Pound Uninspired by Positive Q4 UK GDP, US Dollar Stung by Falling Treasury Yields

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 Supported by USD Weakness

The Euro’s negative correlation with the US Dollar offered support to the single currency this week as the US currency faltered. However, these gains were tempered by the news that Germany will be extending its lockdown in March, as well as the EU’s ongoing vaccination debacle.

Looking ahead to next week, the Euro may come under pressure with the release of the Eurozone’s latest PMI figures, which are likely to report economic activity in the bloc continued to contract this month.

Top EUR data releases:

Feb 16 EUR GDP (Q4)

Feb 19 EUR Manufacturing PMI (Feb)

Feb 19 EUR Services PMI (Feb)

 

USD – US Dollar Slumps as Treasury Yields Fall

The US Dollar experienced a clear selling bias this week, with the currency falling in step with a drop in US Treasury yields. This came on the back of some lacklustre inflation figures as well as concerns that Joe Biden’s stimulus package could face delays due to disagreements amongst Democrats over the eligibility of relief checks.

Coming up next week, the publication of the latest US retail sales figures could help the US Dollar to recoup some of its losses, amidst forecasts sales growth will have rebounded in January.

Top USD data releases:

Feb 17 USD Retail Sales (Jan)

Feb 17 USD Industrial Production (Jan)

Feb 17 USD FOMC Minutes

 

GBP – Pound Strengthens but UK GDP Fails to Add Gains

The Pound rallied through most of the week, although a better-than-expected 1% fourth quarter GDP reading failed to drive further gains as the data also revealed the UK economy shrank 9.9% in 2020, the worst fall on record. Elsewhere, Sterling sentiment also continued to benefit from the UK’s vaccination programme, with 20% of the adult population reportedly having received at least one jab.

Turning to next week, the Pound could face some headwinds with the publication of the UK’s latest PMI figures, with another sizable contraction in private sector growth this month likely to reflect poorly on GBP exchange rates.

Top GBP data releases:

Feb 17 GBP Inflation Rate (Jan)

Feb 19 GBP Manufacturing PMI (Feb)

Feb 19 GBP Services PMI (Feb)

 

 

AUD – Australian Dollar Firms in Risk-On Trade

The Australian Dollar struck higher this week, with the appeal of the risk-sensitive currency being boosted amidst an upbeat market mood. The positive sentiment was driven by hopes for US stimulus as well as a positive phone call between US President Joe Biden and his Chinese counterpart, Xi Jinping

Looking ahead, the publication of Australia’s jobs report will be the main focus for AUD investors next week, with another dip in the unemployment rate potentially helping to buoy the Australian Dollar.

Top AUD data releases:

Feb 16 AUD RBA Minutes

Feb 18 AUD Unemployment Rate (Jan)

Feb 19 AUD Retail Sales (Jan)

 

ZAR – Rand Buoyed by Upbeat Sentiment

The South African Rand rallied in line with other emerging market currencies this week as the improving market sentiment supported risk-driven assets. The Rand was also supported by suggestions that more Chinese businesses will look to South Africa for exports in the coming months, amidst the ongoing tensions between China and Australia.

Looking ahead to next week, the focus for ZAR investors looks to be on South Africa’s latest CPI figures. Will another slowing of inflation put some pressure on the Rand?

Top ZAR data releases:

Feb 17 ZAR Inflation Rate (Jan)

Feb 17 ZAR Retail Sales (Dec)

 

CAD – Canadian Dollar Underpinned by Strong Oil Prices

The Canadian Dollar was able to hold its ground against the majority of its peers this week, with the commodity-linked currency able to hold off the advances of some of its stronger rivals as oil prices held around a one-year high.

The publication of Canada’s consumer price index is likely to be the main focus for CAD investors next week, with the ‘Loonie’ potentially strengthening if domestic inflation accelerated in January.

Top CAD data releases:

Feb 17 CAD Inflation Rate (Jan)

Feb 18 CAD ADP Employment Change (Jan)

Feb 19 CAD Retail Sales (Dec)