Weekly Market Report: 6th – 10th December 2021

Monday 6th December – The increase in the UK’s construction PMI gave the Pound an initial boost on Monday as the data indicated that this was the fastest increase in purchasing for three months. Despite this, comments from the Bank of England put a stop to any gains as the bank expressed concerns about the challenging period for monetary policy and this pushed the currency back slightly. According to the Foreign Exchange Market, the Pound finished at 1.1754 against the Euro and 1.3262 against the US Dollar.

 

The Euro failed to make any gains during trading on Monday as it lost ground against many of its rivals following a drop in German factory orders which fell more than expected. There was a contraction of 6.9% which was a lot higher than -0.5% and this weighed heavily on the single currency.

The US Dollar also lost ground against many of its rivals as a risk-on mood meant that demand for the Greenback dropped. This improved sentiment came after the news was released that it’s looking likely that the Omicron variant causes mild symptoms while the preliminary data is also looking fairly promising.

Tuesday 7th December

The Pound was left vulnerable to losses on Tuesday as it lost ground against many of its rivals due to a lack of data.

The Omicron variant of Covid-19 is a cause for concern and with cases rising, investors are concerned that new restrictions could dent the economic recovery. The ongoing Brexit fishing row is still weighing heavily on the currency but at the close of trading, the Pound finished at 1.1751 against the Euro and 1.3246 against the US Dollar according to the Foreign Exchange Market.

The Euro also lost ground on Tuesday as mixed data from across Europe put a dent in the single currency while investors took a risk-on market mood. German industrial production beat expectations but the German ZEW economic sentiment index dropped and that placed pressure on the currency. A lack of data today could also leave the Euro exposed to further losses.

It was a mixed day for the US Dollar as demand for the safe-haven currency was dented thanks to a bullish market mood. However, the Greenback managed to rise against the Pound and the Euro following hawkish comments from the Federal Reserve.

Wednesday 8th December

The Pound took a tumble on Wednesday as it reacted to news that new covid restrictions would be brought back in.

Even though the new strain is looking as though it could come with milder symptoms, the Prime Minister decided that new restrictions would help to stop the spread. This placed pressure on the currency and forced it downwards. As a result, it finished the day at 1.1643 against the Euro and 1.3208 against the US Dollar according to the Foreign Exchange Market.

The Euro strengthened against many of its rivals yesterday following news that the European Central Bank would increase its stimulus programme in light of the new Covid variant. This gave the single currency a boost as this will result in a tightening of monetary policy.

There was some selling pressure on the US Dollar as the impact of the new variant left investors concerned about the economic recovery. Pfizer/BioNTech announced that a third vaccination would neutralise the new variant and this helped to boost markets and as a result, the appeal of the safe-haven currency dropped.

Thursday 9th December

The Pound managed to recover some of its losses on Thursday as it firmed following its poor performance on Wednesday following the announcement that new Covid-19 restrictions would be put in place.

It looks as though the upside comes from many other currencies weakening and investors looking to make shrewd investments. According to the Foreign Exchange Market, the Pound finished at 1.1709 against the Euro and 1.3223 against the Us Dollar.

It was a quiet day for the Euro as it reacted to a narrowing of trade surplus in Germany. This raised concerns that the biggest economy in Europe might not recover as swiftly as expected. Causing more problems for the single currency was strong US data which meant that the Euro suffered from a negative correlation against the US Dollar.

The US Dollar experienced a change in risk sentiment on Thursday as new covid measures were put in place in the UK. Along with this, tensions around the globe and concerns around the debts of Chinese property company Evergrande all worked in favour of the Greenback. Furthermore, an improvement in the US initial jobless claims figure saw it hit the lowest level for 50 years and that helped to give the US Dollar a further boost.

Friday 10th December

The Pound had a relatively quiet day on Friday after data showed that GDP growth had slowed to 0.1% in  October.

Despite the disappointing data, the Pound still remained relatively strong as it managed to move sideways and it even strengthened against some of its rivals. However, the news of new restrictions and working from home placed some downward pressure on the currency. According to the Foreign Exchange Market, the currency finished at 1.1726 against the Euro and 1.327 against the US Dollar.

It was a mixed day for the Euro at the end of the week after it lost ground following the release of the German inflation rate. It did manage to make up some ground during the afternoon although it did benefit from a strong negative correlation with the US Dollar.

The US Dollar experienced a sharp drop on Friday even with US inflation reaching a 39-year high of 6.8%. Despite this, the drop came as a result of profit-taking with investors looking to take advantage of the price of the Greenback.

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