US Dollar Bolstered by Fed Hike Bets, Pound Rallies as UK PMIs Impress

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 Pressured by Ukraine Concerns

The Euro faced notable headwinds this week, linked to uncertainty over Russia’s next moves in Ukraine. A speech from Russian President Vladimir in which he doubled down on the war weighed on EUR sentiment, offsetting some positive Eurozone data.

Centre stage next week will be the publication of the Eurozone’s consumer price index. Could another softer-than-expected inflation reading weaken European Central Bank (ECB) rate hike bets and pull the Euro lower?

Top EUR data releases:

Feb 27 EUR Economic Sentiment (Feb)

Mar 1 EUR German Inflation Rate (Feb)

Mar 2 EUR Inflation Rate (Feb)

 

USD – US Dollar Bolstered by Fed Rate Hike Bets

Federal Reserve interest rate expectations propelled the US Dollar sharply higher this week. Rate hike bets were bolstered by stronger-than-expected US PMIs, hawkish FOMC minutes and a stronger-than-expected core PCE price index. At the same time, a prevailing risk-off mood also buoyed USD demand.

Turning to next week the publication of the latest ISM PMI releases could extend the US Dollar’s positive momentum if they point to strong growth in the US private sector.

Top USD data releases:

Feb 27 USD Durable Goods Orders (Jan)

Mar 1 USD ISM Manufacturing PMI (Feb)

Mar 3 USD ISM Non-Manufacturing PMI (Feb)

 

GBP – Pound Strengthens on PMI Surprise

The Pound got off to a roaring start this week as a surprise rebound in the UK’s services PMI turbocharged Bank of England (BoE) rate hike bets. While Sterling subsequently fell victim to some profit taking it was still able to close the week with the bulk of these gains intact.

A speech by BoE Governor Andrew Bailey is likely to be the primary focus for GBP investors next week. Could a broadly hawkish outlook reinforce BoE rate hike expectations and propel the Pound higher?

Top GBP data releases:

Mar 1 GBP Manufacturing PMI (Feb)

Mar 1 GBP BoE Governor Bailey Speech

Mar 3 GBP Services PMI (Feb)

 

AUD – Australian Dollar Undermined by Weak Wage Growth

The Australian Dollar stumbled this week, with the currency facing an uphill battle through the first part of the week amid a cautious market mood. AUD exchange rates then faced additional pressure as Australia’s wage price index fell short of expectations in the fourth quarter, weakening Reserve Bank of Australia (RBA) rate hike expectations.

Likely acting as the main catalyst of movement for the ‘Aussie’ next week will be the publication of Australia’s latest GDP figures. Will a robust expansion of growth in the last quarter of 2022 reflect positively on AUD exchange rates?

Top AUD data releases:

Feb 28 AUD Retail Sales (Jan)

Mar 1 AUD GDP (Q4)

 

ZAR – Rand Plunges as SA added to ‘Grey List’

The South African Rand slumped at the start of this week as a risk-off mood undermine the appeal of the emerging market currency. ZAR exchange rates then rallied in an initial response to the latest SA Budget, but these gains quickly faded at the Financial Action Task Force announce it would add South Africa to its ‘Grey List’.

Looking ahead, the Rand could face headwinds next week if South Africa’s fourth quarter employment figures report another rise in domestic unemployment.

Top ZAR data releases:

Feb 28 ZAR Unemployment Rate (Q4)

Feb 28 ZAR Balance of Trade (Jan)

 

CAD – Canadian Dollar Fluctuates as Inflation Cools

The Canadian Dollar traded in a wide range this week. The currency initially came under pressure as a softer-than-expected inflation reading cemented expectations the Bank of Canada (BoC) tightening cycle is over. The ‘Loonie’s positive correlation with the US Dollar extended some support later in the session, although these gains were undermined by weak oil prices.

The release of Canada’s latest GDP figures will be in the spotlight for CAD investors next week. Will a slowing of growth in the fourth quarter limit demand for the Canadian Dollar?

Top CAD data releases:

Feb 28 CAD GDP (Q4)