Euro Soars on 2022 ECB Rate Hike Bets, Pound Fluctuates as BoE Raises Interest Rates

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 Spikes on ECB Rate Hike Speculation

The Euro ticked higher in the first half of this week, bolstered by a weaker US Dollar as well as a record jump in Eurozone inflation, which fuelled speculation the European Central Bank (ECB) could begin hiking interest rates before the end of 2022. The Euro was then turbocharged after ECB President Christine Lagarde bolstered this speculation by declining to rule out such a move this year.

Looking ahead to next week, the Euro could receive some support following the release of Germany’s latest industrial production figures. With factory output forecast to have risen in December.

Top EUR data releases:

Feb 7 EUR German Industrial Production (Dec)

Feb 9 EUR German Trade Balance (Dec)

Feb 11 EUR German Inflation Rate (Jan)

 

USD – US Dollar Dented by Dovish Fed Comments

The US Dollar stumbled through the first half of this week, with the currency falling in tandem with US Treasury yields after Federal Reserve policymakers sought to temper market rate hike expectations. The ‘Greenback’ was able to claw back some of these losses in the latter half of the week however, on the back of a stronger-than-expected non-farm payroll release.

Centre stage next week will be the publication of the US consumer price index, with the US Dollar likely to rise if domestic inflation continued to climb last month.

Top USD data releases:

Feb 10 USD Inflation Rate (Jan)

Feb 10 USD Initial Jobless Claims (5/Feb)

Feb 11 USD Michigan Consumer Sentiment (Feb)

 

GBP – Pound Firms as BoE Hikes Rates

The Pound trended broadly higher this week after the Bank of England (BoE) raised interest rates and signalled that more hikes are likely to come as it attempts to tame rising inflation. However, this upside in Sterling was suppressed by ongoing political uncertainty as the initial findings from the Sue Gray report into the Downing Street ‘partygate’ scandal were seen as damaging for Boris Johnson.

In the spotlight for GBP investors next week will be the publication of the UK’s latest GDP figures. Will a slowing of economic growth in the fourth quarter of 2021 weaken the Pound?

Top GBP data releases:

Feb 11 GBP GDP (Q4)

Feb 11 GBP Business Investment (Q4)

Feb 11 GBP Trade Balance (Dec)

 

 

AUD – Australian Dollar Strengthened by Bullish Trade

The Australian Dollar trended higher against the majority of its peers this week, courtesy of a prevailing risk-on mood. However, these gains were capped as the Reserve Bank of Australia (RBA) sought to pour cold water on speculation it could start raising interest rates in the near-term.

Turning to next week, the ‘Aussie’ could face some pressure at the start of the session with the release of Australia’s latest retail sales figures, if December’s finalised release confirms a sharp contraction of sales growth.

Top AUD data releases:

Feb 7 AUD Retail Sales (Dec)

Feb 8 AUD Consumer Confidence (Feb)

 

ZAR – Rand Undermined by Power Cuts

The South African Rand struggled to attract support this week, following the announcement from state utility Eskom that it would need to implement scheduled power cuts amidst a lack of capacity. With these cuts estimated to cost the South African economy roughly ZAR700million per day in lost output.

Turning to next week’s session, the Rand could face additional pressure, depending on how long these power cuts remain in place.

Top ZAR data releases:

Feb 9 ZAR Business Confidence (Jan)

Feb 10 ZAR Manufacturing Production (Dec)

 

CAD – Canadian Dollar Fluctuates amid Oil Price Volatility

The Canadian Dollar traded in a wide range through the first half of this week, as fluctuating oil prices infused some volatility into the commodity-linked currency. The subsequent release of Canada’s latest jobs report then placed pressure on the ‘Loonie’ at the end of the week after it reported a larger-than-expected rise in domestic unemployment.

A speech by Bank of Canada (BoC) Governor Tiff Macklem will likely be a key focus for CAD investors next week. Will a more hawkish outlook from Macklem help to bolster the Canadian Dollar?

Top CAD data releases:

Feb 8 CAD Trade Balance (Dec)

Feb 9 CAD BoC Macklem Speech