Pound Tumbles as BoE Warns of UK Recession, US Dollar Surges on Upbeat Economic Data

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 Weakens amid Ongoing Energy Security Fears

The Euro trended lower this week as ongoing concerns about the Eurozone’s economy and worsening gas crisis weighed on the single currency. A stronger US Dollar added to EUR’s woes, by way of the currencies’ negative correlation. Meanwhile, mixed data from the Euro area failed to provide the currency with any meaningful support.

Market-moving Eurozone data is thin on the ground next week. As a result, headlines around the possibility of a Eurozone recession or gas supply fears could dominate movement in EUR.

Top EUR data releases:

Aug 10 EUR German Inflation Rate Final (Jul)

Aug 12 EUR Industrial Production (Jun)

 

USD – US Dollar Rallies amid Risk-Off Mood and Strong US Data

The US Dollar started this week’s trade on the back foot as a risk-on market mood sapped the safe-haven currency’s appeal. However, rising US-China tensions rattled markets, providing USD with some risk-off flows. In addition, strong US data and hawkish Federal Reserve rhetoric underpinned the ‘Greenback’.

US inflation is in focus next week. Signs that price pressures are easing may dent the Dollar by lowering rate rise expectations. But if inflation continues to climb, the ‘Greenback’ may gain ground.

Top USD data releases:

Aug 10 USD Inflation Rate (Jul)

Aug 11 USD PPI (Jul)

Aug 12 USD Michigan Consumer Sentiment Prel (Aug)

 

GBP – Pound Tanks as BoE Forecasts a UK Recession

The Pound fluctuated throughout much of the week amid thin trading conditions and hesitancy ahead of the Bank of England (BoE) interest rate decision. Downbeat UK data put some pressure on the Pound, with the UK’s final services PMI revealing a larger-than-expected drop in activity. Sterling then slumped after the BoE raised interest rates by 0.5%. The downside came as the bank forecast a UK recession starting in Q4 2022 that would last throughout 2023.

Most of the coming week will be quiet, but the UK’s GDP data on Friday may cause big movement. Economists expect a 0.3% contraction in GDP, which could see Sterling fall sharply.

Top GBP data releases:

Aug 9 GBP BRC Retail Sales Monitor (Jul)

Aug 12 GBP GDP (Jun)

Aug 12 GBP Business Investment Prel (Q2)

 

AUD – Australian Dollar Dented by RBA’s Dovish Hike

After making some early risk-on gains, the Australian Dollar quickly faced strong headwinds. AUD slipped following a dovish rate rise from the Reserve Bank of Australia (RBA) as the central bank signalled that it may slow the pace of future tightening. AUD managed to recover some losses later in the week amid upbeat economic data from China and a return of risk appetite.

Next week, economists are forecasting improvements in both consumer and business confidence in Australia. Such results could support the ‘Aussie’ Dollar.

Top AUD data releases:

Aug 9 AUD Westpac Consumer Confidence Index (Aug)

Aug 9 AUD NAB Business Confidence (Jul)

Aug 11 AUD Consumer Inflation Expectations (Aug)

 

ZAR – Rand Wavers Lower amid China Tensions and USD Strength

The South African Rand fluctuated lower this week as worries about China’s response to a US delegation visit to Taiwan, which China views as a breakaway province, triggered widespread risk aversion. China’s reaction was less severe than anticipated, and this helped the market mood recover. However, the US Dollar’s strength later in the week continued to push the Rand lower.

Next week’s South African data releases may be fairly low impact. As a result, the Rand will likely continue to trade on global risk sentiment and USD dynamics.

Top ZAR data releases:

Aug 10 ZAR SACCI Business Confidence (Jun)

Aug 11 ZAR Mining Production (Jun)

Aug 11 ZAR Manufacturing Production (Jun)

 

CAD – Canadian Dollar Subdued as Oil Continues to Soften

The commodity-tied Canadian Dollar stumbled at the start of this week’s trade as oil prices continued their recent downward trend. However, the ‘Loonie’ showed some resilience: despite crude prices falling throughout the week, CAD was able to recoup some losses against its weaker peers.

Canadian economic data is in short supply next week. As a result, movements in the oil market may drive CAD exchange rates. Will crude prices continue to soften?

Top CAD data releases:

Aug 11 CAD 2-Year Bond Auction