Pound Collapses on BoE Recession Warning, US Dollar Surges Following Fed’s Hawkish Surprise

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 Softens Despite Record Jump in Eurozone Inflation

Trade in the Euro was mixed this week. The single currency initially fluctuated following a record surge in Eurozone inflation last month and a deeper-than-expected contraction in the bloc’s latest manufacturing PMI. EUR exchange rates then stumbled in the second half of the week as the Euro’s negative correlation with the US Dollar saw it weaken as the latter rallied.

Potentially buoying the Euro are the start of next week will be the Eurozone’s latest retail sales figures, which are expected to report sales growth rebounded in September.

Top EUR data releases:

Nov 8 EUR Retail Sales (Sep)

Nov 11 EUR German Inflation Rate (Oct)

 

USD – US Dollar Rallies on Hawkish Fed Powell Comments

After struggling at the start of the week, the US Dollar received a shot in the arm following the Federal Reserve’s latest interest rate decision. After delivering a 75bps hike as expected, Fed Chair Powell shocked markets by signalling the bank remains open to another 75bps increase in December. The release of the latest US employment figures then trimmed these gains at the end of the week after reporting a surprisingly strong uptick in unemployment last month.

The latest US CPI figures could propel the US Dollar higher again next week if October’s release reports another bump in core inflation. However, the outcome of the US midterm elections could limit the ‘Greenback’s upside potential if the Democrats lose control of either Congress or the Senate.

Top USD data releases:

Nov 8 USD Midterm Elections

Nov 10 USD Inflation Rate (Oct)

Nov 11 USD Consumer Sentiment (Nov)

 

GBP – Pound Plummets as BoE Warns of Prolonged Recession

The Pound struggled to attract support through the first half of this week, as an increasingly gloomy outlook for the UK economy took its toll on Sterling sentiment. Sterling then nosedived in the wake of the Bank of England’s (BoE) latest interest rate decision as its 75bps hike was overshadowed by the bank’s bleak recession warning.

The publication of the UK’s latest GDP figures will be the primary focus for GBP investors next week. An expected contraction in growth in the third quarter is likely to drag on the Pound.

Top GBP data releases:

Nov 11 GBP GDP (Q3)

Nov 11 GBP Business Investment (Q3)

 

AUD – Australian Dollar Dented by Dovish RBA

The Australian Dollar got off to a poor start this week following another dovish 25bps rate hike from the Reserve Bank of Australia (RBA). Some Chinese economic optimism then offered some support to the ‘Aussie’ in mid-week trade, before a rebound in the US Dollar placed renewed pressure on AUD exchange rates.

Turning to next week, will another deterioration in domestic business confidence weaken the Australian Dollar?

Top AUD data releases:

Nov 9 AUD NAB Business Confidence (Oct)

 

ZAR – Rand Rally Curtailed by Hawkish Fed

The South African Rand ticked higher through the first half of this week, with demand for the emerging market currency being underpinned by a prevailing risk-on mood. However, the Rand was then forced to erase a good portion of these gains in the second half of the week, amid concerns that US interest rates may continue to climb at an accelerated pace.

In the absence of any high impact ZAR data releases next week, movement in the Rand is likely to remain tied to market risk sentiment.

 

CAD – Canadian Dollar Rallies as Employment Growth Surges

The Canadian Dollar trended broadly higher this week. The currency being underpinned by its positive corelation with the US Dollar as well as an uptick in oil prices. The release of Canada’s jobs figures at the end of the week then accelerated this uptrend after reporting am impressive jump in employment growth.

A sparse data calendar, will likely see oil price dynamics drive movement in the commodity-linked ‘Loonie’