Pound Undermined by Economic Concerns, US Dollar Retreats as Powell Outlines 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 Strengthens in spite of Setbacks
The Euro got off to a mixed start this week, as while a pullback in the US Dollar buoyed the single currency, its gains were capped on the back of some weaker-than-expected PMI releases and German growth warnings from the Bundesbank. EUR exchange rates then traded sideways through the second part of the week as the minutes from the European Central Bank’s (ECB) latest policy meeting appeared to reaffirm the bank’s dovish bias.
In the spotlight for EUR investors next week will be the Eurozone’s latest inflation reading. But with the ECB reluctant to tighten its monetary policy an expected acceleration in inflation translate into any gains for the Euro?
Top EUR data releases:
Aug 30 EUR German Inflation Rate (Aug)
Aug 31 EUR Inflation Rate (Aug)
Sep 3 EUR Retail Sales (Jul)
USD – US Dollar Slides as Market Sentiment Improves
The US Dollar stumbled out of the gate this week, as a scaling back of Federal Reserve tapering expectations bolstered market risk appetite at the expense of the safe-haven ‘Greenback’. The US Dollar then extended these losses through the second half of the week, following a speech from Fed Chair Jerome Powell in which he outlined plans to start tapering the bank’s bond purchases this year.
The publication of the latest US payroll figures will no doubt be the centre of attention for USD investors next week. Will another robust payroll reading help to send the US Dollar sharply higher?
Top USD data releases:
Sep 1 USD ISM Manufacturing PMI (Aug)
Sep 3 USD Non-Farm Payrolls (Aug)
Sep 3 USD ISM Non-Manufacturing PMI (Aug)
GBP – Pound’s Recovery Capped by Economic Concerns
The Pound got off to a strong start this week, with the currency clawing back a good portion of the previous session’s losses amidst upbeat market sentiment. However, Sterling was then left mostly rangebound through the remainder of the week as concerns over supply chain issues and labour shortages cast uncertainty over the UK’s economic outlook.
Looking ahead to next week’s session, with notable UK data releases thin on the ground and domestic coronavirus cases on the rise, the Pound could be vulnerable to some losses.
Top GBP data releases:
Sep 1 GBP Manufacturing PMI (Aug)
Sep 3 GBP Services PMI (Aug)
AUD – Australian Dollar Rallies in Upbeat Trade
The Australian Dollar was able to mount a convincing recovery this week, as a more upbeat market mood helped to revive demand for the risk-sensitive currency. However, these gains were capped towards the end of the session, amidst concerns over a worrying rise in domestic coronavirus cases.
The publication of Australia’s latest GDP release will no doubt be the primary focus for AUD investors next week. Expect to see the ‘Aussie’ face some headwinds if growth slowed more than expected in the second quarter after a number of states implemented new lockdown measures.
Top AUD data releases:
Sep 1 AUD GDP (Q2)
Sep 2 AUD Trade Balance (Jul)
ZAR – South African Rand Buoyed by Bullish Trade
The South African Rand bounced back this week, with the emerging market currency catching bids as market sentiment improved. However, these gains were tempered in light of South Africa’s employment report, after it revealed unemployment rose again in the second quarter.
Turning to next week’s session, the publication of South Africa’s latest trade figures will likely be the highlight for ZAR investors. Will an expansion of the country’s trade surplus help to extend the Rand’s upward trajectory?
Top ZAR data releases:
Aug 31 ZAR Trade Balance (Jul)
Sep 1 ZAR Manufacturing PMI (Aug)
CAD – Canadian Dollar Buoyed by Recovery in Oil Prices
The Canadian Dollar firmed this week, as the appeal of the commodity-linked ‘Loonie’ was bolstered by a strong rebound in oil prices, although the Canadian Dollar’s momentum quickly ran out once prices began to stall in the latter half of the session.
In the continued absence of any notable CAD data releases next week, the ‘Loonie’ is likely to remain highly sensitive to oil price movement.
Top CAD data releases:
Sep 2 CAD Trade Balance (Jul)