Friday 27th January – Sterling remained subdued on Friday as Chancellor Jeremy Hunt’s speech failed to boost investor confidence. Despite outlining plans for growth and investment, he stated tax cuts would have to wait until inflation was controlled, causing disappointment.
The Euro ended last week’s trade negatively due to ongoing concerns about the Russia-Ukraine conflict. Russia’s recent missile and artillery attacks in Ukraine and explosions near a nuclear power station added to worries of escalation.
The US Dollar saw mixed trade on Friday due to market reactions to the US core PCE price index and other data releases. The price index slightly increased in December, suggesting a potential slowdown in inflation, but a larger-than-expected drop in personal spending could indicate an impending economic downturn, reducing chances of a Fed interest rate hike.
Thursday 26th January
The Pound remained subdued yesterday due to a larger-than-anticipated drop in the CBI’s distributive trades survey, raising concerns about the UK retail sector. Nevertheless, expectations for interest rate hikes by the Bank of England next week may have prevented a further decline in Sterling.
The Euro faced multiple challenges yesterday, including growing worries over escalating tensions in the Russia-Ukraine conflict, with Russia viewing the West’s tank donation as “direct involvement.”
The US Dollar initially strengthened after US GDP and durable goods orders surpassed expectations, but these positive releases also boosted market sentiment, reversing the USD’s gains as a safe-haven currency.
Wednesday 25th January
Sterling experienced a tumultuous start but eventually made a comeback yesterday, earning modest gains against multiple currencies. This was due to ongoing bets on a 50bps interest rate hike by the Bank of England next week. However, UK economic uncertainties limited the GBP’s growth.
The Euro faced setbacks yesterday as anxieties grew over a potential escalation in the Russia-Ukraine conflict, causing unease among EUR investors. Germany’s decision to supply battle tanks to Ukraine further escalated the situation, with the Russian embassy in Germany alleging it raised the war to a new level.
The US Dollar moved indecisively yesterday due to light trading ahead of crucial US data releases today and tomorrow, mixed movements in the US bond market, and a lacklustre market sentiment.
Tuesday 24th January
The Pound experienced a significant drop yesterday after the latest UK services PMI showed a steeper contraction than expected, raising concerns about a potential recession.
The Euro saw limited movement yesterday, despite positive PMI reports surpassing forecasts, including a return to growth for the service sector after six months. The single currency struggled to gain traction.
The US Dollar had a mixed performance yesterday, initially gaining as a safe-haven currency in a cautious market, but trimmed its gains later in the session due to upbeat US PMI reports boosting market sentiment and declining US Treasury yields weighing on the USD.
Monday 23rd January
The Pound was hit yesterday by a warning from the EY Item Club that the UK’s expected recession this year could be worse than previously thought. This was compounded by the National Grid activating contingency plans during a cold snap.
The Euro dropped, losing overnight gains as risk-on sentiment weighed on the safe-haven currency. The weaker-than-expected improvement in Eurozone consumer confidence also impacted EUR.
The US Dollar experienced some volatility yesterday, as an optimistic market outlook weighed on the safe-haven currency while rising US Treasury yields supported it. USD saw a slight decline against stronger peers and modest gains against weaker ones.
Currency Ranges for the week:
GBP/USD: Low: 1.22738 High: 1.24217
GBP/EUR: Low: N/A High: N/A
EUR/USD: Low: N/A High: N/A