Weekly Report – 10th October – 14th October 2022

Friday 14th October – The Pound lost some of its gains on Friday as investors reacted to the news that Kwasi Kwarteng had been sacked as chancellor. Following this, speculation grew that Liz Truss would be ousted within days. However, Truss made a U-turn on her pledge to freeze corporation tax, instead hinting that it would rise to 25% in April.

currency news

 

The Euro made up ground against many of its rivals even with concerns rising around the Ukraine and Russia conflict. The European Central Bank made hawkish comments which helped to support the single currency as it announced that a 75-bp rate increase is needed this month.

The US Dollar also strengthened during the session as risk aversion moved through the markets, helping to grow the popularity of the Greenback. However, the gains were dented somewhat after it was announced that US retail sales had stalled.

Thursday 13th October

There was a climb of more than 2% for the Pound against some of its peers after it came about that Truss had plans to make a U-turn on the mini-budget. Speculation grew that corporation tax would rise even with Truss stating that she was going to stick by plans to scrap the hike.

An upbeat mood in the European markets lent support to the Euro while some hope around the conflict in Ukraine helped to give the single currency additional support. This came as the UN general assembly voted to condemn the annexation of Ukraine territories.

It was a volatile day for the US Dollar as investors took a risk-on mood, placing pressure on the currency. US core inflation rose more than expected and this forced the US Dollar to spike. Despite this, the improved market mood undid these gains and pulled the currency lower.

Wednesday 12th October

The Pound made some form of recovery following losses from Tuesday following rumours that the Bank of England would look to extend its bond-buying scheme beyond the end date of the 14th of October. Sterling was also supported by news that Truss would cap revenues for renewable and nuclear energy companies even though the Prime Minister denied that this was a windfall tax. Despite this, an unexpected contraction of 0.3% in UK GDP limited the recovery of the Pound

The Euro weakened during trading despite industrial production in the Eurozone expanding more than expected. The drop came following the ongoing attacks from Russia on Ukraine, especially with concerns around the safety of the Zaporizhzhia nuclear power plant.

The US Dollar moved higher and made up ground against many of its peers thanks to a risk-off mood and better-than-expected PPI figures. Despite this, movement slowed as a result of the Federal Open Market Committee meeting minutes which hinted that monetary tightening might slow down.

Tuesday 11th October

There was some support for the Pound as it moved higher against a number of weaker peers. This came as the Bank of England extended its bond-buying programme, adding index-linked gilts to its purchases. This helped to support the Pound although the financial stability of the UK was questioned by investors.

There was a lack of direction for the Euro as there was no notable data driving it in any direction. There was some support from a pullback in the US Dollar and this was down to the negative correlation between the two currencies.

The US Dollar weakened as it looked as though the safe-haven currency had been over-purchased and this caused a corrective pullback. A drop in Us Treasury yield also placed pressure on the currency while US economic confidence and consumer inflation expectations dropped.

Monday 10th October

The Pound fluctuated during trading although it did manage to recover any losses during the evening. This movement came following an escalation in attacks from Russia on Ukraine, causing markets to become concerned.

There was some element of volatility in the Euro as it moved lower against many of its rivals. The markets were reacting to the latest attack on the famous Russian Kerch Bridge and Russia’s intent to react to this with major missile strikes.

Risk aversion on a wider scale gave the US Dollar a boost as an intensification of the Ukraine conflict caused global markets to take a cautious approach. Along with this, a large interest rate increase from the Federal Reserve was expected and this supported the Greenback.

Currency Ranges for the week:

GBP/USD: Low: 1.09273 High: 1.13481

GBP/EUR: Low: 1.12785  High: 1.16042

EUR/USD: Low: 0.964586  High: 0.980125

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