Pound Underpinned by BoE Rate Hike Expectations, ECB’s Dovish Bias Weighs on EUR Exchange Rates

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 ECB’s Dovish Bias

The Euro softened again this week, as the divergence in monetary policy between the European Central Bank (ECB) and its peers looks to grow ever wider as its policymakers reiterated their reluctance to start tightening its monetary policy. Adding to the pressure on the single currency was also the publication of Germany’s latest ZEW survey, after reporting economic sentiment in the Eurozone’s largest economy tumbled to a new post-pandemic low this month.

Acting as the main catalyst of movement in the Euro next week will likely be the Eurozone’s latest PMI releases, with the single currency potentially facing additional headwinds if economic activity in the bloc continued to slow in October.

Top EUR data releases:

Oct 21 EUR Consumer Confidence (Oct)

Oct 22 EUR Manufacturing PMI (Oct)

Oct 22 EUR Services PMI (Oct)

 

USD – US Dollar Stumbles in Upbeat Trade

A clear US Dollar selling bias emerged this week, as a prevailing risk-on mood limited demand for the safe-haven currency, in spite of a surprise acceleration of US inflation and hawkish FOMC minutes. The US Dollar then remained on the back foot through the latter half of the week amidst a slump in US Treasury yields, only finding some modest support on the back of some stronger-than-expected US retail sales figures.

Turning to next week’s session, the US Dollar may continue to be driven primarily by market risk appetite, although the latest US Markit PMI releases may also influence USD dynamics.

Top USD data releases:

Oct 18 USD Industrial Production (Sep)

Oct 21 USD Initial Jobless Claims (16/Oct)

Oct 22 USD Services PMI (Oct)

 

GBP – Pound Strengthens on BoE Rate Hike Speculation

The Pound trended broadly higher this week, firming on the back of some hawkish comments from a Bank of England (BoE) policymaker, which triggered speculation the bank could hike interest rates by the end of 2021. Reinforcing the uptrend in Sterling were some positive UK data releases, revealing another fall in domestic unemployment last month as well as a rebound in GDP in August.

The publication of the UK’s consumer price index looks to be a key focus for GBP investors next week as another strong inflation reading could reaffirm expectations of an early rate hike from the BoE.

Top GBP data releases:

Oct 20 GBP Inflation Rate (Sep)

Oct 22 GBP Manufacturing PMI (Oct)

Oct 22 GBP Services PMI (Oct)

 

AUD – Australian Dollar Bolstered by NSW Reopening

The Australian Dollar got off to a strong start this week, as the lifting of lockdown measures in New South Wales on Monday, was welcomed by AUD investors. While the ‘Aussie’ was able to broadly maintain its upward momentum through the latter half of the week, its gains were tempered somewhat by a mixed jobs report.

Looking ahead, the release of Australia’s latest PMI figures will be closely watched by AUD investors next week, as they look to see whether the easing of regional lockdown measures could have led to a rebound in private sector activity.

Top AUD data releases:

Oct 19 AUD RBA Minutes

Oct 21 AUD Manufacturing PMI (Oct)

Oct 21 AUD Services PMI (Oct)

 

ZAR – Rand Boosted by Revised Growth Forecast

After initially stumbling out of the gates, the South African Rand was able to mount a convincing recovery this week as an improving market mood made the emerging market currency more attractive. This uptick in the Rand was also supported by the IMF’s latest growth forecasts as it predicted South Africa’s economy will expand more than previously expected this year.

Coming up next week, the publication of South Africa’s latest CPI figures will be in the spotlight. Will another rise in domestic inflation last month help to buoy the Rand?

Top ZAR data releases:

Oct 20 ZAR Inflation Rate (Sep)

 

CAD – Canadian Dollar Underpinned by Rising Oil Prices

The Canadian Dollar strengthened this week as the commodity-linked currency was underpinned by a sharp rise in oil prices, with WTI crude climbing above $81 a barrel to its highest levels in seven years.

Turning to next week’s session, the publication of Canada’s consumer price index could see the ‘Loonie’ maintain its positive trajectory, if domestic inflation continued to accelerate in September.

Top CAD data releases:

Oct 20 CAD Inflation Rate (Sep)

Oct 21 CAD ADP Employment Change (Sep)

Oct 22 CAD Retail Sales (Aug)