Weekly Report – 9th May to 13th May 2022

Friday 13th May -The pound lost ground against many of its peers as it struggled against ongoing economic concerns. With the cost-of-living crisis worsening and the row over the Northern Ireland protocol continuing, there are worries that the UK economy could struggle further.

 

A 1.8% drop in Eurozone industrial production placed pressure on the Euro. In addition to this, the chances of the Russia-Ukraine war escalating looked like, especially with Finland stating that it wants to join Nato.

Despite a risk-on mood, the US Dollar was underpinned by the likelihood of Federal Reserve rate increases and that helped to strengthen the currency. However, US consumer confidence dropped and that seems to put a cap on rate hike bets, causing the safe-haven currency to weaken.

Thursday 12th May

After UK GDP contracted unexpectedly by 0.1% in March, the Pound lost ground as fears that the UK could experience a recession grew. Despite this, the currency invited some dip-buying after it hit a two-year low against the US Dollar. Along with this, some sharp selling of the Euro might have also pushed investors to invest in the Pound.

As Russia threatened to take action after Finland hinted that it would apply to join Nato, the Euro slumped. This left investors concerned and proved that the Ukraine invasion could become a large conflict. Furthermore, the single currency also had a negative correlation with the US  Dollar and this put further pressure on the currency.

It was a strong day for the US Dollar as it reached almost multi-year highs against a number of peers. The safe-haven currency experienced a rise in interest as a result of a bearish market mood. However, the currency did struggle against a number of stronger peers, causing it to move in a narrow range for the majority of the session.

Wednesday 11th May

It was a quiet day for the Pound as it struggled to gain any traction against many of its rivals. As reports emerged that the UK government might get rid of the Northern Ireland protocol, there were concerns that this could have a negative impact on the currency at a time when things are already perilous.

Hawkish comments from the European Central Bank were not enough to bolster the Euro. Ukraine also announced that it will shut down sections of the pipeline to stop Russian gas flows to Europe. There were concerns that this could cause economic problems in Europe and this put the single currency under pressure.

The US Dollar slipped as a bullish market mood meant that investors showed interest in riskier currencies. As US inflation came in higher than forecasts, the Greenback spiked briefly although this was short-lived as it soon lost these gains once short-term traders cashed in.

Tuesday 10th May

The Pound experienced some volatility yesterday after the cost-of-living crisis continued to cause problems for the currency. The British Retail Consortium highlighted that sales had dropped by 1.7% year-on-year in April and this caused further concerns that the economy could be hit by a real drop in income.

It was a quiet day for the Euro which was governed by a low economic sentiment in Germany, even though it came in higher than expected. In addition to this, there was a certain mood around the Ukraine invasion as it was warned that this would become a war of attrition and that Russia might take further steps.

There was mixed success for the US Dollar as it dipped initially as investors shunned the safe-haven currency. However, market sentiment shifted and this increased demand for the Greenback, helping to give it a boost thanks to comments from the Federal Reserve stating that interest rates will have to be normalised rapidly and the economy will stand strong.

Monday 9th May

The Pound experienced a sharp rise as it was supported by dip-buying but also news that Vladimir Putin did not declare a full war on Ukraine during his speech. However, the currency lost ground during the afternoon following a speech from the Bank of England where it was warned that the economic outlook might be worse than initially forecast last week.

The Euro strengthened against many of its peers after Putin decided not to escalate his invasion of Ukraine. Despite this, any gains were limited as the Sentix index of investor confidence dropped for the third month in a row, reaching an almost two-year low.

Early in the session, the US Dollar weakened slightly as it suffered from profit-taking after the US Dollar reached a two-decade high. It did manage to make some progress during the afternoon after it gained support following a dip in market mood.

Currency Ranges for the week:

GBP/USD: Low: 1.21661 High: 1.23993

GBP/EUR: Low: 1.16068  High: 1.17806

EUR/USD: Low: 1.03582  High: 1.05888

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