Fed Tapering Talk Buoys USD, Coronavirus Concerns Weigh on the Pound
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 Buoyed by Upbeat Eurozone Outlook
The Euro opened this week on strong footing, with optimism over the EU’s vaccine rollout and the Eurozone’s improving economic prospects helping to lift EUR exchange rates. However the single currency then fell victim to profit taking in the second half of the week amid fears the Indian variant of the coronavirus could soon find its way to the continent.
Turning to next week’s session, the primary focus for EUR investors looks to be on the Eurozone’s consumer price index. While an expected acceleration of inflation is unlikely to alter the European Central Bank’s (ECB) current dovish stance, it could still provide a boost to the Euro.
Top EUR data releases:
Jun 1 EUR Inflation Rate (May)
Jun 3 EUR Services PMI (May)
Jun 4 EUR Retail Sales (Apr)
USD – US Dollar Weakens on Mixed US Data
The US Dollar initially weakened this week, as falling US Treasury yields and a prevailing risk-on mood sapped demand for the safe-haven currency. After briefly rallying on some hawkish Federal Reserve comments, the US Dollar fell back again in the latter half of the week after a surprise slump in US durable goods orders.
Centre stage next week will be the latest US non-farm payroll. Following April’s abysmal release, USD investors will be hoping for a strong rebound in employment growth this month, but another miss could send the US Dollar sharply lower.
Top USD data releases:
Jun 1 USD ISM Manufacturing PMI (May)
Jun 3 USD ISM Non-Manufacturing PMI (May)
Jun 4 USD Non-Farm Payrolls (May)
GBP – Pound Dented by Brexit Uncertainty
The Pound struggled to attract support through the first half of this week, as the currency was undermined by renewed Brexit friction between the UK and EU regarding the Northern Ireland protocol. Sterling then stabilised in the latter half of the week however, after Boris Johnson suggested the UK is on track to continue reopening the economy in June.
Looking ahead, the latest UK services PMI will be in the spotlight next week. May’s finalised figures could be revised higher following the reopening of more of the UK economy, and provide a boost to the Pound.
Top GBP data releases:
Jun 1 GBP Manufacturing PMI (May)
Jun 3 GBP Services PMI (May)
AUD – Australian Dollar Retreats as Victoria Lockdown Announced
The Australian Dollar rallied through the first half of this week, with the appeal of the risk-sensitive ‘Aussie’ being lifted by rising equities and commodities, as well as a pullback in the US Dollar. However AUD exchange rates fell from their best levels in the second half of the week following the announcement that the state of Victoria would be going into a seven-day lockdown.
Turning to next week, the focus for AUD investors will likely be on the Reserve Bank of Australia’s (RBA) latest rate decision. No policy changes are expected next week, but a hawkish tone from the bank could help to propel the ‘Aussie’ higher.
Top AUD data releases:
Jun 1 AUD RBA Rate Decision
Jun 2 AUD GDP (Q1)
Jun 3 AUD Trade Balance (Apr)
ZAR – Rand Climbs to Two-Year High
The South African Rand steadily advanced over the past week, with the emerging market currency being propelled to its best levels in over two years. The rally came amidst improving market risk appetite as well as expectations that the Federal Reserve will leave interest rates on hold for some time.
The publication of South Africa’s latest unemployment report will be the focus for ZAR investors next week, with ZAR exchange rates likely to come under pressure if the jobless rate continued to climb in the first quarter.
Top ZAR data releases:
Jun 1 Unemployment Rate (Q1)
CAD – Canadian Dollar Rocked by Fluctuating Oil Prices
In the absence of any notable domestic data, movement in the Canadian Dollar was tied closely to oil prices this week. As a result, CAD exchange rates have been infused with some volatility as oil prices fluctuated.
Looking ahead to next week’s session, the focus for CAD investors will likely be Canada’s GDP release, with the ‘Loonie’ set to rise if the country’s economy expanded in line with expectations in the first quarter of 2021.
Top CAD data releases:
Jun 1 CAD GDP (Q1)
Jun 4 CAD Unemployment Rate (May)
Jun 4 CAD Ivey PMI (May)