Fed Rate Speculation Infuses Volatility in the US Dollar, Plunging Oil Prices Weigh on the Canadian Dollar

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 Covid Fears

The Euro initially got off to a strong start this week as an adjustment of Fed and BoE rate hike expectations helped to ease concerns over potential policy divergence between the European Central Bank (ECB) and its peers. The single currency was unable to sustain these gains however, weakening in the latter half of the weak after the latest Eurozone manufacturing PMI was revised lower.

The priority for EUR investors next week will likely be the publication of the latest industrial releases from Germany, alongside December’s ZEW survey. Will some upbeat data from the Eurozone’s largest economy help to bolster the Euro?

Top EUR data releases:

Dec 6 EUR German Factory Orders (Oct)

Dec 7 EUR German Industrial Production (Oct)

Dec 7 EUR German ZEW Economic Sentiment (Dec)

 

USD – US Dollar Volatility amid Fed Speculation

The US Dollar fluctuated over the past week amidst fluctuating expectations for when the Federal Reserve might begin hiking interest rates. This prompted a sharp drop in USD exchange rates amidst fears Omicron could deter the Fed from tightening its monetary policy, before comments from Fed Chair Jerome Powell suggested inflation can no longer be described as ‘transitory’ and hinted the bank might accelerate the tapering of its stimulus programme.

Given Powell’s recent comments, the publication of the US consumer price index will undoubtedly be the highlight of next week’s session. Should inflation have continued to accelerate in November then the US Dollar could surge on Fed rate hike bets.

Top USD data releases:

Dec 9 USD Initial Jobless Claims (4/Dec)

Dec 10 USD Inflation Rate (Nov)

Dec 10 USD Consumer Sentiment (Dec)

 

GBP – Pound Slips on Covid and Brexit Concerns

The Pound edged lower against the majority of its peers this week, initially weakening as the currency was swept up in the Omicron driven selloff as the UK introduced new restrictions. Sterling then faced additional headwinds through the latter half of the session amidst ongoing Brexit uncertainty.

In addition to Brexit and Covid developments, GBP investors will also be keeping an eye on the UK’s latest monthly GDP release next week. Will a slowing of domestic growth in October exert some pressure on the Pound?

Top GBP data releases:

Dec 10 GBP GDP (Oct)

Dec 10 GBP Industrial Production (Oct)

Dec 10 GBP Trade Balance (Oct)

 

AUD – Australian Dollar Rocked by Fluctuating Market Sentiment

The Australian Dollar traded in a wide range this week, amidst some considerable volatility in FX markets linked to concerns over the Omicron Covid variant. While a stronger-than-expected Q3 GDP report offered some support to AUD exchange rates in mid-week trade, jittery investors quickly undermined these gains.

Turning to next week, the direction of the ‘Aussie’ is likely to be driven by the Reserve Bank of Australia (RBA) as it is expected to maintain its dovish outlook for monetary policy as it concludes its December meeting.

Top AUD data releases:

Dec 7 AUD RBA Interest Rate Decision

Dec 8 AUD RBA Lowe Speech

Dec 9 AUD RBA Bulletin

 

ZAR – Rand Rallies amid Market Correction

Following last week’s plunge after the emergence of the Omicron Covid variant, The South African Rand was able to mount a convincing recovery this week amidst a correction in markets. This uptrend in the Rand was aided by the release of South Africa’s latest manufacturing PMI as it printed at a five-month in November.

In the spotlight for ZAR investors next week will be the publication of South Africa’s latest GDP figures. Markets are bracing for a sharp slump in growth in the third quarter due to the riots which took place over the summer, confirmation of which is likely to weigh heavily on the Rand.

Top ZAR data releases:

Dec 7 ZAR GDP (Q3)

Dec 8 ZAR Retail Sales (Oct)

 

CAD – Canadian Dollar Undermined by Collapse in Oil Prices

The Canadian Dollar came under some notable pressure this week, with the oil-sensitive currency being undermined as WTI crude prices plunged to a three-month low, amidst concerns Omicron could hit demand. This offset the publication of Canada’s latest GDP report at the start of the week, which reported a stronger-than-expected rebound in domestic growth over the summer.

The Bank of Canada (BoC) will conclude its December policy meeting next week. No policy changes are expected this month, but the BoC’s forward guidance is likely to act as key catalyst for the ‘Loonie’, potentially leading to losses if the bank should strike a cautious tone.

Top CAD data releases:

Dec 7 CAD Ivey PMI (Nov)

Dec 8 CAD BoC Interest Rate Decision