US Dollar Collapses as US Inflation Slows, Pound Rocked by Energy Price Jitters

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 Rebounds on USD Weakness

The Euro struggled to attract support through the first half of this week, with EUR sentiment being undermined by persistent concerns over European energy security. However the single currency was able to bounce back in the latter half of the session thanks to its strong negative correlation with the US Dollar.

Germany’s ZEW economic sentiment index may drive movement in the Euro next week, with another slump in morale this month likely to weigh on EUR exchange rates.

Top EUR data releases:

Aug 16 EUR German ZEW Economic Sentiment Index (Aug)

Aug 17 EUR GDP (Q2)

Aug 18 EUR Inflation Rate (Jul)

 

USD – US Dollar Nosedives on Softer-than-Expected Inflation

The US Dollar plummeted this week, with the publication of the latest US CPI figures triggering a 1% plunge in USD exchange rates in the middle of the week. This aggressive selloff came as USD investors lowered their expectations for the next Federal Reserve interest rate decision in light of a weaker-than-expected inflation print.

All eyes will be on the minutes from the Fed’s July policy meeting next week. If the minutes suggest policymakers are wary about maintaining the recent pace of the bank’s rate hikes then the US Dollar may extend its losses.

Top USD data releases:

Aug 17 USD Retail Sales (Jul)

Aug 17 FOMC Minutes

Aug 18 USD Initial Jobless Claims (13/Aug)

 

GBP – Pound Fluctuates amid Energy Price Concerns

The Pound traded in a wide range over the past week, with Sterling fluctuating through much of the week amid concerns over a sharp rise in UK energy costs and ta lack of action by the government to tackle the issue. The end of the week then saw the Pound limp over the finishing line after the UK’s latest GDP figures reported a contraction of growth in the second quarter.

There will be plenty of data to influence GBP exchange rates next week, the most impactful of which may be the UK’s consumer price index. Will another uptick in inflation raise fresh concerns over the cost of living crisis?

Top GBP data releases:

Aug 16 GBP Unemployment Rate (Jun)

Aug 17 GBP Inflation Rate (Jul)

Aug 19 GBP Retail Sales (Jul)

 

AUD – Australian Dollar Firms as Risk Appetite Improves

The Australian Dollar trended higher this week, the risk-sensitive currency being bolstered by an improving market mood. However the ‘Aussie’s climb did not come without hurdles, with a drop in domestic consumer confidence dragging on AUD exchange rates in the first half of the week.

In addition to the minutes from the Reserve Bank of Australia’s (RBA) August interest rate decision, the release of Australia’s latest employment figures will be a key focus for AUD investors next week, with another robust jobs report likely to bolster the ‘Aussie’.

Top AUD data releases:

Aug 16 AUD RBA Meeting Minutes

Aug 18 AUD Unemployment Rate (Jul)

 

ZAR – Rand Soars on Easing Fed Rate Hike Bets

The South African Rand rallied this week, with the emerging market currency benefitting from easing Fed rate hike expectations. A more modest pace of monetary tightening from the bank would help to relieve some of the pressure on the South African economy.

The publication of South Africa’s latest retail sales figures could provide fresh direction to the Rand next week, with another slump in sales growth likely to drag on ZAR exchange rates.

Top ZAR data releases:

Aug 17 ZAR Retail Sales (Jun)

 

CAD – Canadian Dollar Undermined by Falling Oil Prices

The Canadian Dollar trended broadly lower this week, the commodity-linked currency being undermined by a notable drop in oil prices.

The publication of Canada’s latest inflation figures will be the primary focus for CAD investors next week. Will another uptick in inflation boost BoC rate hike bets and lift the Canadian Dollar?

Top CAD data releases:

Aug 16 CAD Inflation Rate (Jul)

Aug 18 CAD PPI (Jul)

Aug 19 CAD Retail Sales (Jun)