Pound Soars on Rate Hike Speculation, US Dollar Receives Short-Lived Boost as Fed Signals Tapering Plans

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 Wavers amid German Election Uncertainty

The Euro fluctuated this week amidst elevated German political uncertainty, ahead of this weekend’s general election. EUR exchange rates were also rocked by the Eurozone’s latest PMI figures, after they printed well below expectations this month.

The focus for EUR investors next week will be the publication of the Eurozone’s consumer price index. Inflation is forecast to have risen again this month, but in light of the European Central Bank’s (ECB) currency dovish bias, any upside in the Euro could be limited.

Top EUR data releases:

Sep 30 EUR German Inflation Rate (Sep)

Oct 1 EUR Manufacturing PMI (Sep)

Oct 1 EUR Inflation Rate (Sep)

 

 

USD – US Dollar Finds Fleeting Gains Following Hawkish Fed

The US Dollar struck higher in the first half of this week, as the Federal Reserve dropped its strongest hints yet that it will begin tapering its bond purchases by the end of the year, whilst also signalling the process could be faster than previously thought. But the ‘Greenback’ was unable to sustain these gains for long, with USD exchange rates faltering towards the end of the week amidst improving market risk appetite.

Turning to next week’s session, the priority for USD investors is likely to be the latest ISM manufacturing PMI, where reports of robust expansion in the US factory sector could help to bolster the US Dollar.

Top USD data releases:

Sep 27 USD Durable Goods Orders (Aug)

Oct 1 USD PCE Price Index (Aug)

Oct 1 USD ISM Manufacturing PMI (Sep)

 

 

GBP – Pound Rallies on Early 2022 Rate Hike Speculation

The Pound got off to a poor start this week, faltering amidst concerns the UK’s energy prices crisis could exacerbate the UK’s current economic woes. The second half of the week then saw Sterling rally sharply following the Bank of England’s (BoE) latest policy meeting, after its forward guidance prompted investors to start pricing in a rate hike for early 2022.

Looking ahead, questions over the resilience of the UK’s economic recovery may continue to hound the Pound next week, limiting the upside potential of any upbeat GBP data releases.

Top GBP data releases:

Sep 30 GBP GDP (Q2)

Oct 1 GBP Manufacturing PMI (Sep)

 

 

AUD – Australian Dollar Weakens in Bearish Trade

The Australian Dollar initially stumbled this week as a prevailing risk-off mood and dovish Reserve Bank of Australian (RBA) minutes took their toll on the currency. However, the ‘Aussie’ managed to claw back some of these losses in the second half of the week, on the back of some stronger than expected PMIs as well as improving market sentiment.

The publication of Australia’s latest retail sales figures is likely to act as a key catalyst of movement in the ‘Aussie’ next week, with another slump in sales growth last month, potentially weakening AUD exchange rates.

Top AUD data releases:

Sep 28 AUD Retail Sales (Aug)

Oct 1 AUD Manufacturing PMI (Sep)

 

ZAR – South African Rand Slips to Three-Week Low in Skittish Trade

The South African Rand stumbled to a three-week low at the start of this week, as the Evergrande crisis rippled through markets, spooking investors and sending commodity prices crumbling. However, the Rand then rebounded in the latter half of the week after the South African Reserve Bank (SARB) raised its 2021 growth forecast following its latest policy meeting.

In the absence of any major domestic data releases, the Rand may remain vulnerable to external forces next week.

Top ZAR data releases:

Oct 1 ZAR Manufacturing PMI (Sep)

 

CAD – Canadian Dollar Bolstered by Trudeau Victory

Justin Trudeau’s election victory helped buoy the Canadian Dollar at the start of this week, with an uptick in oil prices then underpinning the commodity-linked ‘Loonie’ through the mid-week. A smaller-than-expected decline in Canada’s latest retail sales figures then helped to accelerate the appreciation of CAD exchange rates through the latter half of the week.

Coming up next week, Canada’s latest GDP figures will likely be the focus for CAD investors, with another healthy month of growth likely to strengthen the Canadian Dollar.

Looking ahead,

Top CAD data releases:

Oct 1 CAD GDP (Jul)