Weekly Market Report: 11th -14th October 2021

Monday 11th October -There was some selling pressure on Monday that caused problems for the Pound, following concerns that the economic outlook in the UK could cause further misery for the currency.  While there were some initial gains, this only limited them, as positive comments from the Bank of England weren’t enough to help the Pound hold onto those gains. The currency eventually finished the day at 1.1763 against the Euro and 1.3586 against the US Dollar according to the Foreign Exchange Market.

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It was a relatively quiet day for the Euro yesterday after a lack of data left it exposed and open to losses. However, inflationary pressures remained to be a concern with fears arising that the European Central Bank could make a policy error and that dented the appeal of the single currency.

It was a relatively mixed day for the US Dollar yesterday after an average market mood meant that any gains were relatively limited. Further limits were also placed on the Greenback as the US Markets were closed for Columbus Day. However, today, the JOLT’s job openings data for August could give the US Dollar a boost.

Tuesday 12th October

At the start of the session on Tuesday, the Pound edged higher following the release of positive employment figures.

Despite this, those gains were quickly lost during the afternoon as the market reacted to concerns around the end of the furlough scheme and how that impacted the jobs data. According to the Foreign Exchange Market, this saw the Pound finish at 1.1783 against the Euro and 1.3588 against the US Dollar.

Following the release of the German ZEW economic sentiment index for October, the Euro lost some ground as it dropped further than expected, resulting in the worst reading since March 2020. The issue around supply bottlenecks and increasing inflation meant that investors were keeping their distance which does not bode well for the largest economy in the Eurozone.

During the start of trading on Tuesday, the US Dollar slipped back although it managed to bounce back, after a drop in risk appetite meant that support for the safe-haven currency increased, eventually causing it to trade sideways. A near record high in the US jobs opening figure caused initial concerns that the labour market could slow down economic growth, all of which added to the drop in sentiment.

Wednesday 13th October

There was a glimmer of hope for the Pound on Wednesday after some of its rivals weakened during the session following a mixed GDP report.

In August, the UK economy grew by 0.4% which was an improvement on the contraction seen in July. However, this growth was lower than expected, leaving experts claiming that the UK economy is going to slow down during Q4. This saw the currency finish the day at 1.1785 against the Euro and 1.3667 against the US Dollar according to the Foreign Exchange Market.

The Euro saw very little movement as the Eurozone industrial production figures indicated that there had been a contract of 1.6% during August which matched predictions. However, any losses were limited thanks to the weakened US Dollar and a strong correlation between the two.

It was a different day for the US Dollar after a few successful days as an upbeat market mood meant that investors moved away from the Greenback, leaving it in a weaker position. There was no support in the form of the US CPI release either, even though it came in above expectations at 5.4%.

Friday 14th October

Through the session on Friday, the Pound was boosted by improved optimism that a resolution would be found to bring an end to the dispute around the Northern Ireland protocol.

There was further support for the currency in the form of a potential Bank of England rate hike this year which is likely to be implemented at its December Meeting. As a result, the currency rounded off the day at 1.185 against the Euro and 1.3745 against the US Dollar according to the Foreign Exchange Market.

The Euro lost ground against many of its rivals at the end of the week after dovish comments from the European Central Bank suggested that inflationary pressures are only temporary. This dampened support for the single currency and with a lack of data today, it looks as though the currency could see further losses.

It was a mixed day for the US Dollar as a rise in US retail sales came unexpectedly and helped to give the Greenback a boost, even though it also helped to improve the market mood. With a change in mood and investors taking risks, it means that the safe-haven currency traded in a narrow range on Friday.


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