Monday 24th January – As UK private-sector growth dropped to an 11 month low, it meant that the Pound lost ground against many of its rivals. Adding to the pressure, the flash composite PMI also pushed lower while the ongoing spread of Omicron is also causing disruption to the recovery of the economy in the UK.
It was a different day for the Euro as it managed to climb against many of its rivals. Even the composite PMI coming in at an 11 month low could not dampen the single currency. There was strong data coming out of Germany as its PMI data was strong and this helped to boost the Euro while a risk-off mood also helped to drive up interest in the currency.
The US Dollar raced higher as ongoing concerns around tensions between Russia and the Ukraine meant that investors showed an interest in the safe-haven currency. NATO strengthened its position on the eastern borders as a Russian invasion is looking more likely. Furthermore, there was poor economic data and concerns around the Federal Reserve rate hike that caused issues for markets.
Tuesday 25th January
It was a volatile day for the Pound as the currency responded to political concerns which meant that investors were slightly nervous although the currency did edge upwards overall. Giving the Pound a boost was the public sector borrowing figures which came in under expectations, helping to bolster optimism around the recovery of the economy.
It was a disappointing day for the Euro after the single currency struggled to overcome the negative correlation with the stronger US Dollar ahead of the interest rate decision from the Federal Reserve. The business climate report for Germany was also better than expected which helped to boost the Euro. However, the largest economy in Europe is still expected to have hit a recession during the final quarter of 2021.
The US Dollar remained firm during the session as it continued to react to tendons between Russia and the Ukraine and this helped to ensure that demand remained high for the safe-haven currency. However, the upside was limited as US investors still remained hesitant ahead of the Federal Reserve policy meeting tonight.
Wednesday 26th January
It was a day of fluctuation of the Pound eventually moving sideways as investors waited to hear of the release of the Sue Gray report. There was very little in the way of data to help push the currency in either direction, which meant that it was a fairly subdued day for the Pound.
The Euro edged downwards as the upcoming Federal Reserve decision placed pressure on the single currency. The European Central Bank is taking a different approach to other central banks by tightening monetary policy and this placed a strain on markets as they awaited the Fed’s decision.
The US Dollar saw little movement with investors holding back as they were reluctant to make any moves before the Fed’s policy announcement. However, after the decision, the US Dollar soared as the US Central Bank announced that it would begin hiking rates in March with the rises being more aggressive than originally expected.
Thursday 28th January
It was a mixed day for the Pound as it strengthened against its weaker rivals following the release of retail sales data that was better-than-expected. Despite this, the ongoing political issues that the UK is facing as well as the risk-off market mood resulted in the currency being pushed lower against many of its peers.
The negative correlation with the US Dollar forced the Euro to suffer, especially as the US Dollar surged following the Federal Reserve Decision. The appeal of the single currency was also halted by Central Bank policy divergence as the Bank of England and the Fed looked to increase rates in March.
The US Dollar continued its shift in an upward trajectory following the news that the US Central Bank could begin an aggressive hiking cycle in the Spring. By the afternoon, the Greenback seemed to have hit its high after the US GDP growth rate was higher than expected but still did not manage to push the currency higher.
Friday 29th January
The Pound looked to show signs of weakening against many of its safer rivals although it did firm against many of its weaker rivals following poor economic data and ongoing tensions with Russia. A lack of data and the forthcoming findings surrounding ‘Partygate’ meant that there was mixed movement in the currency.
It was a mixed day for the Euro as GDP following the release of vital data from Eurozone economies. German GDP experienced a higher-than-expected contraction although France and Spain performed well. The single currency did make up ground against many of its weaker peers as a result of it being considered a safe-haven currency.
The US Dollar behaved much like the Pound and Euro, as it did take advantage of its weaker peers with a risk-off mood helping to create support for the Greenback. Data was mixed and this might have put a cap on any gains as PCE inflation did not meet forecasts and the core rate came in higher than expected.
Currency Ranges for the week:
GBP/USD: Low: 1.33673 High: 1.3522
GBP/EUR: Low: 1.18769 High: 1.20381
EUR/USD: Low: 1.11248 High: 1.13321