Weekly Report – 5th September – 9th September 2022

Friday 2nd September – There was no real direction for the Pound on Friday as the energy bill support package from Liz Truss was still being digested. Along with this, the death of Her Majesty The Queen might also have had an impact on investors while the Bank of England has decided to put a hold on its rate decision.

currency news

 

The Euro fell at the end of the week, cutting its weekly gains following concerns about the ongoing energy crisis. Following the 75-bp interest rate rise, the single currency saw any losses limited although warnings of a recession did offset this.

It was a slow start for the Dollar as it lost ground due to a risk on mood. Despite this, the Greenback did make up the lost ground as it reacted to Federal Reserve policy tightening. Later in the day, Fed policymakers also indicated their desire for aggressive rate rises.

Thursday 8th September

Following the announcement of the Energy Price Guarantee, the Pound spiked with the hope that the economy would receive a welcomed boost. Despite this, the plans were not costed and so, there are concerns that the price could reach £180bn which would have a significant impact on the economy.

At the start of trading, the Euro nudged higher as markets readied themselves for a significant rate rise by the European Central Bank. The ECB did raise rates by 0.75% while warning of dark times, indicating that the Eurozone could fall into recession.

An upbeat mood in the European markets forced the US Dollar into an early downward trend although it did take advantage of its weaker peers. As a result, losses were limited although the ongoing upbeat mood did cause the currency to struggle against its stronger peers.

Wednesday 7th September

There were some small gains made by the Pound initially during trading but its fortunes soon changed following the Bank of England’s Treasury Select Committee hearing. Warnings were fired that the UK is still heading towards a recession and this caused the GBP to drop.

The growth rate in the Eurozone surpassed previous estimates, coming in at 0.8% instead of 0.6%, helping to strengthen the Euro. Strong GDP data helped to keep the Euro moving in the same direction, which saw it rise against many of its rivals.

The US Dollar moved towards multi-year highs following a lack of trading impulses which left the Greenback struggling to make any gains. A downbeat market mood and an expected Federal Reserve interest rate rise helped to support the currency, preventing any losses.

Tuesday 6th September

There was an element of volatility for the Pound as it made gains initially following the news that Liz Truss would implement a package to prevent soaring energy prices. Despite this, the currency lost any gains following concerns around government spending and bond yields reaching the highest levels seen since December 2013.

A brief upward trend following a drop in EU gas prices wasn’t enough for the Euro as it dropped to weekly lows. Even the drop in energy prices was not enough to boost investors as they are fearful that a recession is on the horizon. During the afternoon, the single currency did manage to make up for some of its losses but it still remained quiet.

The US Dollar firmed as trade returned following the federal holiday. The Greenback was supported by a downbeat mood and expectations of a Federal Reserve rate rise. The ISM’s US Services PMI came in much improved which might have capped any further gains.

Monday 5th September

The Pound was exposed to overnight selling pressure but still managed to nudge higher during trading although it did remain close to the lows seen in the previous week. The currency was not affected by news that Liz Truss would become the next Prime Minister but her plans to deal with the energy crisis could leave the currency exposed.

The Euro was quiet during trading as markets reacted to news that the Nord 1 pipeline had been shut down by Gazprom. As a result, gas prices rose and this forced the single currency downwards. Despite this, the losses were recouped after the initial reaction disappeared.

Following concerns of a recession in the Eurozone, the US Dollar reached 20-year highs. However, these gains were lost as market sentiment improved although the mood was still downbeat while there was a lack of movement due to the Labor Day federal holiday.

Currency Ranges for the week:

GBP/USD: Low: 1.14162 High: 1.16439

GBP/EUR: Low: 1.14491  High: 1.16666

EUR/USD: Low: 0.987609  High: 1.01314

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