Pound Collapses on Grim BoE Forecasts, US Dollar Fluctuates Following Fed Rate Hike
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 Rebounds Following Slow Start
The Euro stumbled at the start of this week, with the single currency being undermined by weaker-than-expected Eurozone economic sentiment and employment data. EUR exchange rates then rallied in the second half of the week as the currency was able to build off a brief pullback in USD exchange rates.
The publication of Germany’s ZEW economic sentiment index may act as a key catalyst for the Euro next week. Will a further deterioration of sentiment undermine the Euro?
Top EUR data releases:
May 10 EUR German ZEW Economic Sentiment (May)
May 11 EUR German Inflation Rate (Apr)
May 13 EUR Industrial Production (Mar)
USD – US Dollar Flip-Flops as Fed Hikes Rates
The US Dollar trended lower through the first half of this week, as investors were reluctant to make any bullish bets ahead of the Federal Reserve’s interest rate hike on Wednesday. This culminated in a sharp slump after Fed Chair Jerome Powell quashed suggestions the US central bank could pursue a 75 bps hike in June. However, the ‘Greenback’ then clawed back much of these losses in the latter half of the week amid a slump in equity markets and upbeat US payroll figures.
The publication of the US consumer price index will be centre stage next week. Will another rise in US inflation weaken the US Dollar in light of the Fed’s reluctant to more aggressively raise interest rates?
Top USD data releases:
May 11 USD Inflation Rate (Apr)
May 12 USD PPI (Apr)
May 13 USD Consumer Sentiment (May)
GBP – Pound Collapse on Grim BoE Economic Forecasts
The Pound fell off a cliff this week, in response to the Bank of England’s latest economic forecasts, following its decision to raise interest rates by 0.25%. The BoE’s forecasts sparked recession fears as it warned UK inflation could climb above 10% this year and that a slowdown in growth is highly likely.
In the spotlight for GBP investors next week will be the UK’s latest GDP figures. Will a lacklustre first quarter growth reading, push the Pound lower?
Top GBP data releases:
May 9 GBP BoE Saunders Speech
May 12 GBP GDP (Q1)
May 12 GBP Business Investment (Q1)
AUD – Australian Dollar Finds Fleeting Gains as RBA Surprises with 25bps Rate Hike
The Australian Dollar initially strengthened this week as a result of the Reserve Bank of Australia’s (RBA) larger-than-expected rate hike and hawkish forward guidance. However, a large portion of these gains were later erased amid a sudden souring of market sentiment.
The publication of Australia’s latest business and consumer confidence indexes could exert some pressure on the ‘Aussie’ next week if sentiment continued to deteriorate in the face of increased economic uncertainty.
Top AUD data releases:
May 10 AUD Business Confidence (Apr)
May 11 AUD Consumer Confidence (Apr)
ZAR – Rand Fluctuates amid Mixed Market Mood
The South African Rand stumbled at the start of this week, with a cautious market mood sapping demand for the emerging market currency. The Rand attempted to mount a recovery later in the week but this was quickly wiped out by a broad market selloff.
Looking ahead, the Rand is likely to remain sensitive to market sentiment next week amid a lull in high-impact data.
Top ZAR data releases:
May 12 ZAR Mining Production (Mar)
May 12 ZAR Manufacturing Production (Mar)
CAD – Canadian Dollar Buoyed by Rising Oil Prices
The Canadian Dollar trended broadly higher through this week, with the commodity-linked currency being bolstered by a sharp uptick in crude prices following the EU’s proposed Russian oil import ban. However underwhelming employment growth figures took some of the shine off of the ‘Loonie’ at the end of the week.
In the absence of any notable Canadian data releases, movement in CAD exchange rates is likely to remain primarily driven by oil price dynamics next week.