Currency Note

Quiet data week ahead for a weakened pound

By Christopher Nye February 20th, 2023

Pound weaker against euro and US dollar on weekly and monthly comparison.

Sterling begins the day weaker than the euro and US dollar, by approximately 0.25% and 0.06%, compared to this time last week.

Markets will look to the eurozone and United Kingdom for the latest purchasing managers data which will be released over the course of this week. We’ll see indexes from France, Germany and the eurozone on Tuesday.

Following the prime minister’s meeting with Stormont leaders in Belfast on Friday, ex-prime minister, Boris Johnson warned Rishi Sunak that it would be a “great mistake” to drop the Northern Ireland protocol. This comes after speculation of a deal between the UK and the EU being close.

Further strikes among the UK’s healthcare workers have been announced. The strikes, announced by the Royal College of Nursing and ambulance workers, are set to take place on Wednesday 15th March.

Euro-watchers will be keeping a close eye on Germany this week, as in addition to PMI, inflation and GDP are scheduled to be released.

In European stock markets, investors saw a higher open at the start of the business day as risk sentiment improved. However, investors remain cautious following subdued trading volumes caused by a US holiday (and the prospect of a Hawkish Fed).

Market watchers are also expecting lots of interesting data from Canada, such as inflation and retail sales. In the US, PMI will also be released.

China’s stocks rebounded sharply this morning, recovering from one-month lows as investors grew optimistic about the country’s economic recovery. The Shanghai Composite jumped 2.06% to 3,290 while the Shenzhen Component gained 2.03% to 11,954.

There will be several speeches from members of the US Federal Reserve bank over the coming days where officials will speak on inflation and the bank’s monetary policy. Dollar-watchers will be listening closely for any comments which could impact the US dollar.

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GBP: Hawkish Fed triggers GBP/USD decline

Pound sterling touched its weakest level since January 5th, as investors rushed to the greenback amid renewed bets of the Federal Reserve remaining hawkish with its monetary policy tightening.

Britain’s softer-than-expected inflation rate easing tightening pressures from the Bank of England also contributed to GBP/USD’s monthly decline.

GBP/USD over the past year

From To


EUR: EUR/USD weakens on monthly comparison

The euro moved further away from its nine-month high against the US dollar touched on February 2nd, as market-watchers looked to the dollar for safe-haven buying amid expectations that the Fed would remain Hawkish. This comes after the recent PPI data which suggested that price pressures remain elevated in the US.

Meanwhile, and despite signs that the eurozone’s inflationary pressures may have peaked, and with a recession looming, the European Central Bank maintains its aggressive policy tightening.

USD: DXY hits strongest levels in 6 weeks

The dollar index (DXY) holds near its strongest levels in six weeks, trading around 104 on Monday. This follows stronger-than-expected economic data from the US, plus hawkish remarks from Federal Reserve officials which kept the currency afloat.

The latest data signalled that elevated inflationary pressures remain in the US as well as a robust jobs market.

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