Weekly Market Report: 31st January – 4th February 2022

Monday 31st January -The Pound experienced a slight wobble as a lack of data meant that it was not given any direction while the release of the Sue Gray report on the lockdown parties weighed on the currency. However, the release of the report was limited due to the ongoing police investigation which meant that there was no sudden decrease or surge in the Pound.

 

The Euro stood strong against many of its rivals yesterday as it took advantage of the negative correlation with a weaker US Dollar. There was a risk-on mood and that could have put a cap on any gains although a slowdown in Eurozone GDP probably didn’t help.

It was a quiet day for the US Dollar as it nudged lower and wavered against many rivals with a bearish mood putting pressure on the appeal of the safe-haven currency. However, any serious losses were presented following the Federal Reserve’s hold last week.

Tuesday 1st February

There was a cap on the Pound which meant that there was very little success as a risk-on market mood meant that the currency outperformed its safer rivals. It also posted losses against its riskier rivals although some upside came in the form of traders repositioning in readiness for the Bank of England policy decision on Thursday.

The Euro slipped against many of its peers as the risk-on mood remained, leaving the single currency lacking support. There was good news in the form of positive employment data although that did limit the currency, as employment figures dropped in Germany and throughout the Eurozone.

The US Dollar weakened as a risk-on market mood meant that demand for the Greenback disappeared. There was mixed data during the afternoon although this didn’t have any impact on the safe-haven currency. This came in the form of job openings rising unexpectedly although ISM manufacturing PMI nudged lower.

Wednesday 2nd February

During trading, the Pound took a firm stance as investors took an interest in the currency ahead of the Bank of England interest rate decision. However, there are concerns about the increase in energy prices and the impact that this could have on the economy.

The Euro also firmed against many of its peers after there was an unexpected rise of the Eurozone’s CPI which reached a record high of 5.1%. Along with this, the flash inflation rate reading also gave fresh hope that the European Central Bank might take a more aggressive stance when it comes to its policy decision.

The US dollar started the day on the decline as the currency struggled against a drop in demand thanks to a risk-on mood. However, some of those losses were regained during the afternoon while a shock decrease in US unemployment meant that risk sentiment changes, resulting in support for the US Dollar.

Thursday 3rd February

The Pound made up ground against many of its peers yesterday as investors reacted to the increase in interest rate from 0.25% to 0.5% by the Bank of England. While four of the nine members of the Monetary Policy Committee voted for rates to be raised higher. This move meant that the currency was given a much-needed boost. However, a rise in energy prices and the cost of living crisis has meant that any gains have been limited.

It was a day of highs for the Euro as it soared higher following speculation that the European Central Bank could be taking a hawkish stance when it comes to monetary policy. Following the rate decision from the ECB, the president did not mention that it is unlikely that a hike will happen in 2022, which meant that there is potential for a rise this year.

The US Dollar lost ground as it reacted to some disappointing economic data. The ISM services PMI nudged lower last month while factory orders also shrunk more than expected during December, placing pressure on the greenback.

Friday 4th February

It was a mixed day for the Pound as it got ahead of its riskier rivals but then lost ground against others after the market was affected by a bearish mood. The volatile Pound was also reacting to the rate rise from the Bank of England while the cost of living crisis caused concerns, putting a limit on the currency.

The Euro firmed against many of its peers after the change in attitude from the European Central Bank helped to give the single currency some momentum. German data was better-than-expected while the risk-on mood also helped to bolster the currency although Eurozone retail sales had contracted which might have put a cap on gains.

The US Dollar benefited from a dip in risk appetite, causing it to rally. The release of strong non-farm payrolls data also helped to boost the US Dollar as there were 467,000 jobs added during January which came in above the expected 150,000.

Currency Ranges for the week:

GBP/USD: Low: 1.34066  High: 1.36217

GBP/EUR: Low: 1.18091  High: 1.20631

EUR/USD: Low: 1.11519  High: 1.14818

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