Sterling posts mixed performances, safe haven US Dollar sees marginal benefits

Early in the week, the Pound's performance was mixed due to the absence of significant data releases. The only notable release was the final manufacturing index, which matched preliminary readings.

Throughout the week, the absence of market-moving releases prevented Sterling from making substantial gains against other currencies. However, on Wednesday, GBP rates experienced an uptick following the release of September's finalized service sector index, which printed at 49.3, surpassing preliminary readings of 47.2. This data painted a slightly less concerning picture of the UK's economy in the third quarter.

Sterling received a boost on Thursday when Bank of England (BoE) Deputy Governor Ben Broadbent suggested that further rate hikes were being considered. However, Friday saw limited data, resulting in muted performance for the Pound against its peers.

Looking ahead for the Pound (GBP), the week began quietly in terms of economic data releases. Consequently, Sterling may struggle to gain significant support during the initial part of the week. The absence of impactful data catalysts could leave GBP vulnerable to shifts in market sentiment or continued analysis of the UK's economic prospects.

Later in the week, on Thursday, the release of August's GDP data is expected. Economists anticipate a 0.2% expansion on a monthly basis, which, if met, could strengthen Sterling by indicating ongoing vitality in the UK economy. However, if the actual figures fall short of expectations, the Pound might experience a decline in value.

EUR

The Euro encountered a challenging week characterized by a mix of disappointing and surprising data, pressure from a strong US Dollar (USD), and efforts by the European Central Bank (ECB) to boost investor confidence.

Early in the week, the Euro struggled against the Pound as Germany's final manufacturing PMI fell below expectations, signaling a significant contraction in the country's economy. The outlook for the Eurozone's largest economy appeared bleak as output dropped to its lowest level in nearly three and a half years.

On Tuesday, the Euro briefly spiked upward but later declined as robust US JOLTs data provided support for the US Dollar. Given the strong negative correlation between EUR and the 'Greenback', the Euro experienced losses.

Wednesday brought final PMI data from Germany and the wider Eurozone, surpassing forecasts. However, the Euro faced setbacks against the Pound due to disappointing retail data. August's sales fell by 1.2% instead of the expected 0.3%. ING economists cautioned that this reading does not bode well for the Eurozone's third-quarter GDP.

Relatively positive comments from the ECB's Luis de Guindos may have helped limit Euro losses on Thursday. He stated that it was 'premature to discuss rate cuts.' Moreover, Germany's trade balance exceeded expectations, reaching €16.6 billion.

By the end of the week, EUR/GBP moved lower despite impressive German factory orders. Strong nonfarm payrolls data from the US bolstered the 'Greenback', resulting in a decline in the negatively correlated Euro.

USD

The US Dollar (USD) kicked off the week with a strong performance as US Treasury yields surged to their highest level in 16 years. This rise, coupled with a prevailing risk-off sentiment in the market, bolstered the safe-haven 'Greenback'.

The positive momentum continued into Tuesday as yields maintained their upward trajectory. Additionally, the release of the latest JOLTs job openings figures in the afternoon exceeded expectations, indicating robustness in the US labor market.

However, the US Dollar faced a setback on Wednesday following disappointing ADP employment figures. The US economy added only 89,000 jobs in September, sparking concerns about a potential slowdown in the labor market and leading to reduced expectations of Federal Reserve tightening.

Thursday brought mixed trading for the USD. While an increase in jobless claims somewhat curtailed its gains, fluctuating bond yields prevented the USD from establishing a clear direction.

The US Dollar regained its strength on Friday after the release of the latest nonfarm payrolls data, which significantly outperformed expectations. The report revealed the addition of 335,000 jobs, well above the anticipated 170,000, contributing to the USD's upward momentum.

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Data for the week ahead

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Monday

20.00 GBP BoE's Mann Speech

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Tuesday

12.00 EUR ECB's President Lagarde Speech

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Wednesday

06.00 EUR German Harmonized Index of Consumer Prices

12.30 USD Producer Price Index ex Food & Energy

18.00 USD FOMC Minutes

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Thursday

12.30 USD Consumer Price Index

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Friday

01.30 CNY Consumer Price Index

14.00 USD Michigan consumer Sentiment Index

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