tone from the BoE highlighted the risk of elevated inflation and suggested a sooner than expected rate hike. This pushed the Pound up against major rivals. The UK currency eventually pulled back on Friday as disappointing UK retail sales missed expectations.
Week ahead
The light UK economic data calendar includes the following:
Calendar
Thursday 7am | Gross Domestic Product (Q2)
Friday 9:30am | Markit Manufacturing PMI (Sep)
US Dollar
The Dollar was mixed.
Movements
EURUSD began the week at 1.1712 and showed little volatility, trading in a tight range all week (1.1690-1.1750) to close unchanged at 1.1715.
GBPUSD opened at 1.3680 and initially moved down, hitting a 1-month low on Wednesday (1.1607). It then sharply recovered on Thursday, appreciating 1% to 1.3750 before finally closing unchanged at 1.3671.
Movement rationale
The FX markets and USD were driven by a deterioration of risk sentiment at the beginning of the week, with the Dollar appreciating against major currencies as contagion grew from companies in the property development sector, following concerns over the future of Evergrande and its impact on the wider markets. USD continued to move higher on Wednesday, as the Federal Reserved indicated that tapering could begin as soon as November, moving to a slightly more aggressive policy normalization campaign than anticipated. Investors’ risk sentiment then improved on Thursday after Beijing injected fresh cash into its financial system, and the Greenback wiped out all gains from the previous sessions. Finally, a sell-off in global equities sent the USD slightly higher on Friday, although eventually it closed the week relatively unchanged.
Week ahead
The US economic calendar includes the following:
Calendar
Monday 1:30pm | Durable Goods Orders (Aug)
Tuesday 3pm | Consumer Confidence (Sep)
Thursday 1:30pm | Initial Jobless Claims (Sep 24), Gross Domestic Product (Q2)
Friday 3pm | ISM Manufacturing PMI (Sep), Michigan Consumer Sentiment Index (Sep)
Euro
The Euro was stable ahead of German elections.
Movements
EURUSD began the week at 1.1712 and showed little volatility, trading in a tight range all week (1.1690-1.1750) to close unchanged at 1.1715.
GBPEUR opened at 1.1679 and during the first part of the week edged lower, down to 1.1610. It then bounced back on Thursday and briefly went back above 1.17 before finishing the week where it started (1.1669).
Movement rationale
Despite the uncertainty related to the upcoming German elections, the Euro remained relatively firm last week, with investors reluctant to take positions ahead of the polls. In term of economic data, positive news came from consumer confidence in the Eurozone, which picked up in September and beat market expectations. However, some disappointing data weighted on the single currency in the second half of the week, with manufacturing PMI in Europe coming out lower than expected and German IFO Business Climate unexpectedly dropping in September.
Week ahead
The Eurozone economic calendar this week includes the following:
Calendar
Wednesday 10am | Industrial Confidence (Sep), Business Climate (Sep)
Thursday 10am | Consumer Price Index (Sep)
Friday 7am | German Retail Sales (Aug)
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