Weekly Market Report: 7th – 11th February 2022

Friday 11th February – The Pound reacted to better-than-expected UK GDP data although it still experienced a mixed day of trading, even with the UK economy growing by 7.5% in 2021. Despite this, the currency lost some ground against risk-sensitive currencies as market mood improved.

 

The Euro slipped as it also suffered at the hands of dovish comments from the European Central Bank, which means that any expectations surrounding an imminent rate hike were dashed. There was also pressure placed on the single currency as investors looked to take advantage of higher-yielding assets that carried more risk.

A sell-off at the end of the week meant that the US Dollar suffered as a risk-on mood resulted in demand dropping for the safe-haven currency. To add to this, US consumer confidence dropped to a ten year low, causing further problems for the Greenback.

Thursday 10th February

The Pound strengthened against many of its rivals as investors grew in confidence as they readied themselves for aggressive interest rate rises by the Bank of England. Despite cautious comments from the BoE, UK government bond yields increased and this gave investors a reason to feel encouraged.

It was a mixed day of trading for the Euro as the currency enjoyed a negative correlation with the weak US Dollar. However, there was pressure placed on the Euro with the ongoing tensions between Russia and Ukraine growing.

The US Dollar started the day in a weak position as investors waited for the latest US CPI release. As US inflation came in above expectations, it meant that the US Dollar experienced some volatility. This caused the safe-haven currency to spike before hitting a slump after some profit-taking.

Wednesday 9th February

The Pound dropped yesterday after it lacked any direction due to the impact of Brexit and the cost-of-living crisis. The currency was also impacted by comments from Bank of England Chief Economist Huw Pill. His aim was to play down the expectations of strong policy action from the BoE, stating that there is a high level of uncertainty.

It was a quiet day for the Euro as there was a significant drop in trade surplus in Germany. However, the trade data was promising as exports and imports rose, experiencing a sharper rise in imports which linked to the shrinking surplus.

The US Dollar fell against many of its peers as investors took a risk-on-mood, pushing down demand for the Greenback. There was also additional pressure placed on the safe-haven currency after there was a pullback of US Treasury yields.

Tuesday 8th February

The Pound made up some ground as it benefited from data from the British Retail Consortium that came in better-than-expected. While the Bank of England rate hike last week, also helped to bolster the Pound. However, any gains were capped as a result of ongoing political problems, with pressure mounting on Boris Johnson to resign.

The Euro had little direction as a mixed market mood meant that it was fairly muted. This came after comments from the European Central Bank meant that demand for the single currency had dropped as a result of investors taking a hesitant stance.

The US Dollar was range bound as a volatile market mood meant that the Greenback did not experience much in the way of demands. Treasury yields continue to rise and that helped to prevent big losses.

Monday 7th February

During the session today, the Pound slipped as there was a lack of data available to provide support and that left the currency vulnerable to losses. Along with this, the cost-of-living crisis continued and that placed pressure on the Pound. Furthermore, there was more misery as the EY Item Club cut its UK growth forecast in light of rising inflation and a decrease in disposable income, which will hold the economic recovery back.

There was little movement for the Euro as investors waited for the latest speech from the European Central Bank. Last week, the hawkish approach from Christine Lagarde helped to bolster the single currency but she took a different stance today, as she remained more cautious. This meant that the currency remained subdued.

It was a quiet day for the US Dollar as an upbeat market mood meant that the safe-haven currency lost demand. Despite this, increasing Treasury yields helped to support the Greenback, enabling it to stand up against weaker rivals.

Currency Ranges for the week:

GBP/USD: Low: 1.35071  High: 1.36403

GBP/EUR: Low: 1.18006  High: 1.19592

EUR/USD: Low: 1.13341  High: 1.14881

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