Pound Stumbles on Bleaker UK Economic Outlook, US Dollar Rebounds following Strong GDP

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 Limited by Russia-Ukraine Concerns

Better-than-expected German data lent the Euro some support through the first half of the week, with businesses and consumers in Europe’s largest economy feeling more optimistic about the coming months. However, Russia-Ukraine worries severely capped the upside, triggering some choppy trade. Hawkish comments from two European Central Bank (ECB) officials cushioned EUR on Thursday, although the single currency remained subdued.

Trade in the Euro could be muted over the coming week, with a considerable lack of Eurozone data over the Christmas period. Any news about the Russia-Ukraine war could impact EUR exchange rates, with negative headlines likely to weigh on the single currency.

Top EUR data releases:

USD – US Dollar Bounces Back on Stronger GDP

The safe-haven US Dollar traded without a clear directional bias early in the week amid a shifting market mood. As risk appetite improved later in the week, the ‘Greenback’ started to slide. However, an upward revision to the US GDP growth rate for the third quarter helped USD recover its losses.

Aside from the latest initial jobless claims figures, US data is also thin on the ground over the coming week. As a result, risk appetite could drive movement in the safe-haven ‘Greenback’. Will a Santa rally see USD fall?

Top USD data releases:

Dec 23 USD Core PCE Price Index (Nov)

Dec 23 USD Durable Goods Orders (Nov)

Dec 29 USD Initial Jobless Claims (24/Dec)

 

GBP – Pound Slides amid Darkening UK Economic Outlook

Growing concern about the UK economy weighed on the Pound this week, as ongoing strike action and an unexpectedly large jump in government borrowing in November rattled GBP investors. The UK’s final GDP reading for the third quarter added to the gloomy picture, as the British economy contracted more than initially estimated in the three months from July to September.

Although the Pound may be muted this week, worries about the UK economy could continue to weigh on GBP. In particular, any signs that Britons are relying on debt to cover rising living costs could dent Sterling.

Top GBP data releases:

Dec 29 GBP BoE Consumer Credit (Nov)

Dec 30 GBP Nationwide Housing Prices (Dec)

 

AUD – Australian Dollar Rebounds from Post-RBA Slump

After a muted start to the week, the Australian Dollar slumped on Tuesday morning following dovish meeting minutes from the Reserve Bank of Australia (RBA). A volatile market mood then saw the risk-sensitive ‘Aussie’ rebound before sentiment soured, clipping AUD’s recovery.

With no notable Australian data due out over the next week, the risk-sensitive ‘Aussie’ will likely trade in relation to market sentiment. News from China could also impact AUD. Will Covid cases continue to rise, thereby weighing on the Australian Dollar?

Top AUD data releases:

 

 

ZAR – South African Rand Jumps as Ramaphosa Re-Elected

The South African Rand leapt higher on Monday after President Cyril Ramaphosa was re-elected as the leader of South Africa’s ruling African National Congress (ANC) party. Ramaphosa’s victory restores some political stability to the country after the President faced an impeachment vote last week. This, along with an improving market mood, lifted the Rand through the session.

Coming up we have South Africa’s balance of trade data for November. The consensus among economists is that the export-oriented country returned to a trade surplus last month, which could provide ZAR with a lift.

Top ZAR data releases:

Dec 30 ZAR Balance of Trade (Nov)

 

CAD – Canadian Dollar Climbs as Oil Prices March Higher

Oil prices climbed steadily over the past week, with WTI crude rising by over 4%, providing a consistent upside for the commodity-linked Canadian Dollar. In addition, Canada’s retail sales data, though slightly below forecast, showed a strong recovery in October. The country’s latest inflation rate reading exceeded expectations, which may also have added to the upside.

If Canada’s latest business barometer shows an increasingly pessimistic tone among entrepreneurs then the ‘Loonie’ could stumble. Meanwhile, oil price dynamics will likely continue to impact the crude-linked currency.

Top CAD data releases:

Dec 23 CAD GDP (Oct)

Dec 30 CAD CFIB Business Barometer (Dec)