Top Currency Pairs Monday 6th February 04:00 UTC GBP/USD: 1.20300 (Last Week: 1.23918) EUR/USD: 1.07900 (Last Week: 1.08689) GBP/EUR: 1.11704 (Last Week: 1.14011)
Market News
Pound Sterling It will be a much quieter week on the economic calendar, but there is still plenty of data for markets to consider from the last back-end of last week. GBP faltered after downbeat market mood left the currency vulnerable, with stronger headwinds as the week went on. Markets expected the Bank of England to lean towards ending its tightening cycle during Thursday's meeting, and were proven correct. The BoE hiked rates by 50bps, but signalled that future meetings would consist of smaller increments if they were to even continue to lift rates at all. This put Sterling in an unfortunate position against its peers, and with a particularly empty week ahead the currency will be ultra-sensitive to market mood. Intensifying strike action and some notable political scandals are adding to the general sense that the UK is in a challenging position, making it much less of an attractive investment at this current point in time.
Euro Last week, the ECB continued its current monetary policy of raising interest rates, hiking by 50 bps and confirming the same for the next meeting in March. This pulled GBP/EUR lower after the Bank of England signalled an end to its tightening policy. The Euro also found some support early this morning as German factory orders grew by 3.2% in December, a rebound from the previous month. Looking ahead however, the Euro could face some early selling pressure, as economists expect Eurozone retails sales to slump last month, with a forecasted 2% decline. Should this be the case, recession concerns may rise which would certainly dent Euro exchange rates. Moreover, if German production contracts on Tuesday, this would only fuel losses.
U.S. Dollar It was a strong previous week for the Dollar. Despite only hiking rates by 25 bps (as expected and priced in), Friday showed unexpectedly strong U.S. nonfarm payrolls report, which suggested the Federal Reserve may stay hawkish for longer. The report highlighted a gain of 517,000 jobs last month, a stark difference to the Reuters poll which expected a gain of just 185,000. This led to the Dollar index gaining 1.1% against a host of other currencies, touching a four week high. Many believed that the Fed would be taking a more dovish path moving forward, including the Fed themselves, but this report and the services industry rebound for January may force them to rethink its monetary policy for future meetings.
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