Euro Strengthens on Aggressive ECB Rate Hike, Pound Falters as UK Data Disappoints
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 Rallies ECB Surprises with Aggressive Rate Hike
The Euro enjoyed strong support at the start of this week, with the single currency being buoyed by USD weakness as well as reports that the European Central Bank (ECB) was discussing a 50bps interest rate hike. After a modest pullback in midweek trade, EUR exchange rates spiked after the ECB delivered a half-percent rate increase.
The publication of the Eurozone’s latest GDP figures will likely be the primary focus for EUR investors next week. Expect to see the Euro plunge if the preliminary figures report growth stalled or contracted in the second quarter.
Top EUR data releases:
Jul 25 EUR German IFO Business Climate (Jul)
Jul 29 EUR Inflation Rate (Jul)
Jul 29 EUR GDP (Q2)
USD – US Dollar Dips as Investors Rein in Fed Rate Hike Bets
The US Dollar stumbled out of the gates this week, as USD investors scaled back their bets for a 100bps interest rate hike from the Federal Reserve this month. The ‘Greenback’ then recouped some of these losses in the latter half of the week as a deteriorating market mood buoyed the appeal of the safe-haven currency.
All eyes will be on the Fed this week as it delivers its July interest rate decision. A 75bps rate hike could help to underpin the US Dollar, but a key focus will be on the Fed’s forward guidance, with any hints at a larger increase in the future likely to propel the US Dollar higher.
Top USD data releases:
Jul 27 USD Durable Goods Orders (Jun)
Jul 27 USD Fed Interest Rate Decision
Jul 28 USD GDP (Q2)
GBP – Pound Undermined by Lacklustre UK Data
The Pound got off to a roaring start this week, underpinned by speculation the Bank of England (BoE) may opt for a 50bps rate hike in August. However these gains where then chipped away though the rest of the week in response to some mixed UK macroeconomic releases, which highlighted the cost of living crisis.
In the absence of any high-impact UK economic data, the direction of the Pound may be driven primarily by UK political developments next week. Likely limiting the upside potential of Sterling amid the uncertainty of the Conservative leadership election.
Top GBP data releases:
Jul 25 GBP CBI Industrial Trends Orders (Jul)
Jul 25 GBP CBI Business Optimism (Q3)
AUD – Australian Dollar Buoyed by Hawkish RBA
The Australian Dollar strengthened through the first half of this week. Hawkish minutes from the Reserve Bank of Australia’s (RBA) July policy meeting in addition to upbeat comments from RBA Governor Philip Lowe both reflected positively on the ‘Aussie’. However the second half of the week saw AUD exchange rates dip amid a souring market mood.
Looking ahead, the publication of Australia’s quarter inflation figures will likely be the main catalyst of movement for the ‘Aussie’ next week. Will a jump in inflation push AUD exchange rates higher?
Top AUD data releases:
Jul 27 AUD Inflation Rate (Q2)
Jul 28 AUD Retail Sales (Jun)
ZAR – Rand Rebounds on SARB Rate Hike
The South African Rand trended lower through the first half of this week, undermined by domestic economic concerns amid a spike in inflation. However the Rand was then able to mount a convincing recovery on the back of the South African Reserve Bank’s (SARB) latest interest rate decision, after the bank opted for a larger-than-expected 75bps hike.
An expansion of South Africa’s trade surplus in June could offer some support to the Rand next week, although any gains will be reliant on a sanguine market mood.
Top ZAR data releases:
Jul 28 ZAR PPI (Jun)
Jul 29 ZAR Trade Balance (Jun)
CAD – Canadian Dollar Seesaws as Oil Prices Fluctuate
The Canadian Dollar initially firmed this week, the commodity-linked currency rising in tandem with oil prices. However the ‘Loonie’s gains were then tested in the second half of the week in response to weaker-than-expected domestic inflation figures and a pullback in oil prices.
Turning to next week’s session the focus for CAD investors is likely to be on Canada’s latest GDP figures, with another contraction in growth in June likely to weaken the ‘Loonie’.
Top CAD data releases:
Jul 29 CAD GDP (May)
Jul 29 CAD GDP Prel (Jun)