Friday 7th October – The Pound started on a good footing as it ticked higher as a result of some dip buying. Despite this good start, as the day progressed, the currency lost ground as investors reacted to an interest rate by the Fed which forced UK bond yields upwards.
The Euro moved in all directions although there was no clear driver for its movement. German data came in below expectations and that weighed heavily on the single currency. However, a downbeat market mood helped the single currency to make up ground on its riskier rivals.
It was a solid day for the US Dollar as US employment data was better than expected, proving that the labour market is in a good position. As a result, expectations firmed around an interest rate rise from the Federal Reserve, giving the Greenback a much-needed boost.
Thursday 6th October
The Pound fell during trading as markets reacted to the recent downgrading in the credit outlook for the UK. The UK credit rating had been moved to negative from stable, placing pressure on the currency. Financial stability in the UK was also questioned as a result of the mini-budget from the government.
Even a mixed tone from the European Central Bank couldn’t hamper the Euro as it firmed against many of its rivals. While further interest rates are likely, there are still concerns around the economy in the Eurozone although the minutes from the latest meeting were seen to be hawkish and that gave the single currency a boost.
The US Dollar firmed as a drop in risk appetite helped to give the currency a much-needed push in the right direction. Poor employment data could not push the currency downwards while the Federal Reserve also strengthened its commitment to increasing interest rates.
Wednesday 5th October
There was a loss of ground for the Pound as investors became concerned about a rise in UK government bond yields following problems in the market. Any losses were limited as the final services PMI came in higher than expected which meant that the services sector avoided contraction in September.
The Euro weakened during trading as the final composite PMI was lower than the initial reading, all of which confirmed a deep contracting in the Eurozone. In addition to this, ongoing concerns about further escalation in the Russia-Ukraine conflict meant that pressure was placed on European markets.
The US Dollar trended higher as risk appetite weakened, which saw traders take advantage of the safe-haven currency. Despite this, some of the gains were lost in the afternoon after US services PMI boosted global markets.
Tuesday 4th October
The Pound continued to recover following the policy u-turn from the government and news that the bond market intervention from the Bank of England is working. Any gains might have been capped as confusion around the latest fiscal plans caused some turbulence although the currency did hold onto its gains.
The Euro strengthened following the latest PPI reading as it came in higher than forecasted and this raised expectations that interest rates will be increased further by the European Central Bank. Negative correlation with the US Dollar also helped to boost the single currency.
The US Dollar dropped during the session following a bullish market mood which meant that demand for the safe-haven currency was lacking. As the Federal Reserve has taken less aggressive action following recent weak US data it created an optimistic mood in other markets, weakening the appeal of the currency.
Monday 3rd October
At the start of the week, the Pound nudged higher as the u-turn on cuts to the higher rate of tax helped to support the currency. This brought relief to the UK bond markets even though investors were warned by analysts that the chancellor should reverse more of the policies he implemented.
The Euro dropped as there was a lack of support for the single currency following fresh concerns for the conflict in Ukraine. Adding to the pressure was the latest manufacturing PMI which was revised lower than expected.
It was a slow start for the US Dollar as a risk-on mood hit demand for the currency. The Greenback attempted to rally during the afternoon although the release of the ISM manufacturing PMI brought that to an end as it showed that US factory almost came to a halt in September.
Currency Ranges for the week:
GBP/USD: Low: 1.10962 High: 1.14829
GBP/EUR: Low: 1.13432 High: 1.15505
EUR/USD: Low: 0.954565 High: 1.16842