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Busy FX calendar amid rising Covid concerns

Busy FX calendar amid rising Covid concerns

Towards the end of last week we saw a slightly more positive outlook from global investors with the Euro Stoxx 50 up around 3% and on Wall Street, the S&P 500 was nearly 4% higher from where it started on Monday. 

On the currency front, with the exception of sterling which found itself under some modest downward pressure at different stages over the week, the action was confined to relatively narrow ranges. In terms of rates, EUR/GBP briefly climbed up to 86p and GBP/USD traded as low as $1.317. Overall, though EUR/GBP operated within a 84.9p-86p band and GBP/USD moved in a $1.317-1.329 range. EUR/USD traded between $1.123-1.135. 

Looking to the week ahead, in regards to data there are some important releases including flash PMI’s, UK CPI, unemployment and US retail sales. However, a lot of focus will be on monetary policy meetings, with the Fed, BoE and ECB all due. All three meetings provide some event risk for their respective currencies with the Fed likely to comment on QE tapering, the ECB is likely to continue to emphasise that rate hikes are unlikely next year,  while the market is no longer anticipating a rate hike from the BoE this month. 

Traders will also be following Covid-19 newsflow as the spread of Omicron increases, particularly in the UK. Focus will be on restriction measures and potential lockdown – the result of which would likely have a detrimental effect on sterling.

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