Weekly Currency Report 9-15 October 2023

There was a mixed mood on markets last week, as remarks from Federal reserve officials and US inflation data impacted sentiment throughout.

Overall, the Euro Stoxx 50 finished down by 0.2% for the week. Meantime, oil prices rose sharply, with Brent crude climbing above $90 per barrel.

In the early part of last week, dovish comments from a number of Fed officials and general risk aversion on markets, saw US Treasury yields move sharply lower. However, some above consensus US CPI inflation data for September, resulted in Treasury yields rising up from their troughs near the end of the week.

US Treasury market spilled over to European bonds, with German Bund and UK Gilt yields declining by circa 4-20bps also.

Heavily influence the dollar

Similarly, fluctuating US sovereign yields continued to heavily influence the dollar. EUR/USD trading high before edging all the way back below $1.05 on Friday. Meantime, GBP/ USD rose to a peak of $1.234, only to end the week down in the lower half of $1.21-1.22. Elsewhere, EUR/GBP remained tightly range bound between 85- 88p. As trading gets underway this morning, EUR/USD opens above $1.05, GBP/USD is up in the top half of $1.21-1.22, and EUR/GBP is at the midpoint of 85 -88p.

This week, a busy UK macro calendar, which includes the CPI (Sep) and wage (Aug) inflation releases, will garner close attention. Other UK labour market and retail sales data will also feature. In the US, retail sales and industrial production for September, as well as a number of housing market updates are due. However, remarks from a number of Fed speakers may have a greater impact on the dollar. In the Eurozone, the data calendar is relatively sparse.