Pound Rallies on Robust UK Data, Euro Fluctuates on Mixed ECB Rate Hike Expectations

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 Volatile amid ECB Rate Hike Doubts

The Euro tumbled in the first half of this week, in response to a Bloomberg report suggesting the European Central Bank (ECB) may look to slow its current hiking cycle following its February meeting. This led to increased volatility in EUR exchange rates later in the week as ECB policymakers sought to push back against these rumours.

Turning to next week’s session, the publication of the Eurozone’s latest PMI figures will be in the spotlight. January’s preliminary figures may boost the Euro if the bloc’s private sector avoided a contraction at the start of 2023.

Top EUR data releases:

Jan 24 EUR Manufacturing PMI (Jan)

Jan 24 EUR Services PMI (Jan)

Jan 25 EUR German IFO Business Climate (Jan)

 

USD – US Dollar Rocked by Fluctuating Market Mood

The US Dollar traded in a wide range this week as demand for the safe-haven currency ebbed and flowed in connection to fluctuating market risk appetite. An upbeat mood and fall in US Treasury yields pressured USD in the first half of the week, before the ‘Greenback’ rebounded later in the week after some abysmal US data spooked investors.

Centre stage next week will be the publication of the latest US GDP release. Will another robust expansion of the US economy in the last quarter of 2022 help to buoy USD exchange rates?

Top USD data releases:

Jan 24 USD Services PMI (Jan)

Jan 26 USD GDP (Q4)

Jan 27 USD Core PCE Price Index (Dec)

 

GBP – Pound Strengthens as Strong Data Boosts BoE Rate Hike Bets

The Pound rallied this week, supported by some high-impact UK data releases. A stronger-than-expected wage growth reading and another double-digit inflation reading stoked expectations the Bank of England (BoE) will need to continue to raise interest rates in the coming months, propelling Sterling higher in the process.

Looking ahead, the UK’s latest PMI releases may act as the primary catalyst of movement for the Pound next week. Another contraction in private sector growth is likely to stoke UK recession fears and may to pull GBP exchange rates lower.

Top GBP data releases:

Jan 24 GBP Manufacturing PMI (Jan)

Jan 24 GBP Services PMI (Jan)

 

AUD – Australian Dollar Undermined by Disappointing Employment Data

The Australian Dollar opened this week on solid footing, an upbeat mood helping to underpin the appeal of the risk-sensitive currency. However, market sentiment then soured sharply in the middle of the week. Coupled with an unexpected rise in domestic unemployment in December, this saw AUD exchange rates plunge through the second half of the week.

Australia’s latest inflation print will be the primary focus for AUD investors next week. If inflation continued to climb in the fourth quarter this could boost Reserve Bank of Australia (RBA) rate hike bets and lift the ‘Aussie’.

Top AUD data releases:

Jan 23 AUD Services PMI (Jan)

Jan 24 AUD Business Confidence (Dec)

Jan 25 AUD Inflation Rate (Q4)

 

ZAR – Rand Undermined by SA Power Woes

The South African Rand was met by heavy selling pressure this week, with an initial slump in the currency being linked to South Africa’s ongoing power crisis. The downtrend in ZAR was then extended as domestic inflation was shown to have slowed to a seven-month low in December.

Movement in the Rand is likely to be driven by the South African Reserve Bank’s (SARB) latest interest rate decision next week. Will another 50bps rate hike help buoy ZAR exchange rates?

Top ZAR data releases:

Jan 26 ZAR PPI (Dec)

Jan 26 ZAR SARB Interest Rate Decision

 

CAD – Canadian Dollar Pressured by Inflation Miss

The Canadian Dollar traded with modest gains through the first half of this week as the currency was underpinned by rising oil prices. A subsequent plunge in crude prices, in addition to weaker-than-expected inflation data saw CAD exchange rates then tumble through the latter half of the session.

The Bank of Canada (BoC) is expected to deliver a modest 25bps rate hike next week. The slowdown is likely to stoke speculation the BoC is nearing the end of its tightening cycle and could see the ‘Loonie’ come under additional selling pressure.

Top CAD data releases:

Jan 25 CAD BoC Interest Rate Decision