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4th January - Weekly FX Update

Top Currency Pairs Tuesday 4th January 9:00 UTC GBP/USD: 1.34902 (20th December: 1.31802) EUR/USD: 1.12940 (20th December: 1.12598) GBP/EUR: 1.19445 (20th December: 1.17056)

Market News

Pound Sterling The Pound regained some serious strength throughout the Christmas period after fears of fresh restrictions and potential lockdowns were drowned out with how mild the new Omicron variant is in comparison to the Delta variant. Boris Johnson recently announced it was "plainly milder". Against the Euro, the Pound hit a new 22 month high this morning at 1.19515, and bounced off of its yearly low against the Dollar recovering almost 3% in 2 weeks, with the GBP/USD rate breaking the 1.35 barrier for the first time since November. Looking ahead, any negative Omicron headlines could derail the Pound with it currently being its biggest catalyst, as the UK economic calendar eases back into action with Markit manufacturing PMI for December set to release today. Economists expect no movement.

Euro The Euro has started 2022 weak after falling to the Dollar in early trading as well as giving up a 22-month high for the GBP/EUR exchange rate. This came after a rise in US bond yields supported the greenback, and Boris Johnson announcing that Omicron is "plainly milder", leaving the UK lockdown-free for the time-being. German economic data also came in lower than expected, with retail sales falling 2.9% year on year in November. Today, traders are awaiting German unemployment and French inflation data, as well as a host of other European economies inflationary figures.

U.S. Dollar The Dollar has made a strong start to 2022 on a firm footing, where it has recently seen a lot of the gains it made towards the end of 2021 subdued by risk-taking in other currencies by investors over Christmas. This week is set to be a busy week in the US calendar, with nonfarm payrolls set to headline on Friday. The most important information will be released on Wednesday, when investors will also be able to get an insight into the Fed's monetary policy outlook when FOMC meeting minutes for December are released.

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