Friday 4th November -The Pound continued to lose ground at the end of the week following the news from the Bank of England that the UK is in a recession. Furthermore, it also raised interest rates and claimed that the recession will last until mid -2024, all of which weighed heavily on the currency.
The Euro strengthened against a number of its peers as better-than-expected data gave the single currency a boost. Furthermore, hawkish comments from the European Central Bank and a strong negative correlation with the US Dollar also helped to support the currency.
It was a disappointing day for the US Dollar as it slumped during trading following a drop in year-on-year wage growth. This resulted in markets calling back bets in readiness for more Federal Reserve interest rate increases.
Thursday 3rd November
The Pound dropped as it reacted to a 75 bps interest rate rise and news that the UK had entered a recession. It is expected that the economy will remain in recession until 2023 and so, the Bank of England is expecting to reduce the speed of its tightening cycle.
It was a mixed day for the Euro as the single currency improved against weaker rivals but lost ground elsewhere. There was support from the unemployment rate which dropped to a new low of 6.6% but the negative correlation with a strong US Dollar went against the currency.
The US Dollar continued its upward trend as it took advantage of the interest rate decision from the Federal Reserve. However, any gains were limited as the publication of the ISM non-manufacturing PMI indicated that there was a significant slowdown in activity in the US service-sector activity.
Wednesday 2nd November
Further fears over the cost-of-living crisis weighed heavily on the Pound as it stumbled during trading. Adding to this was the new food inflation figures which indicated the increasing prices are putting a squeeze on how much consumers are spending, all of which indicates that the UK is heading into a recession.
The Euro almost hit weekly lows following the latest manufacturing PMI figures which indicated that there was a worse-than-expected dip in factory activity. Along with this, the Euro also moved in relation to its negative correlation with the US Dollar which left the single currency lacking any support.
The US Dollar weakened initially but it managed to make up for some of these losses as US jobs data came in better than expected. The Federal Reserve also announced an increase in interest rates but stated that speed of rate rises would slow down and this caused the Dollar to drop before rising back up after the Fed announced that the slowdown would not happen instantly.
Tuesday 1st November
There was no clear direction for the Pound as the UK’s final manufacturing PMI came in with mixed results. While the data came in higher than expected, it still highlighted a strong contraction in factory activity in the UK.
The Euro wobbled during trading as there was a lack of data to drive it in either direction. Along with this, market sentiment was shifting although it did manage to make some gains against some of its weaker peers, even with the US Dollar experiencing a rally.
The US Dollar surged as US Data came in better than expected which raised expectations of strong interest rate rises from the Federal Reserve. The ISM manufacturing PMI and the ISM manufacturing figures beat forecasts, showing that the US economy is resilient.
Monday 31st October
The Pound dropped during trading as it struggled to continue to take advantage of the tailwinds from the previous week. A drop in mortgage approvals and credit card borrowing left investors concerned and with interest rates increasing as well as a drop in spending, it looks like the UK is heading into a recession.
The Euro dropped today while Eurozone inflation hit a new high of 10.75. This put more pressure on the European Central Bank to increase interest rates but even this could not give the single currency a boost.
The US Dollar surged as it managed to make up for some of the losses seen during the previous week. The Greenback picked up prior to the interest rate decision from the Federal Reserve on Wednesday. Markets expect rates to rise to 4% offering higher returns on investments, all of which helped to boost the appeal of the currency.
Currency Ranges for the week:
GBP/USD: Low: 1.11362 High: 1.15581
GBP/EUR: Low: 1.13636 High: 1.16519
EUR/USD: Low: 0.973702 High: 0.998039