Weekly Market Report: 25th – 29th October 2021

Monday 25th October -On Monday, the Pound had a mixed day of trading as a lack of data failed to give the currency much in the way of direction.  Any possibility of a Bank of England rate increase seemed to have disappeared after the release of mixed data on Friday and the ongoing concerns around the rising Covid-19 cases in the UK, slowing the currency down slightly. As a result, the currency finished at 1.1856 against the Euro and 1.3762 against the US Dollar according to the Foreign Exchange Market.

 

The Euro slipped yesterday following the drop in the German Ifo Business climate for the fourth month in a row as it came in just below expectations. Furthermore, supply bottlenecks also caused problems for the biggest economy in Europe, causing business sentiment to drop to the lowest levels seen since April.

There was a different outlook for the US Dollar on Monday as it increased following a boost in demand for the safe-haven currency following a rise in US Treasury yields. Despite this, the gains were limited after it lost ground against major rivals following an upbeat market mood that placed pressure on the Greenback.

Tuesday 26th October

On Tuesday the Pound edged higher against a number of its rivals after Covid cases dropped for the fourth day in a row.

In addition to this, the Confederation of British Industry’s Distributive trades also came in above expectations. Despite this, a downturn in market sentiment and profit-taking caused the Pound to lose some of those gains. However, upon closing, it finished at 1.1871 against the Euro and 1.3765 against the US Dollar according to the Foreign Exchange Market.

The Euro weakened against many of its rivals after Germany announced that cuts would be made to the GDP forecast for the country. The projections had been cut to 2.6% from 3.5%, with supply issues causing the largest economy in Europe to struggle.

The US Dollar had mixed fortunes yesterday as it increased and dropped during the first European session, with market sentiment changing, causing it to take a downward trend by the middle of the day. Despite this, it clawed back some of its losses during the afternoon as risk appetite was stifled and there was an unexpected rise in US consumer confidence.

Wednesday 27th October

The Pound experienced a difficult day on Wednesday even though the Office for Budget Responsibility gave a positive forecast.

The UK’s autumn budget was revealed where the Chancellor announced an extra £150bn in spending although this did come with criticism as it was found that UK households would suffer as a result. The currency also struggled following Brexit tensions after Boris Johnson announced that conditions had been met to trigger article 16. As trading closed, the currency finished at 1.1842 against the Euro and 1.3739 against the US Dollar according to the Foreign Exchange Market.

It was a varied day for the Euro as it climbed during the first part of the day following news that German consumer confidence had risen. However, as the tendency to buy increased as a result of potential price increases in the near future, it meant that the single currency lost many of these gains during the afternoon session.

It was a volatile day for the US Dollar after the Greenback performed well during the morning session but then lost its gains during the afternoon. The changes came following a shift in market mood as well as a reduction in US durable goods orders even though orders did contract less than experts had expected.

Thursday 28th October

The Pound experienced a volatile day of trading on Thursday as the currency reacted to both positive and negative news.

It was announced the impact of covid on the economy was not as bad as initially feared which should have given the currency a boost. However, this was not the case as it was announced that Brexit would cause twice as much damage as the pandemic, placing downward pressure on the Pound. At the end of the day, the currency finished at 1.1811 against the Euro and 1.3799 against the US Dollar according to the Foreign Exchange Market.

The Euro pushed higher yesterday after traders expected a hike in rates earlier than anticipated after the European Central Bank’s policy meeting. The President took a dovish stance and muted their expectations although there was an admission that inflation was causing more problems than anticipated. This resulted in markets bringing forward their rate-rise predictions.

The US Dollar fell yesterday as there was a drop in US GDP growth for the third quarter of this year, dropping to 2% from the 6.7% seen in the second quarter. This sharp slowdown hints at the fact that the UK economy has been damaged more than anticipated by the Delta variant of coronavirus.

Friday 29th October

On Friday, the Pound lost ground against most of its peers as Brexit tensions increased after France detained a British fishing boat.

The UK also triggered a committee to discuss the outcomes of the activation of Article 16, with a deadline of the end of November being put in place for negotiations. So, as the week came to an end, the currency finished at 1.1837 against the Euro and 1.3685 against the US Dollar according to the Foreign Exchange Market.

The Euro also slumped on Friday after a heavy-sell of was seen after the US Dollar soared, causing a negative correlation to develop between the two currencies. This slump meant that any gains from the European’s Central Bank decision on Thursday were lost along with the gains seen following the positive gains seen in the Eurozone CPI figures.

The US Dollar soared on Friday and this was put down to an end-of-the-month correction prior to the Federal Reserve meeting this week. It is expected that the Fed will announce tapering plans and this help to give the US Dollar a boost on Friday and it could help to offer support this week too.

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