Weekly Report – 25th July to 29th July 2022

Friday 29th July – The Pound weakened at the end of the week as the Bank of England consumer credit report indicated a large rise in borrowing during June. Borrowing reached £1.7bn which was way above the expected £1bn and suggests that people are now borrowing more than ever before to deal with the cost of living.

 

It was a mixed day for the Euro as it started the day on a high as the latest GDP and inflation figures helped to bolster the single currency. Despite this, any gains were capped as the currency had a strong negative correlation with the US Dollar.

The US Dollar had a positive end to the week as it benefitted from the latest PCE price index in June which came in above expectations. However, as US Treasury bond yields dropped, any gains were capped.

Thursday 28th July

There was very little movement for the Pound as political concerns and uncertainty caused problems for the currency. There was more pressure on GBP exchange rates due to threats of a possible strike at the biggest container port in the UK which would cause problems for the economy.

The Euro was pushed lower as the single currency reacted to concerns about energy security in the EU. There are concerns around a possible energy crisis during winter as Russian gas exports are likely to slow down.

At the start of trading, the US dollar firmed which might have indicated that it had been oversold following the interest rate decision from the Federal Reserve. Despite this, a contraction in growth during Q2 caused further problems for the Greenback as it looked as though the US is heading into a recession.

Wednesday 27th July

There was very little direction for the Pound during trading while sentiment surrounding the Pound was supported by a possible interest rate hike of 50bps during August. Despite the upside, the Pound was limited as it looked as though it faces a summer of discontent.

The Euro saw very little movement as the ongoing possible energy crisis weighed heavily on the currency. This came as Russia reduced the flow of gas through the Nord Stream pipeline to 20% of its capacity which caused concerns that there would be a gas shortage this winter.

The US Dollar weakened at the start of trading as it reacted to a positive market mood which reduced demand for the Greenback. Even improved US durable goods orders did not give the currency a boost but eventually, the US Dollar collapsed following the rate decision by the Federal Reserve to raise rates by 75bps.

Tuesday 26th July

During the session, the Pound nudged lower following the release of the Confederation of British Industry’s latest distributive trades index. It was found that retail sales had contracted during July for the fourth month in a row, proving that the cost of living crisis is having a real impact.

The Euro fell through the session following concerns that a recession is likely. This came after concerns that the Eurozone could face a gas shortage after supplies from Russia were reduced to 20%.

It was a stronger day for the US Dollar as demand increased due to a risk-off mood. This change in mood came after the International Monetary Fund reduced its global growth forecasts.

Monday 25th July

The Pound strengthened during trading as it was boosted by speculation that the Bank of England could introduce a 50bps interest rate hike. Despite the initial gains, they were limited following the economic concerns relating to Brexit and the delays at Dover Port.

It was a defensive start to the week for the Euro as it reacted to the latest German IFO business climate index. It reported that business morale in Germany had dropped to a new two-year low following worries over a possible gas shortage, pushing the country closer to a recession.

The US Dollar had a slow start to the week as expectations of investors dropped in relation to possible interest rate hikes which placed pressure on the currency. Also adding to its woes was a risk-on mood which reduced demand.

Currency Ranges for the week:

GBP/USD: Low: 1.19716 High: 1.22334

GBP/EUR: Low: 1.17882  High: 1.198

EUR/USD: Low: 1.01012  High: 1.02483

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