Pound Rocked by Abysmal PMI Print Euro Undermined by Ukraine Uncertainty

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 Gains Tempered by Ukraine Concerns

The Euro initially got off to a strong start this week as the Eurozone’s latest PMI releases eased recession fears after revealing the bloc’s private sector returned to growth in January. However, the single currency then faced some headwinds in the latter half of the session following a warning from Russia that Germany decision to supply tanks to Ukraine would escalate the conflict.

All eyes will be the on European Central Bank (ECB) next week. Another 50bps is widely expected but EUR investors will be more focused on the bank’s messaging. If the ECB signals it will ‘stay the course’ with its current pace of monetary tightening, the Euro is likely to soar.

Top EUR data releases:

Jan 31 EUR GDP (Q4)

Feb 1 EUR Inflation Rate (Jan)

Feb 2 EUR ECB Interest Rate Decision

 

USD – US Dollar Supported by Upbeat GDP Release

The US Dollar struggled to find purchase at the start of this week, a broadly upbeat market mood severely limiting the safe-haven currency’s upside potential. A stronger-than-expected US GDP print then offer some limited support to the ‘Greenback’ in the latter half of the week.

Next week’s US data calendar is packed with high-impact releases. The most influential of which will be the Federal Reserve’s first interest rate decision of the year. Will a 25bps hike reinforce expectations the Fed is nearing the end of its tightening cycle and pull the US Dollar lower?

Top USD data releases:

Feb 1 USD Fed Interest Rate Decision

Feb 3 USD Non Farm Payrolls (Jan)

Feb 3 USD ISM Non-Manufacturing PMI (Jan)

 

GBP – Pound Knocked by Weak PMI Release

The Pound tumbled in the first half of this week. Sterling fell sharply after January’s weaker-than-expected PMIs reported the UK’s private sector suffered its largest contraction in two years. However, the Pound was able to claw back some of these gains later in the week, thanks to Bank of England (BoE) rate hike expectations.

The BoE’s interest rate decision is likely to act as the main catalyst of movement for the Pound next week. A 50bps rate hike is already priced in leaving the focus on the bank’s forward guidance. Will GBP investors be disappointed if the bank’s outlook casts doubts on future hikes?

Top GBP data releases:

Feb 1 GBP Manufacturing PMI (Jan)

Feb 2 GBP BoE Interest Rate Decision

Feb 3 GBP Services PMI (Jan)

 

AUD – Australian Dollar Bolstered by Above Forecast Inflation

The Australian Dollar received a shot in the arm this week, following the publication of Australia’s latest inflation figures. A stronger-than-expected inflation print in the fourth quarter bolstered Reserve Bank of Australia (RBA) rate hike bets, which coupled with an improving market mood, helped to underpin the ‘Aussie’.

China’s latest manufacturing data is likely to be the key focus for AUD investors next week. Another contraction in China’s factory sector could impact demand for Australian exports and is therefore likely to weigh on the ‘Aussie’.

Top AUD data releases:

Jan 31 AUD Retail Sales (Dec)

 

ZAR – Rand Wobbles amid Ongoing Power Woes

The South African Rand fluctuated over the past week, with the currency unable to find stable footing amid ongoing concerns over South Africa’s power crisis. Infusing further volatility into ZAR exchange rate was the South African Reserve Bank’s (SARB) decision to opt for a 25bps rate hike this month.

In the absence of any notable ZAR data next week, movement in the Rand is likely to be dictated by market sentiment. Could a cautious mood see the Rand soften?

 

CAD – Canadian Dollar Sinks as BoC Signals End to Rate Hikes

The Canadian Dollar was dealt a heavy blow this week, following the Bank of Canada’s (BoC) latest interest rate decision. While the BoC raised rates again this month, it also signalled this is likely to be the last hike in some time.

Looking ahead, the publication of Canada’s latest GDP figures could place additional pressure on CAD exchange rates next week, if growth is shown to have contracted in December.

Top CAD data releases:

Jan 31 CAD GDP (Dec)

Feb 1 CAD Manufacturing PMI (Jan)