Pound Rallies, US Dollar Rebounds on Fed Tapering Speculation

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 Firms on Encouraging PMI Data

The Euro received a boost from stronger-than-expected finalised Eurozone manufacturing and services PMIs this week, with growth in the latter hitting its highest level since 2018. Meanwhile, the bloc’s consumer price index also surged into the top end of the European Central Bank’s (ECB) target range at 2%, although a rebound in USD and a slump in German retail sales limited EUR. 

Looking ahead to next week, the ECB’s interest rate decision will likely be the main focus, with any indication of tightening monetary policy in response to rising inflation being EUR-positive. EUR traders will also eye Germany factory data and the finalised Eurozone GDP data for the first quarter. 

Top EUR data releases:

Jun 7 EUR German Factory Orders (Apr)

Jun 8 EUR GDP (Q1)

Jun 10 EUR ECB Interest Rate Decision

 

USD – US Dollar Rebounds on Fed Taper Talk

The US Dollar initially struggled this week amid a prevailing risk-on market mood, which weighed on the safe-haven currency. However, rising US Treasury yields, robust employment data, a record high ISM non-manufacturing PMI, and comments from a Federal Reserve official on starting to discuss tapering, which could lead to tighter Fed monetary policy, boosted USD to overturn its losses.

Speculation about the Fed tapering its monetary policy is set to drive the US Dollar next week ahead of May’s US inflation rate data, which is forecast to surge to 4.7%. Rising inflationary pressure could cause more Fed officials to join the call to start tapering, potentially boosting the ‘Greenback’.

Top USD data releases:

Jun 10 USD Consumer Price Index (May)

Jun 10 USD Initial Jobless Claims (5/Jun)

Jun 11 USD Michigan Consumer Sentiment Index (Jun)

 

GBP – Pound Boosted by Surging Services Sector

The Pound fluctuated this week as fears over the Delta coronavirus variant offset assurances from UK Prime Minister Boris Johnson that there is still no clear evidence to delay the final easing of lockdown measures on 21 June. The finalised May UK services PMI helped GBP make gains at the end of the week after the data was upwardly revised to a 24-year high.

Looking ahead, coronavirus developments will remain key to GBP investors as any hints that the UK government could delay this month’s easing of lockdown measures would be Pound-negative. The UK’s latest GDP data could provide support to Sterling, with 2.5% growth forecast for April.

Top GBP data releases:

Jun 11 GBP Industrial Production (Apr)

Jun 11 GBP UK GDP (Apr)

 

AUD – Australian Dollar Volatile amid Victoria Lockdown

The risk-sensitive Australian Dollar benefited from risk-on market mood early this week. Australia’s latest GDP data for the first quarter unexpectedly came in at 1.8% and offset a dovish Reserve Bank of Australia (RBA) policy meeting. However, AUD exchange rates plunged at the end of the week following disappointing economic data and concerns over Victoria’s lockdown extension.

In the week ahead, AUD traders will monitor the latest Australian consumer and business confidence data for June. If this points to a positive mood in the economy, then the AUD exchange rate will head higher. Coronavirus concerns will also remain in focus as Victoria goes into another week of lockdown.

Top AUD data releases:

Jun 8 AUD NAB Business Confidence (May)

Jun 9 AUD Westpac Consumer Confidence (Jun)

Jun 9 AUD RBA Kent Speech

 

ZAR – South African Rand Surges in Risk-On Trade

The risk-sensitive South African Rand rose last week thanks to risk-on market mood and high commodity prices, hitting its highest levels against USD since early 2019. But fears of a third wave of Covid-19 have dampened confidence in the outlook for the nation’s economy. 

Risk sentiment will continue to drive the ZAR exchange rate next week. In South African economic news, the release of the latest GDP data for the first quarter could support the South African Rand if the figures show solid growth as forecast.

Top ZAR data releases:

Jun 8 ZAR GDP Growth Rate QoQ (Q1)

Jun 10 ZAR Business Confidence (Q2)

 

CAD – Rising Oil Prices Buoy ‘Loonie’

The commodity-linked Canadian Dollar rose last week thanks to rising oil prices. Increasing demand for commodities drove-up the CAD exchange rate, with oil prices hitting a two-year high. This offset a lower-than-expected 1.4% first quarter GDP reading, well below the 3.8% forecast.

Canadian Dollar traders will be awaiting next week’s interest rate decision from the Bank of Canada (BoC), which is widely expected to hold at 0.25%, but any bullish monetary policy adjustments would boost CAD exchange rates. Oil prices will also continue to influence the direction of the currency. Could rising oil prices continue to buoy the Canadian Dollar next week?

Top CAD data releases:

Jun 8 CAD Balance of Trade (Apr)

Jun 9 CAD BoC Interest Rate Decision