Pound Plummets Following Dovish BoE Rate Hike, Euro Strengthened by Ukraine Peace Talk Optimism
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 Finds Gains on Hopes for Peace in Ukraine
The Euro opened this week’s session on strong footing as hopes for a potential ceasefire in Ukraine reflected positively on the single currency. However, these gains were tempered somewhat by comments from European Central Bank (ECB) President Christine Lagarde, in which she further undermined expectations for an ECB rate hike this year.
The publication of the Eurozone’s latest PMIs will be closely watched by EUR investors next week. These will offer the first insight into how the war in Ukraine may have impacted economic activity, with a drop in private sector growth likely to reflect poorly on the euro.
Top EUR data releases:
Mar 24 EUR Manufacturing PMI (Mar)
Mar 24 EUR Services PMI (Mar)
Mar 24 EUR EU Council Meeting
USD – US Dollar Stumbles in Risk-On Trade
The US Dollar trended lower through this week’s session, with the appeal of the safe-haven currency being undermined by hopes for a negotiated end to the conflict in Ukraine. The downtrend in the ‘Greenback’ remained in place throughout the week in spite of the Federal Reserve delivering its first interest rate hike in over three years, whilst also signalling plans to raise rates up to six more times in 2022.
In focus for USD investors next week will be the latest US durable goods orders, with the US Dollar potentially extending its losses if order growth contracted as expected in February.
Top USD data releases:
Mar 24 USD Durable Goods Orders (Feb)
Mar 24 USD Manufacturing PMI (Mar)
Mar 24 USD Services PMI (Mar)
GBP – Pound Plummets Following Cautious BoE Rate Hike
The Pound nosedived this week following the Bank of England’s latest interest rate decision. While the BoE raised rates as forecast, its forward guidance proved more cautious than expected, leading to a sharp decline in GBP exchange rates. This reversed Sterling’s modest gains seen earlier in the week amid an improving market mood.
Turning to next week’s session, the publication of the UK’s consumer price index is likely to be the primary focus for GBP investors. Will another rise in inflation prove a hinderance to the Pound given the BoE’s apparent reluctance to continue hiking interest rates?
Top GBP data releases:
Mar 23 GBP Inflation Rate (Feb)
Mar 24 GBP Services PMI (Mar)
Mar 25 GBP Retail Sales (Feb)
AUD – Australian Dollar Undermined by China Covid Concerns
The Australian Dollar initially fell back this week, as the imposing of new Covid lockdowns in large parts of China spooked AUD investors. However, the ‘Aussie’ was able to claw back a good portion of these losses on the back of Australia’s latest jobs figures, after revealing domestic unemployment fell to a 13-year low in February.
A speech by Reserve Bank of Australia (RBA) Philip Lowe may act as a key catalyst of movement for AUD exchange rates next week, with the Australian Dollar likely to fall if he continues to downplay the chances of a rate hike this year.
Top AUD data releases:
Mar 22 AUD RBA Lowe Speech
Mar 23 AUD Manufacturing PMI (Mar)
Mar 23 AUD Services PMI (Mar)
ZAR – Rand Firms as Risk Appetite Strengthens
Trade in the South African Rand was mixed this week, with ZAR exchange rates initially faltering as Ukraine-Russia peace talk optimism weakened commodity prices. But the Rand was able to bounce back in the latter half of the session, as the currency benefitted from prevailing risk-on mood.
In the spotlight for ZAR investors next week will be the South African Reserve Bank’s (SARB) latest interest rate decision, with an expected rate hike potentially bolstering the Rand.
Top ZAR data releases:
Mar 22 ZAR Unemployment Rate (Q4)
Mar 23 ZAR Inflation Rate (Feb)
Mar 24 ZAR SARB Interest Rate Decision
CAD – Canadian Dollar Rebounds on Strong Inflation Figures
The Canadian Dollar initially got off to a poor start this week, with a pullback in crude prices dampening the appeal of the oil-sensitive ‘Loonie’. CAD exchange rates were then able to bounce back in the latter half of the week on the back of a hotter-than-expected Canadian inflation print.
In the absence of any notable CAD data next week, the direction of the Canadian Dollar is likely to remain closely tied to oil price dynamics. Could another drop extend more pressure on the ‘Loonie’?