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Weekly FX Outlook September 28th



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GB Pound

Sterling had a volatile week.

Movements

GBPUSD opened at 1.2882 and moved lower in the first half of the week, briefly trading down to 1.2680 before recovering part of its losses and ending the week with a negative performance of 0.72% at 1.2789.

GBPEUR had a positive week, opening at 1.0894 and initially trading in a narrow range (1.0850-1.0940) before moving higher and closing at 1.0999 up by 0.96%.

Movement rationale

At the start of the week, rising risk-aversion and the introduction of new COVID measures in Britain, weighed on Sterling, which reached a 2-month low versus the Dollar by Wednesday. Little support was offered by BOE comments, although the BOE governor ruled out negative rates in near future. Sterling then rebounded strongly towards the end of the week amidst restored optimism on the outcome of Brexit trade negotiations.

Week ahead

With limited major data releases this week, Sterling should remain driven by risk sentiment and Brexit headlines, with the ninth and final round of scheduled negotiations taking place.

Calendar

Tuesday 3pm | BoE's Governor Bailey speech

Wednesday 7am | Gross Domestic Product (Q2)

Thursday 9:30pm | Markit Manufacturing PMI (Sep)

US Dollar

The US Dollar had a strong week.

Movements

EURUSD opened at 1.0830 and steadily depreciated throughout the week to close at 1.1627, registering a weekly loss of 1.72%

GBPUSD opened at 1.2882 and moved lower in the first half of the week, briefly trading down to 1.2680 before recovering part of its losses and ending the week with a negative performance of 0.72% at 1.2789.

Movement rationale

The Dollar cemented its best weekly run since April and traded near its two-month high against a basket of major currencies, as rising Coronavirus infections in Europe and uncertainty surrounding the upcoming U.S. elections triggered a risk-off sentiment. This resulted in heavy losses in the equity markets and a renewed demand for Dollar. Also, data for US jobless claims released Thursday ticked higher, signalling a prolonged weakness in the US labour market which is struggling to maintain the initial rate of recovery from the damages caused by the pandemic.

Week ahead

USD is expected to have a relatively volatile week ahead, with the following main events having the potential to influence the markets:

Calendar

Tuesday 3pm | Consumer Confidence

Wednesday N/A | Presidential Debate, 1:30 | Gross Domestic Product Annualized (Q2)

Thursday 1:30pm | Initial Jobless Claims (Sep 25), 3pm | ISM Manufacturing PMI (Sep)

Friday 1:30pm | Nonfarm Payrolls (Sep), Unemployment Rate (Sep), 3pm | Michigan Consumer Sentiment Index (Sep)


Euro

The Euro had a weak week.

Movements

EURUSD opened at 1.0830 and steadily depreciated throughout the week to close at 1.1627, registering a weekly loss of 1.72%

GBPEUR had a positive week, opening at 1.0894 and initially trading in a tiny range (1.0850-1.0940) before moving higher and closing at 1.0999 up by 0.96%.

Movement rationale

The Euro suffered downward pressure last week as investors seemed hesitant to buy the currency amid worsening Eurozone Coronavirus fears. Slightly disappointing German business confidence data published Thursday indicated that the recovery is slowing, and dovish comments from the European Central Bank also weighed on the Euro.

Week ahead

The Eurozone economic data calendar includes the following:

Calendar

Monday 2:45pm | ECB's President Lagarde speech

Tuesday 10am | Consumer Confidence (Sep), Business Climate (Sep)

Wednesday 7am | Germain Retail Sales (Aug)

Thursday 10am | Unemployment Rate (Aug)

Friday 10am| Consumer Price Index (Sep)


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