Monthly Currency Report – October 2023

Friday 27th October – The British Pound (GBP) meandered aimlessly on Friday due to the absence of significant UK data, leaving the currency without a clear course. Despite a series of feeble economic reports from the UK throughout the week, Sterling did manage to eke out some gains against its weaker counterparts.


On the other side, the Euro (EUR) remained under pressure as the week drew to a close. Investors were still grappling with the dovish interest rate decision from the European Central Bank (ECB). However, the common currency did receive limited support due to its negative correlation with a weakened US Dollar.

Friday saw the safe-haven US Dollar (USD) falter, influenced by a more risk-on sentiment after robust GDP data released on Thursday. Furthermore, the latest core PCE price index, the Federal Reserve’s preferred measure of inflation, showed a slight easing of price pressures last month, tempering expectations of Fed action.

Thursday 26th October

The Pound (GBP) encountered initial challenges on this day following the Confederation of British Industry’s (CBI) latest distributive trades survey, which unveiled a concerning decline in retail trade. Nonetheless, Sterling managed to recover some of its losses later in the session against its weaker peers, buoyed by an improving market sentiment.

Meanwhile, the Euro (EUR) weakened as the European Central Bank (ECB) put the brakes on its interest rate hike cycle after 15 months of tightening policies. Although this move was anticipated, it still weighed on EUR exchange rates. ECB President Christine Lagarde’s statement that the Eurozone economy is likely to remain weak fueled speculations that interest rates have reached their peak.

As for the US Dollar, it displayed mixed performance during the session, retreating against its stronger counterparts despite a remarkable acceleration in US GDP in the third quarter. Instead of boosting Federal Reserve rate hike expectations, the positive GDP data lifted market spirits, muting the safe-haven appeal of the “Greenback.”

Wednesday 25th October

The British Pound (GBP) showed a mixed performance as it navigated without a clear direction due to the absence of noteworthy UK economic data. Without guiding indicators, Sterling’s movements were influenced by risk appetite, leading to declines against safer currencies and gains against riskier ones.

On the same day, the Euro (EUR) enjoyed some modest success following better-than-expected results in Germany’s latest business climate indicator. Companies in the Eurozone’s largest economy displayed reduced pessimism regarding the business outlook, marking the first improvement in the index since March.

The US Dollar (USD) moved higher on Wednesday, benefiting from a cautious market sentiment that favored safe-haven assets. Persistent concerns about the ongoing Middle East conflict weighed on investors.

Tuesday 24th October

The British Pound (GBP) experienced a decline on this day following disappointing UK economic data, which dented expectations for a Bank of England (BoE) interest rate hike. The latest unemployment rate in the UK showed an increase in joblessness, while preliminary PMIs for October indicated an ongoing contraction in business activity.

The Euro (EUR) also weakened during the session, driven by dismal PMI results. Both the manufacturing and services scores fell below expectations, signaling a deepening downturn in private sector activity and raising concerns of a potential Eurozone recession.

Conversely, the US Dollar (USD) advanced against many of its counterparts on Tuesday as the latest US PMI results exceeded forecasts. Unexpected growth in both the services and manufacturing sectors for October demonstrated resilience in the US economy and boosted expectations of Federal Reserve interest rate hikes.

Monday 23rd October

The British Pound (GBP) remained within a narrow range at the beginning of the week, lacking significant macroeconomic data to provide clear direction. Ongoing geopolitical tensions and a cautious market sentiment limited Sterling’s upward potential.

The Euro (EUR) displayed a mostly rangebound performance on Monday, with investors seemingly hesitant to make significant moves ahead of the European Central Bank’s (ECB) upcoming interest rate decision. While no policy changes were anticipated this month, the ECB’s accompanying statements could inject notable volatility into the single currency as the bank grapples with communication challenges in its forward guidance.

The US Dollar (USD) saw broad declines during the session as a surge in US Treasury yields weakened the case for Federal Reserve interest rate hikes. Nevertheless, the USD losses were mitigated by a cautious market sentiment, ensuring demand for the safe-haven currency did not collapse.

Friday 20th October

Last week ended on a sour note for the British Pound (GBP) due to the release of the UK’s latest retail sales figures. The figures for September revealed a significant 0.9% contraction in sales growth, which raised concerns about a potential UK recession and negatively impacted sentiment towards the Sterling.

On Friday the Euro gained strength as fears of an escalation in the Israel-Hamas conflict led investors to seek safe-haven assets. However, the Euro’s gains were somewhat tempered by Germany’s latest producer price index, which reported an unexpected decline in prices last month.

The US Dollar (USD) experienced mixed movements at the end of last week. Initially, USD exchange rates strengthened as geopolitical uncertainties increased demand for safe-haven currencies. However, the ‘Greenback’ struggled to maintain these gains due to falling US Treasury yields.

Thursday 19th October

There were mixed movements for the British Pound (GBP), as the absence of new economic data left the currency without a clear direction. Concerns about a potential recession put pressure on the Pound, but the possibility of another Bank of England (BoE) interest rate hike limited its losses.

The Euro (EUR) rallied on this day, with the safer Euro attracting bids amid widespread risk aversion. Additionally, a pullback in the US Dollar (USD) also supported the Euro, thanks to the strong negative correlation between the two currencies.

The safe-haven US Dollar initially performed strongly due to a risk-off market sentiment but later relinquished a significant portion of its gains during European trading, primarily because of a pullback in US Treasury yields.

Wednesday 18th October

There was some initial support for the British Pound (GBP) after UK inflation exceeded expectations, increasing bets on another Bank of England (BoE) interest rate hike. However, the Pound, which had become increasingly sensitive to market sentiment, faced challenges against some of its stronger peers later in the session amid a souring market mood.

The Euro (EUR) managed to rebound against riskier currencies on this day as anxious investors sought refuge in safer currencies like the Euro. Although the Euro experienced gains, its strong negative correlation with the US Dollar (USD) limited its upward movement. Additionally, a speech from European Central Bank (ECB) President Christine Lagarde did not lead to significant market movement.

The US Dollar climbed on this day, with growing anxiety around violence in the Middle East leading to safe-haven flows into the ‘Greenback.’ An increase in US Treasury yields also supported the American currency, as analysts believed rising oil prices might prompt the Federal Reserve to hike interest rates again.

Tuesday 17th October

There was a decline for the British Pound (GBP) following the release of the UK’s latest employment data, which dampened expectations for Bank of England (BoE) interest rate hikes. Slowing wage growth and signs of slack in the UK labor market led investors to rein in their expectations for tighter monetary policy from the British central bank.

The Euro (EUR) performed well on this day, boosted by stronger-than-expected German data. The latest ZEW economic sentiment index showed that investor morale in the Eurozone’s largest economy improved more than expected in the current month, reaching its highest level since April.

The US Dollar (USD) faced choppy trading on this day, despite stronger-than-forecast US retail sales, which boosted expectations of Federal Reserve rate hikes. USD exchange rates were undermined by weaker earnings in the US banking sector and new restrictions on US firms exporting AI chips to China.

Monday 16th October

The British Pound (GBP) started the week without a clear direction as investors awaited high-impact wage and inflation data later in the week. Hawkish comments from Bank of England (BoE) Chief Economist Huw Pill provided some support for the Pound, indicating the potential for higher interest rates. However, Sterling’s upside potential was limited.

The Euro (EUR) also experienced mixed movements on this day as an improving market mood and a weakening US Dollar influenced the currency in two different directions. While the Euro benefited from its negative correlation with the US Dollar, a slight increase in risk appetite caused the safer single currency to struggle against its riskier counterparts.

The US Dollar (USD) declined during the session, as more Federal Reserve policymakers echoed their colleagues’ recent comments suggesting that interest rates may have peaked. As the session progressed, an improved market mood added to the pressure on the safe-haven ‘Greenback.’

Friday 13th October – On Friday, the British Pound (GBP) lost ground due to growing concerns about the UK economy. Fresh data indicated a 17% year-on-year increase in company insolvencies in England and Wales for September. Additionally, UK Chancellor Jeremy Hunt warned of forthcoming ‘challenges’ and ‘difficult decisions’ in his upcoming Autumn Statement.

It was a mixed performance for the Euro (EUR) on Friday, partly influenced by its negative correlation with the strengthening US Dollar. A better-than-expected recovery in Eurozone industrial production provided some support to the EUR, while bearish comments from European Central Bank (ECB) President Christine Lagarde weighed on the currency.

The US Dollar (USD) gained strength on Friday as nervous investors sought refuge in safe-haven currencies. Concerns about rising US interest rates and escalating violence in the Middle East dampened market sentiment, bolstering the appeal of the ‘Greenback.’

Thursday 12th October

There were challenges for the British Pound (GBP) against stronger currencies following lacklustre UK GDP data. While the UK economy did show growth of 0.2% in August, this was a modest rebound after a 0.6% contraction in July.

The Euro (EUR) managed to gain ground against weaker currencies after the European Central Bank (ECB) meeting minutes revealed a slightly more hawkish stance than expected. The minutes indicated a potential split among policymakers at the ECB, with hints that ongoing inflation risks might necessitate a rethink of future rate hikes.

The US Dollar (USD) strengthened after the latest American consumer price index surpassed expectations. Instead of cooling as predicted, US headline inflation held steady in September, increasing bets on another Federal Reserve rate hike this year and boosting the USD.

Wednesday 11th October

There was some volatility for the British Pound (GBP), initially declining before recovering against its counterparts and then giving back some of its gains in the afternoon. This fluctuation occurred amidst broader turbulence in the currency markets, with increased expectations of a Bank of England (BoE) interest rate hike supporting the Pound.

However, the Euro (EUR) saw gains, benefiting from its negative correlation with the weakening US Dollar. However, dovish comments from European Central Bank (ECB) officials may have limited the Euro’s upside, although it still managed to gain ground against many other currencies.

The US Dollar (USD) weakened as investors paid more attention to recent dovish remarks from Federal Reserve officials rather than a stronger-than-expected Producer Price Index (PPI) reading. The Federal Reserve meeting minutes released on the previous night also failed to support the USD, as policymakers focused on the duration of restrictive rates rather than their height.

Tuesday 10th October

The British Pound (GBP) displayed mixed performance due to a lack of fresh economic data. Adding to the uncertainty, the International Monetary Fund (IMF) downgraded its growth forecast for the UK while suggesting that British interest rates might need to remain high for a longer period.

There was some support for the Euro (EUR) received some support as the currency benefited from its negative correlation with a weakening US Dollar. However, limited economic data from the Eurozone restrained the Euro’s upward potential.

The US Dollar (USD) fluctuated near weekly lows on Tuesday, influenced by a volatile market sentiment. The USD also remained under pressure due to diminishing expectations for Federal Reserve interest rate hikes, following comments from several Fed officials suggesting that the recent surge in Treasury yields might eliminate the need for further tightening.

Monday 9th October

The British Pound (GBP) initially declined on Monday as a cautious market sentiment reduced the appeal of the currency, which is increasingly sensitive to risk. Nevertheless, the Pound managed to recover against some weaker currencies in the afternoon without a clear trigger, as the absence of UK data exposed it to market fluctuations.

The Euro (EUR) stumbled on Monday after German industrial production fell more than expected. Output in the Eurozone’s largest economy contracted by 0.2%, compared to the expected 0.1% decline. This marked the fourth consecutive month of production decrease.

The US Dollar (USD) initially gained strength at the beginning of Monday’s session due to widespread risk aversion related to the Hamas-Israel conflict, leading to higher demand for the safe-haven currency. However, the USD later gave up these gains. Federal Reserve policymaker Lorie Logan, known for her hawkish stance, suggested that the recent surge in US Treasury yields could eliminate the need for further interest rate hikes.

Friday 6th October – Despite a continued absence of UK economic data, the British Pound (GBP) managed to gain ground against its weaker counterparts on Friday. This ascent was likely propelled by a slight uptick in bets on a Bank of England (BoE) interest rate hike, following recent BoE comments, a positive revision to the UK services PMI, and robust US jobs data.

On the other hand, the Euro (EUR) experienced fluctuations on Friday due to mixed German factory orders data. While there was an impressive 3.9% recovery in orders for August after July’s substantial 11.3% contraction, many analysts remained concerned about the possibility of a recession in the Eurozone’s largest economy.

The US Dollar (USD) saw a spike on Friday afternoon following an unexpectedly strong non-farm payrolls report, which increased expectations of another Federal Reserve rate hike. However, USD quickly retreated as profit-taking activities came into play.

Thursday 5th October

The British Pound (GBP) traded without a clear direction on Thursday, moving within a wide range against its peers due to the absence of fresh UK economic data. Comments from Bank of England (BoE) Deputy Governor Ben Broadbent, who stated that the possibility of further interest rate hikes was still open, likely prevented Sterling from declining.

In contrast, the Euro (EUR) rose during Thursday’s session despite weak German trade data that raised concerns about a recession in the Eurozone’s largest economy. Moderately hawkish comments from European Central Bank (ECB) Vice-President Luis de Guindos may have supported the EUR by pushing back against rate cut speculations and hinting at possible rate hikes if inflation remains stubborn.

The US Dollar (USD) initially gained ground on Thursday morning due to an increase in US Treasury bond yields. However, as the day progressed, yields retreated, which dampened the USD’s performance. Additionally, the latest initial jobless claims figures had limited impact on the currency.

Wednesday 4th October

The British Pound (GBP) trended higher on Wednesday during the European session following the release of the UK’s services PMI data. The final figures for September showed an improvement, with the index being revised up from 47.2 to 49.3. Although this still indicated a contraction, it presented a less concerning picture of the UK’s economic performance in the third quarter.

The Euro (EUR) benefited from its negative correlation with the US Dollar (USD) on Wednesday, as the USD experienced a significant pullback. However, the EUR’s gains were tempered by the release of the Eurozone’s retail sales data, which reported the largest contraction in sales growth since December.

The US Dollar (USD) faced a sharp decline on Wednesday as a result of concerning US jobs data. The latest ADP employment figures indicated that only 89,000 jobs were added to the US economy in September, leading to speculations of a slowing US labour market and dampening expectations for further interest rate hikes by the Federal Reserve.

Tuesday 3rd October

The British Pound (GBP) continued to trade without a clear direction on Tuesday due to the ongoing absence of UK economic data. In the absence of fundamental drivers, GBP’s movement was influenced by market sentiment, causing it to weaken against safer currencies while gaining against riskier ones.

The Euro (EUR) initially saw an uptick in response to unexpectedly hawkish comments from European Central Bank (ECB) Chief Economist Philip Lane. However, the EUR struggled to maintain these gains due to its negative correlation with the US Dollar.

The US Dollar (USD) reached a fresh ten-month high on Tuesday, driven by rising US Treasury yields and a risk-off market sentiment. In the afternoon, the latest JOLTs job openings figure exceeded expectations, indicating continued strength in the US labour market, which helped support the USD throughout the day.

Monday 2nd October

The British Pound (GBP) experienced mixed movements on Monday, trading within a wide range against its peers due to a lack of fresh catalysts. The only data release was the final manufacturing PMI, which closely aligned with preliminary estimates and thus had little impact on the currency.

The Euro (EUR) faced pressure on Monday due to its negative correlation with a strengthening US Dollar. Despite the Eurozone’s jobless rate for August dropping to match the record low of 6.4% seen in June, it failed to halt the EUR’s losses.

The US Dollar (USD) gained ground on Monday, driven by rising US Treasury yields, which reached a 16-year high, and a risk-off sentiment in the market. In the afternoon, the ISM manufacturing PMI surpassed forecasts, although it remained in contraction territory. This positive data contributed to the USD’s gains.

Currency Ranges for the month:

GBP/USD: Low: 1.20556 High: 1.2332

GBP/EUR: Low: 1.14476 High: 1.16007

EUR/USD: Low: 1.0453  High: 1.06868



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