Pound Punished by New Lockdown Measures, EUR/USD Hits New Highs on Upbeat Market Sentiment

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 Rallies on USD Weakness

The Euro’s recent bullish run remained firmly in place through the first half of this week, with the EUR/USD exchange rate touching a new 32-month high as the single currency benefitted from broad weakness in the US Dollar. However, the single currency began to relinquish some of this ground in the latter half of the week in response to some lacklustre EUR data releases.

Turning to next week’s session, the focus for EUR investors will likely be on Germany’s budget announcement as well as the accompanying 2020 GDP figures. EUR investors will be looking to Germany’s government to up its fiscal spending in 2021 to help support the Eurozone’s economic recovery.  

Top EUR data releases:

Jan 13 EUR Industrial Production (Nov)

Jan 13 EUR German Budget

Jan 13 EUR German GDP (2020)

 

USD – US Dollar Undermined by Stimulus Hopes

The US Dollar spent much of this week on the back foot. Demand for the safe-haven currency was limited as market sentiment was cheered by the prospect of greater US fiscal stimulus due to the Democrats taking control of the Senate. A jump in US bond yields allowed for the ‘Greenback’ to then recoup some of these losses later in the session.

Coming up next week, the spotlight for USD investors looks to be on the latest US inflation figures, where a muted reading could stoke expectations for more monetary stimulus from the Federal Reserve.

Top USD data releases:

Jan 13 USD Inflation Rate (Dec)

Jan 15 USD Retail Sales (Dec)

Jan 15 USD Consumer Sentiment (Jan)

 

GBP – Pound Fluctuates amid Brexit Uncertainty

The Pound got off to a poor start during the first week of trade in 2021 as a worrying surge in UK coronavirus cases prompted the government to impose a strict new lockdown in England. Concerns over the potential economic fallout from the lockdown ensured that Sterling remained on the defensive through most of the week.

Looking ahead, next week will see the publication of the UK’s latest month GDP figures. In light of the UK’s second lockdown, November’s release is expected to report a slump in growth, keeping the pressure on Sterling.

Top GBP data releases:

Jan 12 GBP BoE Broadbent Speech

Jan 15 GBP GDP (Nov)

Jan 15 GBP Industrial Production (Nov)

 

AUD – Australian Dollar Accelerates in Risk-On Trade

The Australian Dollar struck higher this week, riding the risk-on tone which prevailed amidst hopes for more fiscal stimulus in the US. This was temporarily able to carry the AUD/USD exchange rate to a new multi-year high before the rebound in the US Dollar and some disappointing Australian trade figures undermined the ‘Aussie’s gains in the second half of the week.

Turning to next week, the only release of note to AUD investors will be Australia’s retail sales figures, with November’s finalised figures set to confirm a sharp rebound in sales growth.

Top AUD data releases:

Jan 11 AUD Retail Sales (Nov)

 

ZAR – Rand Tumbles on Coronavirus Fears

The South African Rand entered free fall this week as fears over the rapid spread of a new variant of the coronavirus throughout the country, as well as the lack of any vaccine rollout, weighed heavily on ZAR exchange rates, The Rand then faced additional losses in the face of a USD rally at the end of the session.

Looking ahead, the Rand is likely to remain on the defensive through next week as well, amidst speculation of another national lockdown.

Top ZAR data releases:

Jan 13 ZAR Retail Sales (Nov)

 

CAD – Canadian Dollar Firms as Oil Prices Jump

The Canadian Dollar rallied this week, with the commodity-linked currency being underpinned by a strong upswing in oil prices which propelled WTI crude prices above the key hurdle of $50 a barrel. This strengthening of oil prices came amidst hopes for US stimulus and confirmation of more production cuts from Saudi Arabia. 

In the absence of any notable Canadian data releases next week, the ‘Loonie’ is likely to continue to be driven by the value of oil.