Hawkish Fed Forward Guidance Turbocharges the US Dollar, Pound Knocked by Reopening Delay

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 Knocked by USD Strength

The Euro held steady though the first half of this week’s session, on the back of stronger-than-expected industrial production figures from the Eurozone. However, a dramatic spike in the US Dollar then dealt a heavy blow to the single currency in the second half of the week, due to the negative correlation between the pairing.

Turning to next week’s session, the primary focus for EUR investors will be on the Eurozone’s latest PMI figures, where a strong pickup in activity in the bloc’s private sector this month could extend some support to the Euro.

Top EUR data releases:

Jun 23 EUR Manufacturing PMI (Jun)

Jun 23 EUR Services PMI (Jun)

Jun 24 EUR German Business Climate Index (Jun)

 

USD – US Dollar Skyrockets Following Fed Rate Decision

After trading sideways for the first half of the week in anticipation of the Federal Reserve’s latest rate decision, the US Dollar roared higher as the Fed’s forward guidance proved to be more hawkish than expected. The Fed now sees the next rate hike coming in 2023 rather than 2024, which alongside the bank’s hints at future tapering of its stimulus programme, catapulted the ‘Greenback’ to multi-week highs.

Looking ahead, the main focus for USD investors next week will be the latest US durable goods figures, with a rebound in orders potentially propelling the US Dollar even higher.

Top USD data releases:

Jun 24 USD Durable Goods Orders (May)

Jun 24 USD GDP (Q1)

Jun 25 USD Personal Spending (May)

 

GBP – Pound Undermined by Reopening Delay

The Pound was placed on the defensive through the first half of this week, as the delay to England’s reopening date dampened the prospect of a swift UK economic recovery. However, Sterling was able to claw back the majority of its losses in the second half of the week, following a stronger-than-expected CPI print, which may put more pressure on the Bank of England (BoE) to start tightening its monetary policy.

In the spotlight next week will no doubt be the BoE’s latest rate decision. No policy changes are expected this month, but will a more hawkish outlook from the bank help to propel the Pound higher?

Top GBP data releases:

Jun 23 GBP Manufacturing PMI (Jun)

Jun 23 GBP Services PMI (Jun)

Jun 24 GBP BoE Interest Rate Decision

 

AUD – Australian Dollar Stumble as Risk Appetite Softens

The Australian Dollar suffered an aggressive selloff this week, as demand for the risk-sensitive currency plummeted in response to a sharp jump in the US Dollar. But helping to limit the ‘Aussie’s losses somewhat was Australia’s latest jobs report, which revealed a surprise drop in domestic unemployment last month.

The publication of Australia’s latest PMI releases will be the focus for AUD investors next week. Will another rise in private sector activity this month help to revive demand for the Australian Dollar?

Top AUD data releases:

Jun 23 AUD Manufacturing PMI (Jun)

Jun 23 AUD Services PMI (Jun)

 

ZAR – Rand Plunges on Fed Rate Hike Hints

The South African Rand plummeted this week, as the currency got caught up in the wider emerging market selloff, after the Federal Reserve signalling that US interest rates will begin to rise earlier than previously expected.

Looking ahead the Rand may seek to mount a recovery next week, if another jump in South African inflation is seen as putting pressure on the South African Reserve Bank (SARB) to hike interest rates.

Top ZAR data releases:

Jun 23 ZAR Inflation Rate (May)

 

CAD –Canadian Dollar Rallies on Upbeat Inflation Figures

The Canadian Dollar traded in a wide range through the first half of this week, in spite of a steady uptrend in oil prices. However, the ‘Loonie’ was able to find its feet later in the week after domestic inflation printed above expectations in May.

The publication of Canada’s latest retail sales figure will likely determine the direction of CAD exchange rates next week, with a forecast contraction of sales growth in April potentially weakening demand.

Top CAD data releases:

Jun 23 CAD Retail Sales (Apr)

 

ILS – Israeli Shekel Gains despite Political Uncertainty

The Israeli Shekel trended broadly higher this week, with the Shekel resuming its rally, which characterised the currency earlier in the year, as ILS investors largely shrugged off the political uncertainty created by the end of Benjamin Netanyahu’s 12-year tenure as Prime Minister.

Coming up, will elevated domestic unemployment in May weaken ILS exchange rates at the start of next week?

Top ILS data releases:

Jun 21 ILS Unemployment Rate (May)