Pound Wavers amid Political Pressure on Boris Johnson, US Dollar Slides Despite Soaring US Inflation

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 Buoyed by US Weakness

The Euro initially faltered this week, as European Central Bank (ECB) President Christine Lagarde indicated the bank’s view on inflation remains the same, despite price growth in the Eurozone soaring to a record high in December. However the single currency was able to strengthen through the latter half of the session, bolstered by its negative correlation with the US Dollar.

Germany’s latest ZEW economic sentiment survey will be the spotlight for EUR investors next week. Could an improvement in sentiment this month reflect positively on the Euro?

Top EUR data releases:

Jan 18 EUR German ZEW Economic Sentiment (Jan)

Jan 20 EUR Inflation Rate (Dec)

Jan 21 EUR Consumer Confidence (Jan)

 

USD – US Dollar Slumps as Fed March Rate Hike Fully Priced In

The US Dollar moved lower this week, despite a hawkish testimony from Federal Reserve Chair Jerome Powell and data showing US inflation rocketed up to a 40-year high last month. This pullback in USD comes amidst suggestions a rate hike from the Fed in March is already fully priced in, leaving the US dollar vulnerable to risk-off trading dynamics.

Looking ahead, the US Dollar may continue to trend lower through next week’s session so long as safe-haven demand remains suppressed by bullish trade sentiment.

Top USD data releases:

Jan 20 USD Initial Jobless Claims (15/Jan)

Jan 20 USD Philadelphia Manufacturing Index (Jan)

Jan 20 USD Existing Home Sales (Dec)

 

 

GBP – Pound Shaken by Political Uncertainty in the UK

The Pound initially rallied through the first half of this week, with Sterling sentiment being underpinned by expectations the Bank of England (BoE) will hike interest rates when it next meets in February. However, GBP exchange rates subsequently faced some headwinds in the latter half of the week amidst doubts over Boris Johnson’s future as Prime Minister, after he admitted attending a social gathering at No 10 during the UK’s first lockdown.

There will be a number of high-profile UK data releases to influence GBP exchange rates next week, the most impactful of which may be the latest inflation figures. Another rise in inflation could help to bolster expectations for additional BoE rate hikes this year.

Top GBP data releases:

Jan 18 GBP Unemployment Rate (Nov)

Jan 19 GBP Inflation Rate (Dec)

Jan 21 GBP Retail Sales (Dec)

 

AUD – Australian Dollar Firms in Risk-On Trade

The Australian Dollar trended higher through this week’s session, with the currency drawing support amidst an upbeat market mood. However, the currency’s advance faced some hurdles in the first half of the week, after Australia reported it trade surplus narrowed more than expected in November, falling below AU$10bn for the first time in seven months.

In the spotlight for AUD investors next week will undoubtedly be the publication of Australia’s latest jobs report. This could see the ‘Aussie’ extend its gains if December’s release reports a fall in domestic unemployment.

Top AUD data releases:

Jan 18 AUD Consumer Confidence (Jan)

Jan 20 AUD Unemployment Rate (Dec)

 

ZAR – Rand Firms in Bullish Trade

The South African Rand struck higher again this week, with the emerging market currency benefitting from a prevailing risk-on mood. This upside was reinforced by bets the South African Reserve Bank (SARB) could hike interest rates at its next policy meeting later this month.

Turning to next week’s session, the release of South Africa’s latest inflation and retail sales figures will be a key focus for ZAR investors as robust readings could further bolster the chances of an imminent rate hike from the SARB.

Top ZAR data releases:

Jan 19 ZAR Inflation Rate (Dec)

Jan 19 ZAR Retail Sales (Nov)

 

CAD – Canadian Dollar Bolstered by Oil Price Rally

The Canadian Dollar trended broadly higher over the past week as the appeal of the commodity linked currency was bolstered by a sustained oil-price rally.

The release of Canada’s latest inflation figures will likely be the primary focus for investors next week. Will an acceleration of inflation last month bolster expectations for a Bank of Canada rate hike later in the year?

Top ZAR data releases:

Jan 19 CAD Inflation Rate (Dec)

Jan 21 CAD Retail Sales (Nov)