Pound Rocked by Cost-of-Living Concerns, Euro Undermined by Regional Tensions

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 Dented by EU-Russia Tensions

The Euro tracked lower this week, with the single currency initially coming under pressure due to its strong negative correlation with the US Dollar. This downtrend was then maintained in the latter half of the week amidst growing tensions between the EU and Russia over Ukraine.

Turning to next week, the publication of the Eurozone’s latest PMI figures will likely act as a key catalyst for EUR exchange rates. Expect the Euro to weaken if Europe’s current Covid wave lead to suppressed economic activity in the bloc this month.

Top EUR data releases:

Jan 24 EUR Manufacturing PMI (Jan)

Jan 24 EUR Services PMI (Jan)

Jan 25 EUR IFO Business Climate (Jan)

 

USD – US Dollar Rocked by Fluctuating Treasury Yields

The US Dollar initially struck higher this week, with a strong uptick in US Treasury yields helping to carry the ‘Greenback’ higher. The US Dollar was then infused with fresh volatility in the latter half of the week as yields retreated and market sentiment fluctuated.

Centre stage next week will no doubt be the Federal Reserve’s first policy meeting of 2022. No policy changes are expected this month, but a hawkish outlook from Fed Chair Jerome Powell could reinforce expectations for multiple rate hikes from the US central bank this year, bolstering the US Dollar in the process.

Top USD data releases:

Jan 26 USD Fed Interest Rate Decision

Jan 27 USD GDP (Q4)

Jan 27 USD Durable Goods Orders (Dec)

 

 

GBP – Pound Infused with Volatility by Cost-of-Living Concerns

The Pound was met by some notable pressure in the first half of this week as weak wage growth figures raised concerns that a cost-of-living crisis could undermine the UK’s economic recovery. Sterling attempted a short-lived rally in the second half of the sessionfollowing the announcement that most remaining Covid restrictions in England would be lifted from next week, but was unable to hold on these gains in the face of ongoing UK political jitters and an abysmal retail sales reading.

Looking ahead, the publication of the UK’s latest PMI figures could provide some support to the Pound next week, if they show activity in the private sector rebounded this month, after an Omicron induced slowdown in December.

Top GBP data releases:

Jan 24 GBP Manufacturing PMI (Jan)

Jan 24 GBP Services PMI (Jan)

Jan 25 GBP Industrial Trends Orders (Jan)

 

AUD – Australian Dollar Buoyed by Stellar Jobs Report

The Australian Dollar strengthened this week, with the currency being underpinned by a stronger-than-expected domestic jobs report, after it reported Australia’s unemployment rate fell to a 13-year low in December. This helped to reverse some of the ‘Aussie’s losses from earlier in the session which came amidst a souring of market risk appetite.

In the spotlight for AUD investors next week will likely be the publication of Australia’s latest CPI reading. Will surging inflation in the last quarter of 2021 bolster expectations for the Reserve Bank of Australia (RBA) to hike interest rates before 2023?

Top AUD data releases:

Jan 23 AUD Services PMI (Jan)

Jan 25 AUD Business Confidence (Dec)

Jan 25 AUD Inflation Rate (Q4)

 

ZAR – Rand Jumps as Inflation Soars

The South African Rand continued to trend higher this week, as stronger-than-expected domestic inflation reading was seen as further bolstering the chances of the South African Reserve Bank (SARB) delivering a rate hike next week.

Unsurprisingly the focus for ZAR investors next week will be on the SARB. Will the Rand extend its rally if the SARB hikes interest rates as forecast?

Top ZAR data releases:

Jan 27 ZAR PPI (Dec)

Jan 27 ZAR SARB Interest Rate Decision

 

CAD – Canadian Dollar Rises in Tandem with Oil Prices

The Canadian Dollar trended broadly higher this week, with the appeal of the commodity-linked currency being underpinned by a sharp rally in oil prices as WTI crude climbed to a 7-year high.

The Bank of Canada’s (BoC) latest interest rate decision will no doubt be the primary focus for CAD investors next week. No policy changes are expected from the bank this month but some hawkish forward guidance could buoy CAD exchange rates.

Top ZAR data releases:

Jan 26 CAD BoC Interest Rate Decision

Jan 21 CAD Retail Sales (Nov)