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10th January - Weekly FX Update

Top Currency Pairs Monday 10th January 9:00 UTC GBP/USD: 1.35899 (Last Week: 1.34902) EUR/USD: 1.13347 (Last Week: 1.12940) GBP/EUR: 1.19888 (Last Week: 1.19445)

Market News

Pound Sterling The Pound has held onto its recent gains as Boris Johnson confirms that the UK will need no further restrictions in order to overcome Omicron. When combining this with high vaccination rates and the Bank of England hiking interest rates in December, Sterling ended the year in positive territory and remains very resilient against the Euro and Dollar, despite an extremely hawkish Federal Reserve. Looking ahead, Friday will see UK GDP data released.

Euro Inflation in the Eurozone rose to 5% in December, which was a record high since the currency was created in 1999. This raised doubts over how quickly price pressures will ease in 2022. Economists predicted a 4.7% rise, which would have been slightly down from the 4.9% figure from November. This could force the ECB to reduce its monetary stimulus quicker, although it is thought that this is the peak and will start a downward trend moving forward. Despite this, the Euro made up some ground against the Dollar last week, but failed to do so against the Pound, as the GBP/EUR exchange rate heads towards the 1.20 mark.

U.S. Dollar On Wednesday, minutes from the Federal Reserve's December meeting were released, which saw committee members flag the potential for faster interest rate hikes, as inflation is high amid a strengthening US economy. This buoyed the Dollar, causing the Dollar to rise in value against both the Pound and Euro. However, Friday saw Nonfarm Payrolls rise by only 199k in December, much lower than the forecasted 400k. This pressured the Dollar and the currency lost the gains it made on Wednesday once the markets reopened this morning. Looking ahead, US inflation figures will be released on Wednesday, which will be a key indicator for short-term USD exchange rates. It is likely that US consumer prices will have reached another 40-year high in December, capping off a year of rampant inflation.

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