Euro Rebounds on Hope for End to War in Ukraine, US Dollar Buoyed by Surging Inflation

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 Rebounds on Hopes for Diplomatic Solution to Ukraine Crisis

The Euro struck fresh multi-year lows at the start of this week, before mounting a convincing recovery in mid-week trade amid hopes for a diplomatic solution to the war in Ukraine. The European Central Bank (ECB) then triggered another brief rally in EUR exchange rates in the latter half of the week after it announced plans to accelerate the winding down of its asset purchase programme, before being quickly reversed by some cautious comments from President Christine Lagarde.

The direction of the Euro is likely to remain tied to developments in Eastern Europe next week, although EUR exchange rates are also likely to be influenced by Germany’s ZEW survey, where a slump in economic sentiment could weaken the single currency.

Top EUR data releases:

Mar 15 EUR German ZEW Economic Sentiment (Mar)

Mar 15 EUR Industrial Production (Jan)

Mar 17 EUR Inflation Rate (Feb)

 

USD – US Dollar Walks Back Gains amid Improving Market Mood

The US Dollar opened this week on strong footing, before gradually relinquishing ground as an improving market mood sapped the appeal of the safe-haven currency. The latter half of the week then saw the US Dollar firm again after the US consumer price index reported domestic inflation soared to a new 40-year high of 7.9% in February.

Centre stage next week will be a widely expected rate hike from the Federal Reserve as it concludes its latest policy meeting. USD investors will be seeking to gauge as to how quickly the bank will continue to tighten its monetary policy, with an aggressive rate hike strategy likely to bolster the US Dollar.

Top USD data releases:

Mar 16 USD Retail Sales (Feb)

Mar 16 USD Fed Interest Rate Decision

Mar 16 USD FOMC Economic Projections

 

GBP – Pound Languishes amid Lull in Data

The Pound struggled to find any strong directional bias through much of this week as the absence of any notable UK economic data left Sterling vulnerable to market sentiment. The publication of the UK’s latest GDP figures then failed to elicit much a response from Sterling at the end of the week, in spite of a much stronger-than-expected uptick in domestic growth at the start of 2022.

In the spotlight for GBP investors next week will be the Bank of England’s (BoE) March policy meeting. With a rate hike largely priced in, the focus will be on the BoE’s forward guidance, with Sterling poised to plunge if the bank adopts a more cautious policy outlook.

Top GBP data releases:

Mar 15 GBP Unemployment Rate (Jan)

Mar 15 GBP Wage Growth (Jan)

Mar 17 GBP BoE Interest Rate Decision

 

AUD – Australian Dollar Fluctuates amid Profit Taking

The Australian Dollar traded in a wide range this week, initially rising to a multi-month on the back of rising commodity prices, before appearing to run afoul of some profit taking. While some hawkish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe offered some support to AUD exchange rates in the latter half of the week, this was not enough for the ‘Aussie’ to recapture its best levels.

The publication of Australia’s latest employment figures will be a key focus for AUD investors next week. Will a drop in unemployment help to propel the ‘Aussie’ higher?

Top AUD data releases:

Mar 15 AUD RBA Minutes

Mar 17 AUD Unemployment Rate (Feb)

 

ZAR – Rand Underpinned by Rising Commodity Prices

The South African Rand struck higher this week with the appeal of the emerging market currency being bolstered by an improving market mood as well as another strong uptick in commodity prices. However, the Rand’s gains were tempered somewhat by the announcement from Eskom that it would need to re-implement scheduled power cuts.

Assuming the commodity price rally persists into next week, the Rand may continue to find support, particularly if South African retail sales show further growth.

Top ZAR data releases:

Mar 16 ZAR Retail Sales (Jan)

 

CAD – Canadian Dollar Stumbles amid Oil Price Volatility

The Canadian Dollar rallied at the start of this week, with the oil-sensitive currency initially rising in tandem with crude prices, before a subsequent pullback in oil then left the ‘Loonie’ to trend lower through the second half of the week.

While remaining sensitive to oil prices, CAD exchange rates will also be influenced by Canada’s CPI figures next week. Will another rise in inflation buoy Bank of Canada (BoC) rate hike expectations and lift the ‘Loonie’ in the process?

Top CAD data releases:

Mar 16 CAD Inflation Rate (Feb)

Mar 18 CAD Retail Sales (Jan)