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29th November - Weekly FX Update

Top Currency Pairs Monday 29th November 9:00 UTC GBP/USD: 1.33356 (Last week: 1.34219) EUR/USD: 1.12745 (Last week: 1.12676) GBP/EUR: 1.18281 (Last week: 1.19120)

Market News

Pound Sterling The Pound fell in strength heading into the weekend after Bank of England policymakers made some cautious comments in regards to a potential interest rate hike in December. This was intensified with the emergence of the new COVID strain Omicron, leaving the Pound touching 1.17728 against the Euro and falling below 1.33 against the Dollar. Fears over new UK restrictions, potential lockdowns and a reduced chance of an interest rate hike prompted a quick sell off. The governments actions over the next couple of weeks will be pivotal in how the Pound fares against other major currencies, as the rise of this new variant gives the Bank of England another excuse to hold interest rates when they make their decision later this month.

Euro Earlier last week, German data showed a fifth-straight month in a row of losses in the IFO business climate survey. Despite this, the Euro has benefitted from the news of the new Omicron variant since the European Central Bank have always held their dovish stance, reaffirming their decision to hold interest rates. This means that the Omicron strain will have less of an impact on the ECB's plans in comparison to the BoE and the Fed, who are both looking to hike rates long before the ECB. Looking ahead, German and European inflation will drive the Euro this week while investors will keep a close eye on COVID cases developing in the EU.

U.S. Dollar The Pound fell below 1.33 against the Dollar on Friday for the first time since last December. The Dollar has gained some considerable strength over the past few weeks from its safe-haven status, which has been reinforced with Jerome Powell being renominated for his position as Federal Reserve Chair, providing the US with a clear outlook and some much needed stability. The new Omicron variant will likely impact the Fed's plans to hike rates, which could be a problem as investors are looking for the central bank to get a hold of inflation, which is running its highest in more than three decades. The highly anticipated non-farm payrolls will also be in focus for the Dollar this Friday, where the last report showed 531,000 jobs added to the US labour market for October.

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