US Dollar Firms in Downbeat Trade, Pound Fluctuates despite Upbeat Data

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 despite Energy Concerns

The Euro got off to a poor start this week, with concerns about economic disruption in Germany due to falling water levels in the Rhine weighing on EUR sentiment. The single currency was then able to rally against its more risk sensitive peers in the latter half of the week, in spite of persistent fears that Europe will face a gas shortage this winter.

In the spotlight for EUR investors next week will be the Eurozone’s latest PMI figures. Expect to see the Euro tumble if private sector growth contracted again in August as this is likely to turbocharge Eurozone recession fears.

Top EUR data releases:

Aug 23 EUR Manufacturing PMI (Aug)

Aug 23 EUR Services PMI (Aug)

Aug 25 EUR German IFO Business Climate (Aug)

 

USD – US Dollar Firms amid Safe-Haven Demand

The US Dollar trended broadly higher through this week, with investors favouring the safe-haven currency amid a prevailing risk-off mood. However, these gains were dented slightly by the publication of the minutes from the Federal Reserve’s July policy meeting, after they struck a more dovish tone than hoped.

Turning to next week, the main focus for USD investors is likely to be on the core PCE price index. If we see a fall in the Fed’s preferred indicator for inflation it’s likely the US Dollar could falter.

Top USD data releases:

Aug 24 USD Durable Goods Orders (Jul)

Aug 25 USD GDP (Q2)

Aug 26 USD Core PCE Price index (Jul)

 

GBP – Pound Fluctuates despite Positive Data

The Pound initially firmed this week as stronger-than-expected wage growth and inflation releases bolstered expectations for another 50bps rate hike from the Bank of England (BoE) next month. However these gains were tempered in the latter half of the session amid persistent recession fears and ongoing political uncertainty.

Looking ahead, the release of the UK’s latest PMI figures could drag on the Pound next week, if they point to another slowing of economic activity in August.

Top GBP data releases:

Aug 23 GBP Manufacturing PMI (Aug)

Aug 23 GBP Services PMI (Aug)

Aug 23 GBP CBI Industrial Trends Orders (Aug)

 

AUD – Australian Dollar Undermined by Weak Risk Appetite

The Australian Dollar found itself on the defensive this week with investors shying away from the risk-sensitive currency as market sentiment soured. Further undermining AUD exchange rates was Australia’s latest employment figures. While unemployment fell to a new record low, employment also fell in for the first time since October 2021.

The publication of Australia’s latest PMI releases will likely act as the main catalyst of movement in the ‘Aussie’ next week. Will a slowing of private sector growth drag AUD exchange rates even lower?

Top AUD data releases:

Aug 23 AUD Manufacturing PMI (Aug)

Aug 23 AUD Services PMI (Aug)

 

 

ZAR – Rand Weakens amid Souring Market Mood

The South African Rand slumped this week, the emerging market currency struggling to hold its ground amid a prevailing risk-off mood. The publication of South Africa’s latest retail sales figures also piled more pressure on ZAR exchange rates following a shock contraction in year-on-year sales growth in June.

A key focus for ZAR investors next week will be the publication of South Africa’s latest unemployment figures. If unemployment continued to rise in the second quarter the Rand is likely to extend its decline.

Top ZAR data releases:

Aug 23 ZAR Unemployment Rate (Q2)

Aug 24 ZAR Inflation Rate (Jul)

Aug 25 ZAR PPI (Jul)

 

CAD – Canadian Dollar Weakens as Oil Prices Fall

The Canadian Dollar fell back this week, the commodity-linked currency being undermined as oil prices fell to new multi-month lows. This downturn in CAD exchange rates was also reinforced by Canada’s latest CPI figures which reported a sizable drop in domestic inflation last month.

In the absence of any notable CAD data releases next week, it’s likely that the direction of the ‘Loonie’ will continue to be dictated by oil price dynamics.