Pound Sterling

Pound Rebounds from One-Month Low on BoE Rate Hike Speculation, US Dollar Firms in Risk-Off Trade

The Pound came under some notable pressure through this week’s session, with the currency only finding some brief respite after the Bank of England dropped hints regarding a potential rate hike early next year. 

At the same time, the US Dollar was well supported this week as a Hawkish Federal Reserve coupled with a prevailing risk-off environment bolster USD Demand. 

Pound Rebounds on Revised BoE Rate Hike Expectations 

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

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

The Pound got off to a poor start this week, faltering amidst concerns the UK’s energy prices crisis could exacerbate the UK’s current economic woes.  

The second half of the week then saw Sterling recoup some of these losses following the Bank of England’s (BoE) latest policy meeting, after its forward guidance prompted investors to start pricing in a rate hike for early 2022. 

Looking ahead, questions over the resilience of the UK’s economic recovery may continue to hound the Pound next week, limiting the upside potential of any upbeat GBP data releases. 

Euro Wavers amid German Election Uncertainty 

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

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

The Euro fluctuated this week amidst elevated German political uncertainty, ahead of this weekend’s general election.  

EUR exchange rates were also rocked by the Eurozone’s latest PMI figures, after they printed well below expectations this month. 

The focus for EUR investors next week will be the publication of the Eurozone’s consumer price index. Inflation is forecast to have risen again this month, but in light of the European Central Bank’s (ECB) currency dovish bias, any upside in the Euro could be limited. 

US Dollar Firms as Fed Signals Tapering Plans 

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

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

The US Dollar struck higher in the first half of this week, as the Federal Reserve dropped its strongest hints yet that it will begin tapering its bond purchases by the end of the year, whilst also signalling the process could be faster than previously thought.  

But the ‘Greenback’ then faltered on Thursday, before rebounding again at the very end of the week in response to rising US Treasury yields and a downbeat market mood. 

Turning to next week’s session, the priority for USD investors is likely to be the latest ISM manufacturing PMI, where reports of robust expansion in the US factory sector could help to bolster the US Dollar. 

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 initially stumbled this week as a prevailing risk-off mood and dovish Reserve Bank of Australian (RBA) minutes took their toll on the currency. 

The ‘Aussie’ started to claw back some of these losses in the second half of the week, on the back of some stronger than expected PMIs, but these gains proved short-lived as market sentiment soured again on Friday. 

The publication of Australia’s latest retail sales figures is likely to act as a key catalyst of movement in the ‘Aussie’ next week, with another slump in sales growth last month, potentially weakening AUD exchange rates. 

Key Data  

Sep 27 USD Durable Goods Orders (Aug) 

Sep 28 AUD Retail Sales (Aug)  

Sep 30 GBP GDP (Q2)  

Sep 30 EUR German Inflation Rate (Sep) 

Oct 1 AUD Manufacturing PMI (Sep)  

Oct 1 GBP Manufacturing PMI (Sep)  

Oct 1 EUR Manufacturing PMI (Sep)  

Oct 1 EUR Inflation Rate (Sep) 

Oct 1 USD PCE Price Index (Aug) 

Oct 1 USD ISM Manufacturing PMI (Sep)