Pound Infused with Volatility by Political Uncertainty, US Dollar Soars on Hawkish Fed Outlook

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 Wavers in Risk-Off Trade

The Euro was propped up in the first half of this week by a gloomy market mood, which alongside a stronger-than-expected Eurozone manufacturing PMI helped to buoy the single currency. However, EUR exchange rates then faltered through the latter half of the session as the Euro was weighed down by its negative correlation with the US Dollar.

Turning to next week, the European Central Bank’s (ECB) latest interest rate decision will be in the spotlight. Expect this to pile more pressure on the Euro if the ECB remains welded to its highly accommodative approach to monetary policy.

Top EUR data releases:

Jan 31 EUR GDP (Q4)

Feb 2 EUR Inflation Rate (Jan)

Feb 3 EUR ECB Interest Rate Decision

 

USD – US Dollar Surges on Hawkish Fed Guidance

The US Dollar rocketed higher this week, with Federal Reserve Chair Jerome Powell’s hints the US central bank could begin to aggressively hike interest rates this year, underpinning USD demand as it rattled markets. This uptick in the ‘Greenback’ was further reinforced by heightened geopolitical uncertainty and a stronger-than-expected US GDP release.

In focus for USD investors next week will be the latest US payroll release. This could see the US Dollar face some headwinds if payrolls disappoint for the third consecutive month.

Top USD data releases:

Feb 1 USD ISM Manufacturing PMI (Jan)

Feb 3 USD ISM Non-Manufacturing PMI (Jan)

Feb 4 USD Non-Farm Payrolls (Jan)

 

 

GBP – Pound Rocked by Political Uncertainty

The Pound traded in a wide range over the past week, with speculation over the contents of the Sue Gray report into ‘partygate’ and announcement of a policy inquiry raise casting doubts over Boris Johnson’s future as Prime Minister. Sterling also faced some pressure at the start of the week after the UK’s latest PMIs reported growth in the service sector slowed to an 11-month low in January.

Centre stage next week will be the Bank of England’s (BoE) latest interest rate decision. While a February rate hike is largely priced in, could some hawkish forward guidance help to bolster the Pound?

Top GBP data releases:

Feb 1 GBP Manufacturing PMI (Jan)

Feb 3 GBP Services PMI (Jan)

Feb 3 GBP BoE Interest Rate Decision

 

 

AUD – Australian Dollar Underminned by Bearish Trade

The Australian Dollar trended broadly lower this week, with the risk-sensitive currency being shunned as markets were rattled by geopolitical uncertainty and a hawkish Fed. This offset the publication of Australia’s stronger-than-expected CPI release, which may have otherwise helped to underpin the ‘Aussie’.

Centre stage next week will be the Reserve Bank of Australia’s (RBA) latest policy meeting. Analysts are predicting the RBA may announce an immediate end to its stimulus programme, which could bolster AUD exchange rates.

Top AUD data releases:

Feb 1 AUD RBA Interest Rate Decision

Feb 3 AUD Trade Balance (Dec)

Feb 4 AUD RBA Statement on Monetary Policy

 

ZAR – Rand Slumps on SARB Rate Decision

The South African Rand trended higher through the first half of the week, with the currency bolstered by expectations on an imminent rate hike from the South African Reserve Bank (SARB). Whilst the SARB did raise rates as expected, it also indicated the next hike could be some way off, leading the Rand to tumble though the latter half of the session.

In the absence of any notable ZAR data releases next week, the Rand is likely to grow more vulnerable to market sentiment, potentially leaving the currency on the back foot if the mood continues to sour.

 

CAD – Canadian Dollar Stumbles as BoC Leaves Rates on Hold

The Canadian Dollar initially trended higher this week, with the commodity-linked currency drawing support from surging oil prices. However the ‘Loonie’ then relinquished a good portion of these gains in the wake of the Bank of Canada’s (BoC) decision to leave interest rates on hold following its first policy meeting of the year.

Turning to next week’s session, the focus for CAD investors will be on Canada’s latest jobs report. Will another drop in unemployment this month help to buoy the Canadian Dollar?

Top ZAR data releases:

Feb 1 CAD GDP (Nov)

Feb 2 CAD BoC Gravelle Speech

Feb 4 CAD Unemployment Rate (Jan)