Pound Knocked by Brexit Jitters, US Dollar Rallies on Hawkish Powell Comments

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 Bolstered by Record Eurozone Inflation Release

The Euro got off to a robust start this week, finding support from some hawkish comments from European Central Bank (ECB) President Christine Lagarde at the ECB’s annual Sintra conference. After stumbling in mid-week trade amid an uptick in USD exchange rates, the Euro then rallied again at the end of the session after another hotter-than-expected Eurozone inflation print.

Germany’s latest industrial releases may act as the main catalyst of movement for the Euro next week, with the single currency potentially facing headwinds if factory orders and industrial production contracted as forecast in May.

Top EUR data releases:

Jul 6 EUR German Factory Orders (May)

Jul 6 EUR Retail Sales (May)

Jul 7 EUR German Industrial Production (May)

 

USD – US Dollar Firms as Powell Suggest US Economy Can Withstand Higher Rates

The US Dollar rallied this week, initially rising in tandem with US Treasury yields. However the bulk of the ‘Greenback’s gains came as a result of comments from Federal Reserve Chair Jerome Powell. Powell suggested the US economy can withstand more monetary tightening and that the Fed will prioritise bringing inflation back under control, even at the expense of US economic growth.

The publication of the latest US non farm payroll figures will no doubt be the primary focus for USD investors next week. Could slowdown in US employment growth weaken the US Dollar?

Top USD data releases:

Jul 6 USD ISM Non-Manufacturing PMI (Jun)

Jul 6 USD FOMC Minutes

Jul 8 USD Non Farm Payrolls (Jun)

 

GBP – Pound Stumbles amid Brexit Uncertainty, Cautious BoE Baily Comments

The Pound trended lower through the first half of this week, undermined by renewed Brexit jitters as MPs voted in favour of a second reading of the government’s Northern Ireland protocol bill. Adding to Sterling’s woes in the latter half of the week were comments from Bank of England (BoE) Governor Andrew Bailey, in which he struck a cautious tone in his outlook for the UK economy.

With UK data thin on the ground next week, the direction of the Pound may be determined by UK political developments and ongoing economic concerns.

Top GBP data releases:

Jul 5 GBP Services PMI (Jun)

 

AUD – Australian Dollar Slumps in Bearish Trade

The Australian Dollar tumbled this week, with the risk sensitive currency plunging in response to a souring market mood. This saw a stronger-than-expected domestic retail sales print be largely ignored by AUD investors.

The Reserve Bank of Australia’s (RBA) latest interest rate decision will be centre stage next week, with another 50bps rate hike potentially helping to push AUD exchange rates higher.

Top AUD data releases:

Jul 5 AUD Retail Sales (May)

Jul 5 AUD RBA Interest Rate Decision

Jul 7 AUD Trade Balance (May)

 

ZAR – Rand Stumbles amid Worst Power Cuts in Two Years

The South African Rand spent most of this week on the defensive, slumping in response to South Africa’s worst power crisis since 2019. State Utility Eskom was forced to implement ‘stage 6’ load shedding amid a failure of 10 generation units and a workers’ strike.

Looking ahead, if we see Eskom need to implement more load shedding next week it’s likely the Rand could continue its downtrend.

 

CAD – Canadian Dollar Undermined by Weak GDP Figures

An uptick in oil prices helped to underpin demand for the commodity-linked Canadian Dollar through the first half of this week. The publication of Canada’s latest GDP figures then prompted the ‘Loonie’ to erase a portion of these gains in the latter half of the week after reporting domestic growth contracted in May.

In the spotlight for CAD investors next week will be Canada’s latest jobs report. Could another drop in unemployment last month help to propel the ‘Loonie’ higher?

Top CAD data releases:

Jul 7 CAD Trade Balance (May)

Jul 7 CAD Ivey PMI (Jun)

Jul 8 CAD Unemployment Rate (Jun)