Weekly Market Report: 1st – 4th November 2021

Monday 1st November The Pound struggled on Monday as it reacted to ongoing Brexit concerns and even a possible Bank of England rate increase couldn’t give the currency the boost it needed.  There were further tensions between France and the UK with both threatening to take action. Furthermore, Northern Ireland Protocol negotiations were also at the mercy of potential violence taking place in NI. This meant that the currency finished at 1.1774 against the Euro and 1.3656 against the US Dollar according to the Foreign Exchange Market.

 

It was a quiet day for the Euro yesterday after a contraction in German retail sales which went against expectations of a 0.6% increase. Despite this, it did make gains against its weaker rivals as it took advantage of a weakening Us Dollar as a result of the negative correlation between the two. 

The US Dollar lost ground against most of its rivals yesterday. Investors took a risk-on approach to the market and that meant that they focused on assets with a higher yield, leaving the Greenback strugglings. Furthermore, the US ISM manufacturing PMI also failed to bolster the safe-have currency as it indicated that production growth in American factories had hit a new 15 month low.

Tuesday 2nd November

Tuesday saw the Pound struggle against a number of its rivals as it lost ground as Brexit concerns continued to place pressure on the currency.

Even though France held off on sanctions over the finishing right dispute, investors were still concerned about the deadlock in the Northern Ireland Protocol as a lack of deal could bring with it serious repercussions. According to the Foreign Exchange Market, this saw the Pound finish at 1.1759 against the Euro and 1.3616 against the US Dollar. 

There was little movement for the Euro yesterday although it did take advantage of some of its weaker peers. However, investors remained cautious as they awaited the Federal Reserve rate decision. The Eurozone’s final manufacturing PMI was revised downwards and that also placed pressure on the single currency, especially as global supply chains continue to cause issues for industries across the bloc.

The US Dollar gained some ground yesterday as the two-day policy meeting of the Fed started. It’s expected that tapering plans will be discussed and so, investors remain bullish as they await the announcement. However, before the decision is announced, US employment figures, factory orders data and ISM services PMI could determine the direction of the currency.

Wednesday 3rd November

On Wednesday, the UK’s services PMI came in better than expected and that gave the Pound a boost, causing it to rally.

The figures show that the service sector has made a strong recovery. This then added to the interest around the Bank of England’s interest rate decision which is expected today, with expectations pointing at a rise in rates. According to the Foreign Exchange Market, the currency finished at 1.179 against the Euro and 1.3696 against the US Dollar.

It was a subdued day for the Euro as investors held off on making any moves prior to the decision from the Federal Reserve on interest rates. However, the single currency did receive support from the jobless rate in the Eurozone with unemployment dropping to 7.4% from 7.5% in September, meeting expectations. 

The US Dollar had a mixed session yesterday as investors remained fairly muted in the run-up to the decision from the Federal Reserve, even though some strong data was released. The Fed announced that the bond purchasing package would be tapered at a rate of $15bn each month although an interest rate rise was not on the cards just yet.

Thursday 4th November

Friday 5th November

The Pound continued to lose ground on Friday as the Bank of England decided to leave interest rates as they are, which forced the currency lower.

However, market sentiment improved during the afternoon and helped to limit any losses. Reports that the UK could trigger article 16 of the Northern Ireland protocol has placed pressure on the currency. At the end of the week, the Pound finished at 1.1685 against the Euro and 1.3498 against the US Dollar according to the Foreign Exchange Market.

The Euro remained unchanged on Friday as it finished the day in the same position it started. A negative correlation with the US Dollar did give it a boost but German industrial production put the single currency under pressure as it had contracted for a second consecutive month. 

During the first part of trading on Friday, the US Dollar made some sharp gains although this demand disappeared during the afternoon. Even better-than-expected non-farm payrolls increased to 531,000 and an increase from September helped to lift the mood. Further news about the release of Pfizer’s new Covid pill also helped to boost risk-on trade.

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