Weekly Market Report: 21st March – 25th March 2022

Friday 25th March – There was an initial drop in the Pound as the latest retail sales data showed that there was a drop. Despite this, the currency did make up some of its losses even though there was no catalyst. An improvement in market mood might have been the reason as well as dip-buying.

 

As the Ifo German business climate indicator dropped to a 14-month low, the Euro struggled to gain any traction. Adding to its woes is the ongoing invasion of Ukraine as hopes of peace faded after more Russian attacks.

The US Dollar nudged higher against many of its peers even though there was a risk-on mood in markets. Even the US consumer confidence score, which was revised lower, was not enough to dent the demand for the safe-haven currency.

Thursday 24th March 

The Pound moved downwards with investors still concerned about the increasing costs of living. Furthermore, commentators were claiming that Rishi Sunak had not done enough to help ease the burden for those who are struggling. However, some support might have been taken from the increase in UK services PMI although there were caveats accompanying the PMI as business optimism dropped to a 17-month low.

It was a mixed day for the Euro after a change in mood in European markets. Even with Russia continuing to invade Ukraine, news of an agreement for the US to supply gas to Europe helped to improve the mood. The Eurozone PMIs also added to the Euro although business activity dropped but composite PMI came in higher than expected.

The US Dollar lost ground after US durable goods orders dropped by 2.2% which was higher than expected. Adding to its problems was a risk-on mood, although this did waver throughout the day.

Wednesday 23rd March

There was a sharp drop for the Pound as rising inflation caused concerns that the UK’s cost-of-living crisis would worsen. The Spring statement from the chancellor and the OBR economic forecast did nothing to ease those fears as the OBR reduced growth forecasts stating that living standards are going to fall significantly.

The Euro lost ground against many of its peers as concerns around the crisis in Ukraine caused a dip in mood. Analysts are worried that Russia is now strengthening its attacks and changing tactics to further invade Ukraine and this saw the European equity markets struggle with the STOXX 600 dropping by 1%.

It was a mixed day for the US Dollar as the safe-haven currency made up ground against its weaker rivals. Despite this, the currency was unable to take advantage and so, some of the gains were lost in the afternoon, causing it to drop against its stronger rivals.

Tuesday 22nd March

It was a positive start for the Pound as it strengthened against many of its peers yesterday as investors overlooked a dovish stance from the Bank of England. Borrowing figures were mixed and that might have given the currency a boost and although the budget deficit came in higher than expected, government borrowing is likely to come in below government forecasts.

It was a mixed day for the Euro as it seems as though talks between Russia and Ukraine seemed to stall. However, any losses for the single currency might have been eased as a result of a weaker US Dollar and a negative correlation between the two.

There was selling pressure yesterday as a risk-on mood dented the demand for the US Dollar. Hawkish comments from the Federal Reserve help to soften the downside for the currency although markets are deciding that tighter monetary policy is required yet investors still maintain an upbeat attitude.

Monday 21st March

At the start of trading, the Pound slipped although the afternoon saw it recover those losses even though there were no clear drivers behind the movement. The strength of the Pound could have been attributed to a technical correction as traders repositioned themselves following the disappointing decision from the Bank of England last week. Furthermore, there was a recovery in the Bank of England bond yields which might have offered support.

The Euro weakened as increasing energy prices concerned EUR investors with some EU countries contemplating putting an embargo on Russian oil. With higher energy prices as well as sanctions on imports, this could cause a lot of economic issues for the Eurozone.

The US Dollar lost ground against a number of its peers yesterday and this came following an upbeat market mood, pushing down demand for the Greenback. The Federal Reserve made some hawkish comments as policymakers said they support a rapid rate of tightening and that could have offered support for the safe-haven currency, helping to cap losses.

Currency Ranges for the week:

GBP/USD: Low: 1.31239 High: 1.32906

GBP/EUR: Low: 1.18922  High: 1.20494

EUR/USD: Low: 1.09614  High: 1.10483

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