Friday 23rd September – The Pound took a turn for the worse as it reacted to the latest mini-budget from the government. UK stocks and bonds slumped while the currency fell by 3.5% against the US Dollar. With a range of tax cuts brought in, there are now concerns that the UK will face more debt, inflation and increased interest rates.
The Euro also faced difficulties following the release of the disappointing Eurozone PMIs. There were larger-than-expected contractions in the manufacturing and service sector with business activity hitting a third month of negative growth.
It was a different day for the US Dollar as it strengthened at the end of the week. There were new 20-year highs for the US Dollar index which helped to boost demand for the safe-haven currency. Along with this, PMI results came in stronger-than-expected which helped to give the currency a boost.
Thursday 22nd September
It was a strong start to the day for the Pound as markets prepared for a 75-bp interest rate rise from the Bank of England. However, a small rate hike was introduced which surprised markets while it was announced the UK economy is already in a recession which meant that the early gains were lost.
The Euro experienced some volatility as it strengthened following a drop in the US Dollar. Despite this, it faced challenges throughout the day as a significant drop in Eurozone consumer confidence pushed the single currency downwards.
At the start of the European session, the US Dollar fell rapidly as the safe haven currency suffered as a result of profit taking. It did manage to recover some losses during the afternoon as a drop in risk sentiment helped to give the currency a boost.
Wednesday 21st September
As UK borrowing came in higher than expected during August, this caused the Pound to slip against many of its peers. Public sector borrowing came in higher than expected and this resulted in concerns being raised about UK public finances.
The Euro struggled as it reacted to news that Russia was intensifying its attacks on Ukraine by putting more troops into the country. This further destruction had analysts worried that this could cause significant damage to the economy in the EU.
The US Dollar nudged higher as the invasion of Ukraine caused global markets to fear the worst. During the evening, the safe haven currency strengthened as the Fed increased rates by 75 bps for the third time and that caused the US Dollar Index to reach a new 20-year high.
Tuesday 20th September
There was a lack of direction for the Pound as a lack of data meant that it was likely to be driven by sentiment. There was pressure on the currency due to the news that attacks on Ukraine would strengthen.
The Euro weakened against many of its peers as the single currency was impacted by the invasion of Ukraine. As the conflict is going to escalate, this resulted in fears that the economy is going to struggle.
The US Dollar strengthened as it was boosted by increasing Treasury yields and a potential hawkish outcome of the Federal Reserve meeting. Concerns about the Ukraine war also meant that traders looked to take advantage of the safe-haven currency.
Currency Ranges for the week:
GBP/USD: Low: 1.08433 High: 1.14562
GBP/EUR: Low: 1.11974 High: 1.14996
EUR/USD: Low: 0.966931 High: 1.00496