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21st November - Weekly FX Update

Top Currency Pairs Monday 21st November 04:00 UTC GBP/USD: 1.18537 (Last Week: 1.17773) EUR/USD: 1.03012 (Last Week: 1.03261) GBP/EUR: 1.15071 (Last Week: 1.14054)

Market News

Pound Sterling Despite news that the UK is set for a prolonged recession, there was reason for some optimism as Friday's retail data revealed better results than previously forecasted. This was on the backdrop of Thursdays Autumn statement, where Jeremy Hunt laid out his plans to raise taxes whilst reducing public spending to bridge the gap in public finances. The announcements made on Thursday had a calming effect on the currency markets, especially when compared to Kwasi Kwarteng's ill-fated mini budget. The Pound staged a late rally to have a positive week against both the US Dollar and the Euro. Looking ahead, there is a fairly quiet week ahead in the UK, with the Purchasing Managers Index for both services and manufacturing being released. It is expected to produce results that show an accelerated rate of contraction.

Euro The destabilising effect of the war in Ukraine continues for the Eurozone with its energy crisis varying in severity as the weeks go by. There also seems to be a difference in opinion amongst those at the head of the ECB on how best tackle the rising tide of inflation. ECB President Christine Lagarde is of the opinion that interest rate hikes are the most effective tool in tackling inflation as opposed to the idea of employing quantitative tightening in a timely manner to avoid hawkish interest rate hikes, a view held by others in the ECB.

U.S. Dollar Its Thanksgiving in the US this week, making it a short trading week with positions being closed off on Wednesday ahead of Thursdays holiday. Similarly to the UK, we see the announcement of the PMI (Purchasing Managers Index) in the US which is also expected to show further contractions in both manufacturing and services. The release of the Federal Reserve's minutes from November's meeting will also be of interest to investors who will look for any clues that suggest a slowing in the tightening process, after recent data may suggest this could be the case.

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