Brexit Uncertainty Infuses Volatility in the Pound
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 Undermined by Dovish Lagarde
The Euro trended lower this week, with the single currency retreating in response to comments from European Central Bank (ECB) President Christine Lagarde. This saw Lagarde sound the alarm over the Eurozone’s fragile recovery, as well as the fundamental challenges the ECB faces due to weak inflation in the bloc.
Looking ahead, the focus for EUR investors next week will be on Germany’s latest industrial data as they look for any signs that activity began to slow again amid Europe’s coronavirus resurgence.
Top EUR data releases:
Oct 5 EUR Retail Sales (Aug)
Oct 6 EUR German Factory Orders (Aug)
Oct 7 EUR German Industrial Production (Aug)
USD – US Dollar Sinks amid Upbeat Trade
The US Dollar fell back this week, with demand for the safe-haven currency weakening in response to improving market sentiment. This was attributed to coronavirus vaccine hopes as well as reports US Congress may be close to signing off on a new coronavirus stimulus package.
Turning to next week’s session, the US Dollar could mount a comeback if we see coronavirus concerns begin to return or if the US service sector reports an improvement in activity last month.
Top USD data releases:
Oct 5 USD ISM Non-Manufacturing PMI (Sep)
Oct 6 USD JOLTs Job Openings (Aug)
Oct 7 USD FOMC Minutes
GBP – Pound Rocked by Brexit Developments
The Pound initially surged this week, jumping on the back of reports which suggested the UK and EU were close to finalising a deal. However, Sterling subsequently collapsed as the two sides failed to close a gap in talks, and the EU formally launched legal action against the UK for breaching the withdrawal agreement with its internal markets bill.
It’s likely we will see Brexit continue to dominate Sterling sentiment next week as well, potentially giving way to additional volatility in GBP exchange rates.
Top GBP data releases:
Oct 5 GBP Services PMI (Sep)
Oct 5 GBP Construction PMI (Sep)
Oct 9 GBP GDP (Aug)
AUD – Australian Dollar Skyrockets in Upbeat Trade
The Australian Dollar roared higher this week, recovering a large part of last week’s losses thanks to a marked improvement in market risk appetite. Coronavirus vaccine optimism as well as hopes for more US fiscal stimulus appeared to be the main catalyst behind this improvement.
In the spotlight for AUD investors next week will be the Reserve Bank of Australia’s (RBA) latest rate decision. No policy changes are expected but keep any eye out for any subtle efforts by the bank to talk down the ‘Aussie’.
Top AUD data releases:
Oct 5 AUD Business Confidence (Sep)
Oct 6 AUD Trade Balance (Aug)
Oct 6 AUD RBA Rate Decision
ZAR – Rand Surges in Risk-On Trade
The South African Rand also soared in trade this week, with the emerging market currency benefitting from the sharp improvement in market sentiment, with ZAR investors surging off reports 2.2 million jobs were lost in the second quarter.
Looking ahead, any additional upside in the Rand next week will be highly reliant upon market sentiment, with the currency potentially facing some headwinds if the mood begins to sour again.
CAD – Canadian Dollar Dented by Sliding Oil Prices
The Canadian Dollar stumbled through the first half of the week as the commodity-linked currency was undermined by a slump in oil prices. However, the ‘Loonie’ was able to claw back some of these losses later in the week on the back of a robust monthly GDP report.
Turning to next week’s session, the focus for CAD investors will be on Canada’s latest jobs report. Will another notable drop in unemployment help to boost CAD exchange rates?
Top CAD data releases:
Oct 6 CAD Trade Balance (Aug)
Oct 7 CAD Ivey PMI (Sep)
Oct 9 CAD Unemployment Rate (Sep)
ILS – Shekel Surges despite Lockdown Extension
The Israeli Shekel shot higher this week, with the Shekel closing out September on a high in spite of a record rise in domestic coronavirus infections and an extension of the national lockdown.
In the absence of any notable data releases, the focus for ILS investors is likely to remain on the domestic fight against the coronavirus, which could leave the Shekel vulnerable to some volatility next week.