Weekly Report – 28th March to 1st April 2022

Friday 1st April – The Pound fell against many of its peers as the cost of living crisis gripped the UK and left investors concerned. This came after the UK energy price cap increased by 54% along with many other costs such as council tax and water bills. All of this has caused concerns that the UK economy could shrink as a result of people having to make cut backs on spending.

 

As the German and Eurozone manufacturing PMIs struggled, the Euro ticked lower. Rising inflation had little impact on exchange rates even after rising to 7.5%from 5.9% although any losses were capped due to an upbeat mood.

The US Dollar fell back at the start of trading with a bullish market mood hitting demand for the currency. Despite this, it climbed in the afternoon after US labour market figures came in strong with the economy adding 431,000 payrolls while unemployment dropped to 3.6%.

Thursday 31st March 

It was a mixed day for the Pound as it moved sideways against many of its rivals even though GDP growth rate for Q4 came in higher than expected. However, this improved data didn’t support the Pound enough as investors remained concerned about the ongoing crisis in Ukraine.

The Euro lost ground as the hope around the Ukraine crisis faded. As it became apparent that Russia was repositioning its troops, the single currency dipped while the announcement that foreign buyers of Russian gas must pay in Russian Rubles also weighed heavily on the currency.

The US Dollar slipped initially against many of its peers even with a downbeat market mood. Furthermore, the core PCE price index also came in below expectations. Despite this, the safe-haven currency did make up some ground later in the day with recovering US Treasury yields also providing some support.

Wednesday 30th March

The Pound wavered as it struggled to find any support due to a lack of economic data. Furthermore, the ongoing crisis in Ukraine continued to cause concern even with the Kremlin claiming that it wanted peace and that left the currency in a weakened position.

The Euro dipped at the start of the day following comments from the European Central Bank and a dip in Eurozone economic sentiment. However, the single currency then rebounded during the afternoon, even with hopes of peace in Ukraine fading. Comments from Moscow, claiming that steps would be taken to de-escalate were then undermined by further attacks although the Euro still rose in the afternoon.

It was a turbulent day for the US Dollar as a volatile market mood meant that the safe-haven currency struggled. Along with this, mixed economic data didn’t help as the US ADP employment change was slightly higher than expected although the final GDP growth rate came in under forecasts.

Tuesday 29th March

It was a quiet start to trading for the Pound as it faced challenges from the Bank of England and the speech from Governor Andrew Bailey. However, as peace talks between Russia and Ukraine seemed to make progress, it helped to give the currency a boost, pushing it higher against many of its peers.

The Euro also soared higher following the latest talks between Russia and Ukraine, which seemed to make progress. Russia announced that it would reduce military activity towards Kyiv and Chernihiv in order to improve mutual trust and create the right conditions for a peace deal.

In contrast, the US Dollar slipped against many peers as an improvement in market mood meant that investors moved away from the safe-haven currency in search of assets that offered better yields. Despite this, improved US data, as well as a hawkish approach from the Federal Reserve, it meant that any losses were limited.

Monday 28th March

The Pound struggled against many of its peers and a dovish speech from the Bank of England made it clear that the current situation is very volatile. It stated that it will take some time before it is possible to assess the impact of Covid-19 and the invasion of Ukraine on the global economy.

The ongoing invasion of Ukraine weighed heavily on the Pound as it nudged lower. However, the single currency also received support from the speculation surrounding the beginning of the European Central Bank’s hiking cycle. It is expected that the Central Bank will increase interest rates for the first time in ten years at some point during this year.

It was a contrasting day for the US Dollar as it gained ground against many of its peers as it took advantage of a risk-off market mood. While the ongoing talks between Russia and Ukraine made no progress, the currency found support in a drop in USA’s goods trade deficit from an all-time high in January.

Currency Ranges for the week:

GBP/USD: Low: 1.30588 High: 1.31773

GBP/EUR: Low: 1.1748  High: 1.19655

EUR/USD: Low: 1.09477  High: 1.1182

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