Geopolitical risks still the main driver in FX

Market reports
Thanim Islam
  • Markets weigh up diplomacy efforts
  • UK jobs and inflation in focus for GBP this week
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Market moves from Thursday spilled into Friday with USD gaining across the board and equities falling further on risk aversion going into the weekend.

On the data front, University of Michigan consumer sentiment figures disappointed and dropped to the lowest since June this year.


Market rates

* Daily move - against G10 rates at 7:30am, 16.10.23

** Indicative rates - interbank rates at 7:30am, 16.10.23


  • GBP: BoE Huw Pill

Our thoughts

Markets were very risk-averse going into the tail end of last week as they were very concerned about the developments in the Middle East. Over the weekend the US has weighed in with diplomatic efforts to avert a wider war in the area causing some of the risk aversion to ease to start the week. President Biden may visit Israel soon in further diplomatic efforts.

Big week for GBP this week with the release of jobs data on Tuesday inflation numbers on Wednesday and retail sales numbers on Friday. US retail sales is the key data point from the US this week, but geopolitical developments will be the key driver in the FX markets this week.

Chart of the day

Geopolitical risks will be the key theme in the FX space for the coming weeks it would seem. The dwindling risk appetite in markets has been in place since August with equities dropping and the safe haven of the dollar being in demand. Going into Thursday last week we saw a retracement of the current trend before we saw risk appetite drop once again. Markets are starting the week by weighing up diplomacy efforts from the weekend but should things worsen then we are likely to see the trend from August continue: Risk aversion.

Source: Bloomberg Finance L.P.

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