Weekly Market Report: 29th November – 3rd December 2021

Monday 29th November – Monday was a mixed day for the Pound even though consumer credit rose to 0.7bn last month, way above expectations, as people increased their borrowing during the rebound after lockdown. However, Brexit concerns and Northern Ireland protocol negotiations along with the latest Covid-19 variant are all weighing heavily on the Pound. According to the Foreign Exchange Market, this saw the currency finish at 1.179 against the Euro and 1.3315 against the US Dollar.

 

The Euro continued moving upwards yesterday, taking advantage of weakening peers as the Omicron variant continued to cause problems. There was a drop in consumer confidence as well as economic sentiment while a surge in German inflation which reached 6% was also not enough to give the single currency a stronger nudge in the right direction.

The US dollar weakened at the start of the day as there was an improvement in risk appetite following the market shock after the announcement of the Omicron variant last week. Despite this, the Greenback bounced back as it headed into the afternoon as investors continued to take advantage of the strength of the safe-haven currency.

Tuesday 30th November

Throughout the session on Tuesday, the Pound lost ground as it suffered from a lack of data, leaving it open to losses.

Brexit uncertainties are weighing heavily on the currency while comments from the Bank of England around the new Covid-19 variant potentially slowing down consumer spending also added to its woes. At the end of trading, the pound finished at 1.1734 against the Euro and 1.3296 against the US Dollar according to the Foreign Exchange Market.

The Euro saw a sharp rise before the session started yesterday but it then started to drop even though German employment data looked positive. There was no clear driver for any movement which meant that it was at the mercy of the latest Omicron variant news throughout the Eurozone and the rest of the world.

The US Dollar started the day behind after traders reacted to the new Omicron variant as they stopped bets on a rate increase from the Federal Reserve. However, the safe-haven currency then reacted to comments from the Federal Reserve as it said that the central bank could still speed up the tapering process but still, the US Dollar could not retain these gains.

Wednesday 1st December

The Pound experienced a rangebound day of trading on Wednesday.

This was down to a number of factors such as the final manufacturing PMI which gave a varied picture of factory activity. Along with this, comments from the Bank of England placed pressure on the currency after it warned that the economy still has some work to do until it recovers. This saw the Pound finish at 1.1730 against the Euro and 1.3278 against the US Dollar according to the Foreign Exchange Market.

It was also a muted day for the Euro as it remained motionless after the release of the Eurozone’s finalised manufacturing PMI. The reading was high but the report still indicated that there are still supply issues. This proved that the reading is hiding the reality which is that businesses are facing tough challenges and that supply chains are continuing to deteriorate.

It was a volatile day for the US Dollar although it did make up some ground in the Afternoon following comments from the Federal Reserve. Along with this, the ADP payrolls data came in better than expected, highlighting that a continued recovery was ongoing in the US labour market while ISM manufacturing also beat expectations.

Thursday 2nd December

The Pound saw a change in fortune on Thursday as it reacted to news that further investment would be made in the biopharmaceutical industry in the UK.

There was a £400m boost for the UK vaccine factory in Stockton-on-tees while the government also announced that £5.5bn would be invested in Covid research and the manufacturing of vaccines. This saw the currency finish at 1.1764 against the Euro and 1.33 against the US Dollar according to the Foreign Exchange Market.

The Euro started the day in a firm position as it was announced that the unemployment rate in the EU had dropped for the sixth month in a row. However, any gains were soon lost as a strong US dollar placed a strain on the single currency due to the negative correlation between the two.

It was a mixed day for the US Dollar on Thursday as it seems as though investors were holding off for the release of non-farm payrolls data today. However, there was some support found during the afternoon as upbeat jobless claims data and positive comments from the  Federal Reserve helped to give the currency a boost.

Friday 3rd December

On Friday afternoon, the Pound took a sharp dive after it reacted to dovish comments from the Bank of England.

The comments indicated that a hike rate is likely but the bank would need more information on the new Omicron variant before it makes a final decision on monetary policy. This caused investors to shun the currency and that placed a lot of pressure on it at the end of the week. As a result, it finished at 1.1695 against the Euro and 1.3233 against the US Dollar according to the Foreign Exchange Market.

The Euro was quite erratic on Friday although it did make gains after the release of some upbeat economic data. The November composite PMI showed that the Eurozone saw an acceleration in growth for the first time in four months. Along with this, retail sales also mounted a recovery as they grew by 0.2% in October.

The US Dollar gained ground against most of its rivals and even US non-farm payrolls couldn’t stop the Greenback. What boosted the currency was the US unemployment figure which dropped by 0.3% while ISM services PMI also came in about forecasts, helping the currency to make decent gains.

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