Weekly Report – 12th September – 16th September 2022

Friday 16th September – It was a disappointing end to the week for the Pound as it lost ground following the release of UK retail sales figures. Sales had dropped by 1.6%, which is more than expected and that could be a sign that the economy is already in recession.

 

It was a day of better fortunes for the Euro as it made up ground against many peers. The final inflation rate in the Eurozone confirmed the rise last month and this firmed up ECB rate rise bets. Along with this, Germany took ownership of stakes in three Russian oil refineries, which helped to ease concerns about the energy crisis.

The US Dollar also strengthened on Friday as the Greenback took advantage of a risk-off mood. Some of those gains were lost during the afternoon as a result of US consumer sentiment coming in under expectations.

Thursday 15th September

The Pound weakened during the day as investors decided to show an interest in other currencies following a dip in risk appetite. The drop in the currency came after a lack of domestic economic data and a drop in mood following the death of the queen.

It was a different day for the Euro as it trended higher as it gained support following hawkish remarks from the European Central Bank. The ECB claimed that it should prioritise dealing with inflation following worries over growth.

The US Dollar also followed the Euro as it made up ground after investors reacted to better-than-expected US Retail sales figures. Despite this, there was a cap on these gains after the release of US industrial production figures showed a contraction in output during August.

Wednesday 14th September

Following the release of the UK’s consumer price index for August, the Pound surged higher. Headline inflation slowed slightly, giving households some much-needed relief when it comes to the cost-of-living crisis. However, core inflation nudged higher, raising expectations that another interest rate rise is likely.

At the start of trading, the Euro edged higher as investors were hopeful that the European energy crisis could come to an end. Traders were boosted by news from Ukraine while the plan to support economies throughout the crisis also added to the optimism. Despite this, the gains were lost as comments from the European Central Bank indicated that interest rate rises might be smaller than expected.

The US Dollar struggled although it did slightly nudge higher throughout the day. Some traders decided to cash in which meant that the Greenback was placed under selling pressure.

Tuesday 13th September

At the start of trading, the Pound initially firmed as a mixed labour market report indicated that a 75-bp rate rise might be likely. However, the currency soon took a turn as further industrial action was announced at Felixstowe container port, leading to concerns that the UK economy will be placed under further pressure.

The Euro moved higher as it took advantage of weaker peers following further optimism that the war in Ukraine and the energy crisis might come to an end soon. However, these gains were limited as economic sentiment in Germany dropped to a new 14-year low.

The US Dollar moved upwards as it reacted to a better-than-expected CPI print. Headline and core inflation both came in higher than forecasts and this raises expectations of another 75-bp interest rate rise.

Monday 12th September

The Pound moved higher and even UK GDP coming in lower than forecasts at 0.2% instead of 0.4% could not hold it back. This rise came as a result of a bullish market mood which helped to boost the currency.

During the start of the day, the Euro firmed as investors hoped that the energy crisis would ease as a result of Ukrainian victories. Despite this, concerns about the cost of gas and a lack of supplies placed pressure on the single currency while forecasts that suggest that Germany will fall into recession next year held the currency back.

An improvement in market mood resulted in the US Dollar dropping while reduced Federal Reserve rate hike bets also placed pressure on the Greenback. However, global markets were positive ahead of the release of US inflation data, as a drop in inflation could cause the Fed to take a step back from tightening.

Currency Ranges for the week:

GBP/USD: Low: 1.13636 High: 1.17311

GBP/EUR: Low: 1.1389  High: 1.15871

EUR/USD: Low: 0.995456  High: 1.01835

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