Weekly Market Report: 14th March – 18th March 2022

Friday 18th March – There was a lack of economic data on Friday and that meant a change in market mood, causing the Pound to struggle. Initially, the currency dipped as the European markets saw a risk-on rally although it did manage to make up for some of its losses as a result of an improved market mood during the afternoon.

 

The Euro dropped as the Eurozone printed a record trade deficit as a result of the rising costs of energy imports. The single currency did manage to recover some of its losses during the afternoon as a result of an improved market mood although it did trend downwards overall.

The US Dollar struggled against many of its peers as a risk-on-mood meant that demand for the currency had dropped.The Federal Reserve made some hawkish comments and that helped to limit any losses as policymakers looked to support rate rises at a faster pace this year.

Thursday 17th March 

The Pound strengthened initially prior to the announcement of the interest rate decision from the Bank of England although it dropped once the bank took a dovish stance. There was a vote on a 25-basis-point rate rise as experts indicated that the economic outlook in the UK had become concerning. As a result, the Pound lost any gains and hit a slump.

It was a successful day for the Euro as it strengthened through the session, even with the Eurozone’s final CPI coming in above forecasts, as markets remained hopeful that a peace deal could be struck in Ukraine. Furthermore, the single currency also took advantage of a negative correlation with the weakening US Dollar.

The US Dollar made further losses as markets took an upbeat mood, denting demand for the Greenback. Even though the Federal Reserve had increased rates, stocks still rose and that meant that the US Dollar dropped indicating that markets believe in the approach that the Fed is taking towards policy.

Wednesday 16th March

The Pound was fairly subdued even though there were suggestions that talks between Russian and Ukrainian diplomats were heading in the right direction. As the afternoon arrived, news that progress had been made on a 15-point peace plan meant that the Pound was given a boost against many of its peers.

It was a mixed day for the Euro as hope of peace in Ukraine helped to ease the pressure on the single currency. Despite this, the upcoming rate decision from the Federal Reserve meant that the currency struggled against a number of its stronger rivals. And so, the negative correlation with the US Dollar meant that the Euro was held back.

The US Dollar dropped against many of its rivals as it suffered due to a risk-on mood, stripping away any demand for the Greenback. Along with this, US retail sales figures were not as good as expected and that meant that the safe-haven currency had very little in the way of support. However, the currency did rise sharply in the lead up to the Fed decision although it quickly fell after the US Central Bank increased rates by 25 basis points.

Tuesday 15th March

There was a lack of direction for the Pound as a result of mixed jobs data. Unemployment in the UK dropped more than expected and this was down to an increase in economic activity. Along with this, there was an improvement in risk appetite and that helped to bolster the Pound, helping to move higher against many of its rivals.

The Euro suffered after a slump was seen in the German ZEW economic sentiment index. This forced investor morale to drop in the largest economy in Europe at a time when the crisis in Ukraine looks likely to push Germany into a recession. Central Bank divergence might have placed pressure on the single currency while there was no change in rates, despite the Federal Reserve and the Bank of England looking likely to increase rates.

The Us Dollar was forced downwards against many of its rivals as the market mood recovered. However, further lockdowns in China put a limit on risk appetite and the expectations of a rate hike also helped to limit the downside of the safe-haven currency.

Monday 14th March

The Pound remained sensitive to risk although it did manage to trend higher as the market mood took an optimistic mood as peace talks continued between Ukraine and Russia. Along with this, it is expected that a 25-basis-point rate hike will be implemented on Thursday at the Bank of England meeting, helping to bolster the currency.

There was better news for the Euro as it strengthened after the news that negotiations between Ukraine and Russia were positive. Russia also agreed to a ceasefire so civilians could evacuate Mariupol and that helped to support the single currency.

The US Dollar lost ground against many of its peers as an improved market mood meant that demand for the safe-haven currency dropped. Despite this, increasing cases of Covid-19 in China meant that risk sentiment was limited and strong US treasury yields meant that any losses were limited.

Currency Ranges for the week:

GBP/USD: Low: 1.30012 High: 1.32055

GBP/EUR: Low: 1.18263  High: 1.1947

EUR/USD: Low: 1.09298  High: 1.11357

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