Pound

Pound Collapses amidst Mounting UK Economic Concerns, US Dollar Soars in Bearish Trade

The Pound tumbled to new multi-month lows this week, as the UK’s fuel crisis exacerbated concerns over the resilience of the UK’s economic recovery. 

At the same time, the US Dollar appreciated sharply through this week’s session, as a prevailing risk-off mood saw investors favour the safe-haven currency. 

Pound Plummets as Economic Concerns Compounded by Fuel Crisis 

GBP/EUR – Unchanged on the week’s opening levels 

GBP/USD – Down one cent on the week’s opening levels 

The Pound was met by an aggressive selloff this week, with Sterling plunging sharply through the first half of the week as the UK’s fuel crisis raised additional questions over the UK’s economic resilience.  

However, Sterling was able to claw back a good portion of these losses through the second half of the week amidst an improving market mood and stronger-than-expected GDP figures. 

Looking ahead, its likely these concerns over growth are likely to persist into next week, as the UK seemingly lurches from one crisis to another. 

Euro Infused with Volatility by Inflation Concerns 

EUR/GBP – Unchanged on the week’s opening levels 

EUR/USD – Down one cent on the week’s opening levels 

The Euro traded in a wide range over the past week, with the single currency fluctuating through the first half of the week on the back of some dovish European Central Bank (ECB) comments as well as in the face of broad US strength.  

This volatility then persisted into the latter half of the week as the Eurozone’s latest CPI figures gave rise to concerns over inflation. 

Turning to next week’s session, the focus for EUR investors looks to be on the publication of Germany’s latest industrial releases, with the Euro likely to appreciate if they print positively. 

US Dollar Soars as Risk Aversion Surges 

USD/GBP – Up one pence the week’s opening levels  

USD/EUR – Up one cent on the week’s opening levels  

The US Dollar roared higher this week, as Chinese growth concerns, coupled with fears the US might hit its debt ceiling, spooked investors and sent them flocking to the safe-haven ‘Greenback’.  

Reinforcing the upside in USD exchange rates was a jump in US Treasury yields in anticipation of an upcoming tapering announcement from the Federal Reserve. 

Centre stage next week will be the publication of the latest US non-farm payroll release. Economists are forecasting a healthy rise in employment growth in September, but could another lacklustre reading bring the US Dollar’s bullish run to a screeching halt? 

Australian Dollar Fluctuates in Bearish Trade 

AUD/GBP – Unchanged on the week’s opening levels 

AUD/USD – Unchanged on the week’s opening levels 

The Australian Dollar traded erratically this week, with some better-than-expected domestic retail sales figures and a sharp souring of market sentiment, infusing some volatility in the currency through the first half of the week.  

However, the ‘Aussie’ was able to claw back some of its losses in latter half of the week on the back of some upbeat Chinese data. 

Top of the agenda for AUD investors next week will be the Reserve Bank of Australia’s (RBA) latest interest rate decision. No policy changes are expected from the RBA this month, but some dovish forward guidance could send the Australian Dollar lower. 

Key Data  

Oct 4 USD Factory Orders (Aug)  

Oct 5 AUD Trade Balance (Aug) 

Oct 5 AUD Retail Sales (Aug) 

Oct 5 AUD RBA Interest Rate Decision  

Oct 5 EUR Services PMI (Sep) 

Oct 5 GBP Services PMI (Sep) 

Oct 5 USD ISM Non-Manufacturing PMI (Sep)  

Oct 6 EUR German Factory Orders (Aug) 

Oct 7 EUR German Industrial Production (Aug) 

Oct 8 USD Non-Farm Payrolls (Sep)