Sterling took slight dip on Friday with the interbank reaching 1.1771 against the EUR and it continues to weaken against the Dollar with the rate reaching 1.3303 bringing it to its 11-month low against the Greenback.
The main reason for the dip was due to the FSTE 100 having its biggest drop since June 2020. The FSTE 100 is the 100 companies with the highest capitalisation listed on the London Stock Exchange. Many investors pull their investments due to the current rising Covid variant. After the discovery of Omicron (which is the new Covid variant), it has been spreading across several locations including Belgium, Hong Kong, and South Africa. This resulted to investors selling their shares, commodities, and cryptocurrencies around the world on Friday with the fears of another lockdown being in place.
However, looking at the over trend with GBPEUR, the slight pull back could just be a correction in the market as the Pound has been trending upwards since the 29 September this year. Again, the main reason for the Pound’s bullish movements is due to the previous inflation and employment economic data releases which came out better than the actual forecast, with the interest rate decision coming next month, this could strengthen the pound further.
On Saturday, 2 cases of the of the newly identified of Omicron was identified here in the United Kingdom. The world health organisation says, “Early evidence suggest that the new variant poses an increased reinfection risk”. Health Secretary Sajid Javid says that the UK took immediate action the moment that the variant has reached the United Kingdom, many scientist are now looking into the intricate details of this variant. Regarding changes this coming Christmas, the health secretary says that people who are planning for their Christmas should continue with their plans as there is enough time to be able to look into the new variant and for everyone to be able to take action against it.
As December approaches, there are 2 main catalysts which could determine its movement. The interest hike which will be determined next month which will be good for the currency however if the new variant spreads across the country, then we could revert back to the previous Covid protocols and have a knock-on effect to the pound.
Looking at this week’s economic data, there are no new releases today that could impact the exchange rates but to reach out for any updates.
Rising Cases continues to weaken the Single currency
Last weeks economic data for the Euro has been very positive with Germany’s Flash Manufacturing PMI data being 0.6 points better off than expected. However, the single currency continues to be weaker than its major counter parts, as the main the headline right now within the eurozone, is the continued increase in Covid-19 cases. Historically, the affect of the virus has always overshadowed many economic data due to the magnitude of how much the virus can damage an economy.
Austria was the first country to implement a full national lockdown and countries such as Belgium and the Netherlands tighten restrictions to prevent the spread of the virus. This has resulted in a large protest across different parts of Europe as groups of people who are against being vaccinated feel that it is a constraint against their personal freedom. So far 66% of people in Austria are fully vaccinated. In Belgium, 75% of the population is double jabbed which is one of the highest vaccination rates in Europe.However, cases continue to rise and restriction continues to get stricter. Partial lockdown has been put in place with bars and restaurants closing at a certain time.
The World Health Organisation has urged governments to double their efforts and reinforce the basics. WHO regional director for Europe says “there’s only 48% of the population who wear a mask indoors, any percentage above the will have an immediate effect and will contribute towards the prevention and deceleration of the virus spread.
As cases continue to rise across the eurozone, we could see further weakness towards the single currency as it could yet again impact many employees as well as businesses.
Looking at the economic data this week which could shake up the Euro. Today we will have the European Central Bank President Christine Lagarde making announcements and it could make some major changes around Europe. If you have any currency concern regarding the Euro, then please do not hesitate to contact your account manager.
Economic recovery could result in consumers spending less in the US
The Dollar has gone from strength to strength. Last weeks’ economic data releases have been in favour of the dollar with the unemployment claims breaching the 200k mark to bringing the jobless claims down to 199k (the lowest level since 1969) from the forecasted 259k. This had a massive impact on the economy and has shown a massive improvement post pandemic. Last weeks’ GDP quarter by quarter data was off by just 0.1% which was initially forecasted at 2.2% but this did not seem to have any impact on the currency and remained bullish against its major counterparts. These figures have resulted in a US economic growth to 2.1%.
As the economic recovery continues, the hike of the US inflation reaches a 30-year high as prices continue to increase with no end in sight. Consumer prices were up by 6.2% from the previous year and it is up by 0.9% month on month which was double the rate hike back in September with an increase of 0.4%. As prices continue to increase, consumers remain frustrated as inflation was supposed to be temporary and this could prevent the US from growing further.
Today, Fed Reserve Chairman Jerome Powell speaks which could cause some volatility towards the Dollar, however, all eyes will be on Friday as the Non-Farm payroll will be released and historically this economic data tends to move the Dollar quite a bit.
If you have any Dollar exchanges that you’re looking to do at some point then please contact your account manager her at Lumon.
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