Weekly FX Outlook September 7th

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GB Pound

Sterling had a volatile week.

Movements

GBPUSD had a volatile week, opening at 1.3404 and moving up to 1.3480 (new high) before sharply reversing the uptrend and depreciating to close at 1.3227, for a weekly fall of 1.31%.

GBPEUR had a relatively volatile week, starting at 1.1188 and trading higher to reach 1.1275 (12-week high) before erasing the gain on Thursday and Friday and closing slightly lower at 1.1166 (-0.20%).

Movement rationale

While Sterling initially continued to move higher on Tuesday, fuelled by an improved global risk appetite, a shift in market sentiment abruptly pushed the currency lower in the second half of the week. Stalled progress in Brexit talks contributed to the Sterling weakness with anxiety over a no-deal scenario starting to weigh on the currency.

Week ahead

GBP is expected to have a relatively volatile week ahead, with a thin economic agenda and another round of Brexit negotiations scheduled to take place between the UK and EU.

Calendar

Tuesday | Inflation Report Hearings

Friday 7am | Manufacturing Production (Jul), Industrial Production (Jul), Gross Domestic Product (Jul)

US Dollar

The US Dollar reversed some of the recent losses.

Movements

EURUSD was relatively volatile, opening at 1.1979 and initially trading with a positive bias on Tuesday, trading briefly above the 1.20 (level not seen since May 2018) before starting to move lower towards the second half of the week to close at 1.1845, recording a weekly loss of 1.12%.

GBPUSD had a volatile week, opening at 1.3404 and moving up to 1.3480 (new high) before sharply reversing the uptrend and depreciating to close at 1.3227, for a weekly fall of 1.31%.

Movement rationale

The Dollar began last week on a soft note, registering new lows versus Euro and Sterling on Tuesday. However, a shift in market sentiment commenced in the second part of the week, as a sell-off in US stocks triggered demand for safe-haven assets, pushing up the Dollar. Friday’s US job data also appeared to help the currency regain some ground, as the unemployment rate improved to 8.4% from 10.2% in July.

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

Thursday 1:30pm | Initial Jobless Claims (Sep 4)

Friday 1:30pm | Consumer Price Index (Aug)

Euro

The Euro had a volatile week.

Movements

EURUSD was relatively volatile, opening at 1.1979 and initially trading with a positive bias on Tuesday, trading briefly above the 1.20 (level not seen since May 2018) before starting to move lower towards the second half of the week to close at 1.1845, recording a weekly loss of 1.12%.

GBPEUR had a relatively volatile week, starting at 1.1188 and trading higher to reach 1.1275 (12-week high) before erasing the gain on Thursday and Friday and closing slightly lower at 1.1166 (-0.20%).

Movement rationale

The Euro, after reaching a new high versus the Dollar, above the symbolically important 1.20 level, started to weaken during the second part of the week, as ECB officials voiced some concerns that the recent currency strength might hold back the bloc’s economy and drag down prices. On the economic front, data was mixed, with PMI releases from Germany and the Euro area beating expectations, while on the other hand core inflation collapsed to 0.4% in August and the unemployment rate continues to rise (up to 7.9% from 7.7% in June) despite reopening of economies.

Week ahead

The European economic calendar includes the following:

Calendar

Tuesday 10am | Gross Domestic Product (Q2)

Thursday 12:45am | ECB Interest Rate Decision

Friday | Eurogroup Meeting

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