Weekly Market Report: 8th – 12th November 2021

Monday 8th NovemberOn Monday, the Pound started positively as it made up for some of the losses it experienced last week following the decision from the Bank of England on interest rates.

While there was no clear indication as to what caused the positive start, it was put down to investors looking to make investments at the right price. This saw the currency finish the day at 1.1705 against the Euro and 1.3563 against the US Dollar according to the Foreign Exchange Market.

 

It was a quiet day for the Euro on Monday as it reacted to dovish remarks from the European Central Bank. It stated that it would be counterproductive to rapidly tighten monetary policy following the recent rise in inflation across the Eurozone. However, the single currency could struggle today if the German ZEW economic index comes in below expectations.

The US Dollar lost ground to many of its peers as a risk-on mood drove down demand for the currency. This improvement in market mood was driven by the news that the new Covid-19 pill from Pfizer was highly effective while the reopening of travel between the UK and the US also acted as a catalyst for the risk-on mood.

Tuesday 9th November

The Pound strengthened at the start of trading on Tuesday after it became apparent that retail sales had recovered during October according to reports from the British Retail Consortium and Barclaycard.

Despite this, the National Institute of Economic and Social Research gave a bleak economic outlook, undermining the initial growth in the Pound. This saw the currency lose ground and finish at 1.1696 against the Euro and 1.3560 against the US Dollar according to the Foreign Exchange Market.

It was a mixed day for the Euro as it dipped at the start of the day following Germany’s balance of trade figures missing forecasts although there was a widening in the surplus. The single currency did make a recovery although it traded mostly sideways following an improvement in economic sentiment in Germany. 

The US Dollar moved higher yesterday against many of its rivals after a risk-off mood helped to provide support for the Greenback. As investors took in the latest financial stability report from the Federal Reserve, market sentiment dropped as it became clear that issues could arise from the real estate sector in China which could affect global markets.

Wednesday 10th November

The Pound lost ground against many of its rivals on Wednesday as it reacted to concerns surrounding Brexit, as it continues to weigh heavily on the currency.

The Brexit Minister did stand down from almost triggering Article 16 but this did nothing to ease the concerns of investors in relation to trade between the UK and EU. As a result, the Pound finished the day at 1.1677 against the Euro and 1.3412 against the US Dollar according to the Foreign Exchange Market.

The Euro dipped yesterday as German government advisers changed their growth forecasts for 2021, dropping it to 2.7% from 3.1%. There was more pressure added to the woes of the single currency as the US Dollar strengthened, strengthening the negative correlation. 

The US Dollar performed well yesterday and volatile trading couldn’t throw it off course. US inflation reached a new 31-year high of 6.1% and this increased the likelihood of the Federal Reserve hiking rates much sooner than expected. There were also more bids as a result of the jobless claims figures as they hit the lowest figure seen during the pandemic.

Thursday 11th November

On Thursday the Pound struggled as it lost ground against many of its main rivals after the latest data release highlighted that GDP growth had slowed during Q3 of this year.

When it comes to economic recovery, the UK is behind many of the other main economies while forecasts indicate that growth could slow down further in the fourth quarter. At the end of trading, the currency finished at 1.1675 against the Euro and 1.3365 against the US Dollar according to the Foreign Exchange Market.

A lack of data left the Euro experiencing a mixed day yesterday although it did manage to make up ground against some of the weaker peers. This came despite the negative correlation with a strengthening US Dollar. As tensions grew with Belarus after Minsk threatened to cut gas supplies the Euro was under pressure and this meant that gains were limited. 

Through the session on Thursday, the US Dollar remained fairly subdued and this was down to the partial closure of markets due to the Veterans Day holiday. However, the currency did edge higher against a number of its peers and this was down to the strong CPI seen on Wednesday.

Friday 12th November

The Pound strengthened against many of its rivals on Friday as there was optimism surrounding the Northern Ireland protocol.

Investors had high hopes as negotiations continued as the change in tone and approach from the UK was welcomed by the European Commission. This saw the currency finish the day at 1.1713 against the Euro and 1.3405 against the US Dollar according to the Foreign Exchange Market.

It was a difficult end to the week for the Euro as Eurozone industrial production contracted for the second month in a row. There were also political tensions between the EU and Belarus and this placed pressure on the single currency, especially as threats to halt gas supplies to the EU were made in reaction to planned EU sanctions. 

The US Dollar lost some of the ground it had made at the start of the week after some profit-taking and a risk-on mood. A lack of positive data also worked against the Greenback as the University of Michigan’s consumer sentiment index dropped which came as a surprise to investors. As the week begins, it’s likely that risk appetite is going to be the main driver behind the direction of the currency.

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