Weekly Market Report: 10th – 14th January 2022

Monday 10th January – It was a relatively mixed day for the Pound as a lack of data meant that there was no real direction for the currency. There was also mixed news in the form of Omicron news although there are signs that cases are dropping, which means that this could help to give the Pound a boost.

 

The Euro strengthened against many of its rivals and this was partly down to the fact that a turn in market sentiment meant that investors took haven in the single currency. There was also a downward trend in the Eurozone unemployment figures and that helped to budge the currency in the right direction. Despite this, any gains were limited as a result of the strong correlation with the strengthening US Dollar.

As the Federal Reserve took some strong policy action, it caused the US Dollar to strengthen as markets reacted nervously and investors lost their appetite for risk, all of which helped to support the safe-haven currency. Inflation is looking to be more challenging than central bankers expected and so, there are expectations that the Fed will increase rates soon, all of which would have an impact on global markets.

Tuesday 11th January

The Pound reached a peak on Tuesday following encouraging data relating to UK jobs while the Bank of England rate hike bets helped to prop the currency up. However, profit-taking then forced the Pound to lose these gains as investors looked to cash in on the strength of the currency, forcing it to take a dip against many of its rivals.

It was an unsteady day for the Euro during trading as the European Central Bank gave off some mixed messages. The bank attempted to reassure people that the bank took a serious approach to inflation although the views on policy did not seem to change. Along with this, it argued that inflation could remain high for longer than anticipated.

The US Dollar firmed in advance of the Federal Reserve Chair Jerome Powell giving testimony in front of the US senate. The safe-haven currency then started to lose some ground as it weakened as Powell testified. Despite the hawkish tone from the Fed chief, nothing new to markets and this saw the USD lose some of its gains.

Wednesday 12th January

The Pound lost some footing against many of its rivals as investors reacted to political concerns surrounding the call for Boris Johnson to resign. There was further pressure placed on the Pound as concerns around Brexit and the ongoing talks over the Northern Ireland protocol are likely to continue this week.

The Euro strengthened against a number of its weaker rivals after the US Dollar dropped sharply, helping the single currency to benefit from the negative correlation between the two. Despite this, any gains were capped as a result of the risk-on market mood.

The US Dollar took a tumble as it dropped to new two-month lows, even though US inflation managed to hit a 40-year high. It looks as though the market had already included in the inflation rate reading when pricing, as some investors remained hopeful that it would come in above expectations and this cause the US Dollar to slip. The downside was also encouraged by a risk-on mood as investors opted for those currencies that offered riskier yet higher yields.

Thursday 13th January

The Pound traded in a wide range although it eventually ended up trending sideways as it reacted to the ongoing uncertainty around the future of Boris Johnson. There was also some economic activity that caused the Pound to experience some volatility although some major retailers did report solid Christmas profits although the hospitality industry did record losses.

The Euro strengthened and even some volatility couldn’t dent its improvement as it took advantage of a weakening US Dollar. However, negative comments from the European Central Bank meant that any gains were capped as it stated that any current inflationary pressures are temporary.

The US Dollar continued to post losses yesterday following the ongoing post-CPI sell-off. Along with this, investors took a riskier approach which meant that they shunned the Greenback. There was also some disappointing data that meant that there was little support for the safe-haven currency. The latest Producer Price Index and initial jobless claims came in lower than expected, placing pressure on the US Dollar.

Friday 14th January

It was a mixed day for the Pound as it made gains against its weaker rivals as a result of some encouraging GDP data. Despite this, the market mood was relatively subdued and this meant that any gains were capped and that resulted in it losing ground against certain safe-haven currencies.

The Euro was also mixed after weak German GDP data placed pressure on the single currency along with the Eurozone trade deficit. However, there was a drop in risk on a global scale and that helped to bolster the Euro against many of its peers.

The US Dollar made up some ground as a downturn in market mood meant that the demand for the Greenback received a welcome boost. There was a drop in US retail sales although this didn’t cause too many problems for the safe-haven currency although the data might have added to the drop in trading sentiment.

Currency Ranges for the week:

GBP/USD: Low: 1.35375  High: 1.37466

GBP/EUR: Low: 1.19584  High: 1.201

EUR/USD: Low: 1.12922  High: 1.14816

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