Pound Firms as BoE Downplays Negative Rates, USD Firms on Stimulus Hopes

Find out how the major currencies have been performing and what movement we could see in the days ahead with our weekly exchange rate update.  

 

EUR – Euro Stumbles as Germany Likely to Extend Lockdown

The Euro found itself on the defensive this week, following the news that Germany is likely to extend its current national lockdown into April in order to prevent a 10-fold increase in infections. Applying additional pressure to the single currency were comments from European Central Bank (ECB) President Christine Lagarde, who indicated the bank is paying close attention to the EUR exchange rate.

Turning to next week’s session, the focus for EUR investors looks to be on the ECB’s first policy meeting of 2021, where a reaffirmation of its FX concerns could drive the Euro even lower.

Top EUR data releases:

Jan 21 EUR ECB Rate Decision

Jan 22 EUR Manufacturing PMI (Jan)

Jan 22 EUR Services PMI (Jan)

 

USD – US Dollar Firms on Reports of a Massive Stimulus Package

The US Dollar was spurred higher this week, on the back of reports suggesting that President-elect Joe Biden will pursue a stimulus package worth $2 trillion once in office. This built on gains made earlier in the week when a slump in equity markets sent investors flocking to the safe-haven ‘Greenback’.

Coming up next week, the spotlight for USD investors is likely to be the inauguration of Biden, with traders eager to see what policies he will prioritise in his first days in office. 

Top USD data releases:

Jan 20 USD Biden’s Inauguration

Jan 21 USD Initial Jobless Claims (16/Jan)

Jan 22 USD Existing Home Sales (Dec)

 

GBP – Pound Buoyed by Hawkish BoE

The Pound enjoyed some notable support through the past week, driven mostly by comments from Bank of England (BoE) Governor Andrew Bailey, in which he downplayed speculation the BoE could slash interest rates below zero. However, these gains were tempered somewhat amidst warnings that the lockdown measures in England could be tightened.

Looking ahead, the publication of the UK’s latest PMI estimates are likely to be the focus for GBP investors next week as they will give some idea of how much the latest lockdown measures have hit economic activity.

Top GBP data releases:

Jan 20 GBP Inflation Rate (Dec)

Jan 22 GBP Manufacturing PMI (Jan)

Jan 22 GBP Services PMI (Jan)

 

AUD – Australian Dollar Undermined by USD Strength

The Australian Dollar faltered at the start of this week, as a souring of market risk appetite put significant pressure on the risk-sensitive ‘Aussie’. While the Australian Dollar was able to claw back some of its losses later in the week as the mood improved, this rebound was capped by the strength of the US Dollar. 

Turning to next week, the spotlight for AUD investors will undoubtedly be on Australia’s latest jobs report, with a potential rise in unemployment in December likely to drag on the ‘Aussie’.

Top AUD data releases:

Jan 20 AUD Consumer Confidence (Jan)

Jan 21 AUD Unemployment Rate (Dec)

Jan 22 AUD Retail Sales (Dec)

 

ZAR – Rand Fluctuates in Cautious Trade

The South African Rand fell sharply through the first half of this week’s session, with the emerging market currency being undermined by a resurgent US Dollar and coronavirus concerns. However, the Rand was able to mount a recovery towards the end of the week despite the market mood remaining broadly downbeat.

Looking ahead, the South African Reserve Bank’s (SARB) latest policy meeting could infuse some additional volatility into the Rand next week depending on if the bank revises its outlook for 2021 in light of the surge in domestic coronavirus cases.

Top ZAR data releases:

Jan 20 ZAR Inflation Rate (Dec)

Jan 21 ZAR Retail Sales (Nov)

Jan 21 ZAR SARB Interest Rate Decision

 

CAD – Canadian Dollar Buoyed by Oil Rally

The Canadian Dollar struck higher this week, as the commodity-linked ‘Loonie’ was supported by a strong uptick in oil prices as WTI crude struck its highest levels in almost a year.

Acting as the main catalyst for the Canadian Dollar next week will likely be Canada’s consumer price index, where another lacklustre CPI reading could force the ‘Loonie’ to relinquish some of its recent gains.

Top CAD data releases:

Jan 20 CAD Inflation Rate (Dec)

Jan 21 CAD ADP Employment Change (Dec)

Jan 22 CAD Retail Sales (Nov)

 

ILS – Shekel Surges to 25-Year High

The Israeli Shekel was back on the offensive this week, with the ILS exchange rate jumping to a 25-year high against the US Dollar. The latest jump comes as Israel leads the world with its coronavirus vaccine programme, and comes despite continued efforts by the Bank of Israel to intervene through foreign currency purchases.

Looking ahead, will we see this surge in ILS exchange rates extend into another week as the currency’s runaway gains show no sign of slowing?