Weekly Market Report: 6th – 10th September 2021

Monday 6th September -Further problems with the supply chain in the UK weighed heavily on the Pound on Monday, forcing it to lose ground to many of its peers. As a result of Brexit-related staff shortages, the UK construction PMI dropped to a new five-month low, heaping pressure on the currency while increasing prices in line with global demand also caused problems. As a result, the Pound finished at 1.1655 against the Euro and 1.3837 against the US Dollar according to the Foreign Exchange Market.

 

It was a varied day for the Euro yesterday as the impact of the increase in German factory orders was undone by a drop in investor confidence in the EU. Exchange rates were boosted by the rise in German factory orders which increased by 3.4% in July. Despite this, investor confidence has now dropped to the lowest levels seen since April and this forced the single currency to remain fairly range bound.

There was also little movement in the US Dollar yesterday, although it did gain some ground on its rivals. With market sentiment remaining relatively steady, the Greenback eventually remained in a narrow range, giving it a slight rebound overnight.

Tuesday 7th September

On Tuesday, the Pound reached a six-week low against the Euro following news that National Insurance Contributions would increase by 1.25%.

This caused concerns that it could cause issues for the economy and force businesses to cut jobs. The losses were limited as the Bank of England suggested that interest rates could increase next year, leading to the currency experiencing decent gains against many of its rivals. At the end of trading, according to the Foreign Exchange Market, the Pound finished at 1.1639 against the Euro and 1.3786 against the US Dollar.

It was a day of mixed fortunes for the Euro yesterday as it lost ground against the US Dollar and made gains against a number of its rivals. German industrial production came in over expectations, giving the single currency a boost while employment and GDP growth in the bloc also came in with favourable numbers. Despite this, any gains were capped after the German ZEW economic sentiment failed to meet forecasts.

The US Dollar experienced another strong day as the US ten-day Treasury note increased to 1.375%. This put the Greenback in a strong position, helping it to continue its recovery after disappointing non-farm payroll data last week. To further boost the currency, a downturn in market sentiment also enhanced the appeal of the USD.

Wednesday 8th September

There was very little in the way of support for the Pound on Wednesday as the latest announcement of National Insurance Contributions increases weighed heavily on the currency.

Sterling was also impacted by continuing Brexit concerns after it was making headlines again after the government moved to extend the grace period on Irish Sea border checks. As a result, the currency finished at 1.1654 against the Euro and 1.3773 against the US Dollar according to the Foreign Exchange Market.

There were mixed messages coming from the European Central Bank and that weakened the Euro yesterday. There was a message of caution from the bank after it was announced that they could begin to normalise monetary policy soon which should have given the currency a boost but this was put down by suggestions that a highly accommodative monetary policy is still required.

The US Dollar continued to trend upwards on Wednesday as the currency continued to gain support even though the market mood was rather bearish. This was also boosted by the news that the latest JOLTs job opening figures reached a new record high in July.

Thursday 9th September

On Thursday the Pound reached a new three-week high against the Euro, even after the negativity surrounding an increase in National Insurance Contributions.

However, the upside in the Pound came as a result of hawkish comments from the Bank of England as it claimed that the economy had met the criteria to begin tightening monetary policy, which could mean that the rate will increase next year. At the end of trading, according to the Foreign Exchange Market, Sterling finished at 1.1709 against the Euro and 1.3837 against the US Dollar.

The Euro lost some ground yesterday after it was announced that the European Central Bank would reduce the speed of its bond buying programme instead of slowing down crisis-era aid. The ECB insisted that this was not tapering although the move took a different approach to the Federal Reserve and the Bank of England and that was the likely reason for the downturn in the EUR.

The US Dollar experienced losses yesterday as market sentiment improved, reducing demand for the safe-haven currency. Following the ECB’s decision, risk appetite increased and this was also supported by news that US jobless claims had also hit a new low during the pandemic, placing further pressure on the currency.

Friday 10th September

On Friday, the Pound traded sideways against many of its peers as the GDP release did nothing in the way of bolstering the currency.

UK GDP came in at 0.1% during July and that left investors believing that the economy had stalled. Some called it nothing more than a blip after it increased by 1% during June although expectations suggest that growth is likely to improve during the rest of the year. As a result, the currency finished the day at 1.1712 against the Euro and 1.3833 against the US Dollar according to the Foreign Exchange Market.

It was a mixed day for the Euro as it lost ground against the US Dollar but beat many of its peers. This improvement came following news that the European Central Bank would slow down the speed of pandemic-era bond buying. Furthermore, forecasts for growth and inflation were also lifted by the ECB.

Through trading on Friday, the Us Dollar strengthened following a rise in US Treasury yields which helped to bolster the Greenback. It also gained support from a risk-off mood with inflation and growth concerns as well as the slow down of crisis-era stimulus markets causing investors to seek haven in the currency.

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