Weekly Report – 19th December – 23rd December 2022

Friday 23rd December -The Pound remained volatile at the end of the week as the domestic headlines became the main focus. With border control officers and postal workers staging strikes, the future of the economy was brought into question, all of which weighed heavily on the currency.

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The US Dollar also struggled as the week came to a close as there were signs that the US economy was slowing. Durable goods orders dropped considerably while a fall in the Federal Reserve’s gauge of inflation also put a cap on rate hike bets. This left the Greenback at risk heading into the festive period.

Thursday 22nd December

The Pound dropped even further during trading as GDP data for the third quarter was revised lower than initial readings. This saw the economy shrink by 0.3% leaving investors fearful that a recession might be deeper than expected.

It was a different day for the Euro as it strengthened after the ECB confirmed that it will have to ease inflation in the Eurozone. It indicated that a rise of 50bps might be common and so, investors were happy with the potential tightening of policy.

The US Dollar strengthened as GDP growth for the third quarter was revised upwards. It was expected that growth would reach 2.9% although this was increased to 3.2% which is an indication that the US economy is in good condition.

Wednesday 21st December

As UK borrowing figures came in higher than forecasted, the Pound lost ground across the whole board. This saw borrowing during November reaching a record high but also adding to the downside was a drop in government investment, which prompted concerns that the economy had little room for growth.

The Euro strengthened after consumer confidence in Germany improved more than expected. Despite this, ongoing concerns around the Ukraine-Russia conflict put a cap on its upside.

It was a mixed day for the US Dollar as an improved market mood meant that investors shunned the Greenback. Even an improvement in consumer confidence, which came in higher than expected, was not enough to push the currency higher.

Tuesday 20th December

There was little in the way of economic data which left the Pound exposed to the market mood, which saw it rise against some of its riskier peers and drop against its safer peers. The risk of ongoing industrial action placed pressure on the Pound, as concerns about disruption left investors worried.

It was a day of success for the Euro as a drop in the market mood helped to give the single currency a lift. A reduction in consumer confidence still didn’t boost the currency during the afternoon although consumer morale did not improve as much as expected this month.

A risk-off mood did not translate into significant gains for the US Dollar but it did manage to see some success against a number of weaker rivals. However, any significant gains were capped by a significant sell off in USD/JPY which meant that investors turned to the Japanese Yen.

Monday 19th December

The Pound experienced some good gains at the start of the week as a result of an improvement in the market mood. The release of the CBI orders figures saw that the contraction in orders was smaller than expected.

There was little movement for the Euro and even an improvement in business sentiment during December, as seen in the German IFO business climate index, was not enough to give it a boost.

The US Dollar edged lower as a risk on mood left the Greenback lacking in appeal. However, these losses were soon capped after a rise in US Treasury yields helped to push the safe-haven currency higher.

Currency Ranges for the week:

GBP/USD: Low: 1.20097 High: 1.24351

GBP/EUR: Low: 1.13113  High: 1.16777

EUR/USD: Low:1.04953  High:1.06995

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