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Euro Tumbles on ECB Rate Cut Speculation, US Dollar Soars in Risk-Off Trade

Euro Tumbles on ECB Rate Cut Speculation, US Dollar Soars in Risk-Off Trade

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 Slides as ECB Thinks Markets Underestimate Rate Cut Odds

The Euro ticked lower this week, undermined by gloomy consumer confidence figures from Germany and more Italian political drama. Adding to the Euro’s woes was a Bloomberg report that suggested European Central Bank (ECB) officials believe markets are underestimating the odds for a rate cut.

Looking ahead to next week, the focus for EUR investors will be on the Eurozone’s preliminary GDP release for the fourth quarter. Will a smaller-than-expected contraction of growth offer some support to the Euro?

Top EUR data releases:

Feb 2 EUR GDP (Q4)

Feb 3 EUR Inflation Rate (Jan)

Feb 4 EUR Retail Sales (Dec)


USD – US Dollar Firms in Risk-Off Trade

The US Dollar has strengthened this week as the prevalence of a risk-off mood bolstered the appeal of the safe-haven currency. Markets turned cautious this week amidst uncertainty over Biden’s stimulus package and a sell-off in equity markets, triggered by a slowing of Q4 GDP and a dovish Federal Reserve which raised concerns over the US economic recovery.

Coming up next week, the spotlight will undoubtedly be on the latest US payroll figures, which could turbocharge demand for the safe-haven ‘Greenback’ if the US jobs market posts another contraction in January.

Top USD data releases:

Feb 1 USD ISM Manufacturing PMI (Jan)

Feb 3 USD ISM Non-Manufacturing PMI (Jan)

Feb 5 USD Non-Farm Payrolls (Jan)


GBP – Pound Firms on Economic Optimism

The Pound rallied through the first half of this week’s session, as GBP investors welcomed the publication of better-than-expected unemployment and wage growth figures. However, the Pound was unable to sustain these gains, retreating in the second half of the session after Boris Johnson indicated that the current lockdown measures are likely to remain in place until at least 8 March.

Turning to next week, the focus for GBP investors will be on the Bank of England’s (BoE) latest rate decision. No policy changes are expected from the BoE this time around, but the bank’s outlook for the UK economy will be closely watched.

Top GBP data releases:

Feb 1 GBP Manufacturing PMI (Jan)

Feb 3 GBP Services PMI (Jan)

Feb 4 GBP BoE Rate Decision


AUD – Australian Dollar Slides amid Gloomy Mood

The Australian Dollar retreated this week as investors shunned the risk-sensitive ‘Aussie’ amidst a slump in market sentiment. This fall in AUD exchange rates came in spite of Australian inflation accelerating faster-than-expected in the fourth quarter.

Looking ahead, the focus next week for AUD investors will be on the Reserve Bank of Australia’s (RBA) latest policy meeting, with the main question being whether or not the bank will opt to extend its current quantitative easing programme past April.

Top AUD data releases:

Feb 2 AUD RBA Rate Decision

Feb 5 AUD Retail Sales


ZAR – Rand Dented by Ratings Fears

The South African Rand fell back this week, being undermined by the prevailing risk-off mood as well as rising concerns that South Africa is at risk of further credit rating downgrades as its debt pile continues to swell.

Going into February, ZAR exchange rates are likely to remain highly sensitive to market sentiment, with the potential for additional losses should risk appetite continue to deteriorate. 

Top ZAR data releases:

Feb 3 ZAR Manufacturing PMI (Jan)


CAD – Canadian Dollar Slides on Softer Oil Prices

The Canadian Dollar found itself of the defensive through much of this week’s session as the appeal of the commodity-linked ‘Loonie’ was knocked by weaker oil prices.

Coming up next week, the release of Canada’s latest jobs report will be in the spotlight for CAD investors, potentially leading to additional losses if the recent contraction in employment persisted into January.

Top CAD data releases:

Feb 5 CAD Unemployment Rate (Jan)

Feb 5 CAD Ivey PMI (Jan)

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