Weekly Report – 30th August to 2nd September 2022

Friday 2nd September – It was a relatively quiet end to the week for the Pound as investors continued to be concerned by economic woes and political troubles. Warnings have been sounded that the UK will enter a recession this year although the British Chambers of Commerce has already said that the UK is in a recession, all of which placed pressure on the currency.

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The Euro firmed at the end of the week following a drop in European gas prices which helped to ease concerns about a recession. Despite this, Russia issued some fresh warnings and threatened to cut off supplies if the EU places a price cap on gas prices.

It was a difficult day for the US Dollar after it fell following a change in the market mood as investors took an upbeat stance. This meant that demand for the safe-haven currency dropped while additional data in the afternoon meant that there were further losses.

Thursday 1st September

The Pound was still under a lot of pressure during trading after there were no real signs that the economic position of the UK was going to improve soon. Research also suggested that 3 million people could find themselves in poverty as a result of rising energy prices and the cost-of-living crisis.

At the start of trading, the Euro moved upwards after there was a rise in German retail sales. Despite this, the single currency soon turned following a report that suggested that Russian gas supplies could be severed completely while it is looking more likely that a recession is on the horizon.

It was a different day for the US Dollar as a drop in market sentiment meant that the currency came out on top. During the afternoon, the currency jumped higher as the ISM manufacturing PMI came out higher than expected. As a result, it increased expectations of a 75-bp rate rise from the Federal Reserve.

Wednesday 31st August

The Pound dropped to new multi-year lows after a continued deterioration of the UK’s economic outlook. Experts have warned that inflation could reach as high as 20% while the cost of government borrowing has increased following an increase in interest rates.

The Euro had a change in fortune as it surged following the news that inflation surpassed expectations, all of which underpinned expectations of a 75-bp rate rise. Furthermore, the ECB has aid that action must be taken in order to help ease the impact of inflation

At the start of trading the US Dollar strengthened following a downturn in the market mood which boosted the appeal of the safe-haven currency. Despite this, some of the gains were lost during the afternoon as the latest figures suggested that employment was slowing down.

Tuesday 30th August

It was a troubling day for the Pound as it hit new multi-year lows following a rather negative report from economists at Goldman Sachs. It warned that UK inflation could reach as high as 22% next year if energy prices continue to rise. In addition, there are expectations that the UK will slip into a recession during Q4 this year.

In contrast to the Pound, the Euro strengthened as investors reacted to news that the EU will take an emergency intervention to deal with the rising energy costs. Despite this, any gains were capped by a bigger-than-expected drop in Eurozone economic sentiment.

There was a drop in interest in the US Dollars following an upbeat mood amongst European investors. Despite this, comments from the Federal Reserve and positive US economic data helped to give the currency a welcomed boost during the afternoon.

Currency Ranges for the week:

GBP/USD: Low: 1.1497 High: 1.17506

GBP/EUR: Low: 1.15313  High: 1.17302

EUR/USD: Low: 0.993354  High: 1.00719

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