It was a quiet week on data releases. Instead, the main drivers were comments from central banks and news updates on covid-19. There is still talk that the Bank of England will push back interest rates into the new year, and the new variant continues to dominate across the board.
What was positive for the pound is that the Organisation for Economic Co-operation and Development (OECD) has said Britain is on track for growth to jump by 5.7% in 2021, with a further 4.5% in 2022. That performance would see the country outpace its G7 rivals in 2021 and 2022.
According to Eurostat, annual inflation for the countries using the euro, including Germany, France, Italy and Spain, soared to 4.9% in November, driven by higher energy prices. The reading marks the highest rate since 1997 when the European Union started collecting data ahead of the euro’s launch.
The virus will be the one to watch for any significant market movements. Next week, we will see Olaf Scholz be sworn in as Germany’s Chancellor, and after the high court ruled that last year’s lockdowns were constitutional, another lockdown could come fast in Germany.
The pair traded to a new weekly high as unemployment in Germany fell to 34,0000 in November. It still remains to be seen if the data will influence the European Central Bank (ECB) as Euro Area inflation widens for the fifth consecutive month. EUR/USD may stage a recovery ahead of the next ECB rate decision on 16th December.
Meanwhile, Chairman Powell of the Federal Open Market Committee (FOMC) in the US warned that inflation is running above their 2% goal. He also suggested that the Omicron variant will do little to detail the Fed from carrying out its exit strategy as he pledged to use their tools to make sure that higher inflation does not become too hard to combat.
The US Dollar looked for support from the job sector and unemployment figures. Despite recent data showing that the job market is recovering at a healthy pace, the Fed has already decided to focus on inflation and job growth is down. Nonfarm payrolls employment increased by 210,000 instead of an expected increase of 573,000 in November. With the unemployment rate falling to 4.2%, it shows that 17.5% of the jobs lost in the pandemic have not been regained, weakening the US Dollar.
With a weak Euro and a relatively strong Canadian Dollar, the currency pair has been tumbling ever lower. EUR/CAD is back at lows, last seen in early 2017. The Bank of Canada has signalled that rate hikes may be coming in early 2022, sooner than previously thought, driven by stronger and more persistent inflation pressures. The Bank of Canada won’t reveal their next decision until 8th December. However, the Canadian dollar remains strong against a weaker Euro as the European Central Bank is behind other major central banks looking to raise rates immediately. However, similar to the UK and the US, this new Covid-19 variant has pushed back interest hike expectations. The recent gains for the Loonie have been reversed, and we have seen nearly a 2.5% decline.
The rates for buying Euros are still very attractive; however, a lot will change over the coming weeks and months as we head deep into the winter. If you want some certainty, it may be wise to look at your requirement sooner rather than later.
If you do not have your total funds available, you can purchase the currency you need on a forward contract, where you buy now and pay later. We will monitor the rate for you and help you take advantage of rate spikes or fix the rate and set your budget in advance of any payments or transfers.