US Dollar Holds near Highs on Fed Tapering, Pound Plummets as BoE Leaves Rates Unchanged

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 Firms as ECB and BoE Policy Gap Narrows

The Euro managed to regain ground this week, despite economic data being both scarce and unimpressive. The recovery came as the policy gap between the European Central Bank (ECB) and the Bank of England (BoE) narrowed, which saw the single currency surge against the Pound and capitalise against other rivals’ weaknesses.

Germany’s ZEW economic sentiment index for November could exert some downward pressure on the Euro early next week as investor morale in Europe’s largest economy is forecast to fall for the sixth consecutive month.

Top EUR data releases:

Nov 09 EUR DE Balance of Trade (Sep)

Nov 09 EUR DE ZEW Economic Sentiment Index (Nov)

Nov 12 EUR EU Industrial Production (Sep)

 

USD – US Dollar Rallies on Fed Tapering Announcement and Non-Farm Payrolls

The US Dollar wavered at the start of the week amid a risk-on market mood and ahead of the Federal Reserve’s interest rate decision. After the Fed decided to taper bond purchases by $15bn a month, the US Dollar eventually regained the upside. The ‘Greenback’ was further boosted by a stellar non-farm payrolls report: October’s results beat forecasts while the previous two months were revised higher.

More strong jobs data could boost the US Dollar further in the coming week, as could the latest US CPI, with inflation forecast to rise from 5.4% to 5.5%.

Top USD data releases:

Nov 10 USD Inflation Rate (Oct)

Nov 10 USD Initial Jobless Claims (06/Nov)

Nov 12 USD JOLTs Job Openings (Sep)

 

 

GBP – Pound Plunges as BoE Leaves Bank Rate Unchanged

The Pound was subdued through the first part of the week as Brexit tensions weighed on GBP, with growing fears of violence in Northern Ireland as UK-EU negotiations ended in another deadlock. While Sterling firmed ahead of the Bank of England (BoE) policy meeting, it then nosedived across the board as the bank unexpectedly voted to leave rates unchanged.

GBP investors will be focusing on the UK’s GDP data next week. While month-on-month growth is expected to edge higher, quarter-on-quarter growth is forecast to have slowed significantly, which may dent GBP.

Top GBP data releases:

Nov 11 GBP GDP Growth Rate QoQ (Q3)

Nov 11 GBP Business Investment QoQ (Q3)

Nov 11 GBP GDP MoM (Sep)

 

AUD – Australian Dollar Slides as RBA Holds Cash Rate at Record Low

The Australian Dollar suffered significant losses over the past week, with the biggest hit coming from the Reserve Bank of Australia’s (RBA) decision to keep its cash rate at a record low of 0.1%. A souring market sentiment and a 6% drop in Australian exports also contributed to AUD’s downside.

Next week, an expected rise in Australia’s unemployment rate and a fall in consumer confidence could dent the ‘Aussie’, while a forecast increase in business confidence could potentially cushion the downside somewhat.

Top AUD data releases:

Nov 09 AUD NAB Business Confidence (Oct)

Nov 09 AUD Westpac Consumer Confidence Index (Nov)

Nov 11 AUD Unemployment Rate (Oct)

 

ZAR – South African Rand Recovers as Central Banks Hold Interest Rates

The South African Rand tumbled to an eight-month low early this week amid falling commodities prices and political jitters. South African local elections saw support for the ruling African National Congress (ANC) slump. The Rand managed to recover, however, after the Fed, RBA and BoE left interest rates unchanged, as rate hikes would have drawn capital away from South Africa’s riskier emerging market.

Looking ahead, some positive manufacturing and mining production reports may bolster ZAR exchange rates, but movements in the commodities markets could exert the most influence over the Rand.

Top ZAR data releases:

Nov 08 ZAR SACCI Business Confidence (Oct)

Nov 11 ZAR Mining Production MoM (Sep)

Nov 11 ZAR Manufacturing Production MoM (Sep)

 

CAD – Canadian Dollar Dented by Falling Oil Prices

The oil-sensitive Canadian Dollar fell against its key counterparts this week, though it did manage to gain on some of its weaker rivals. The downside came as WTI crude slid by $4 over the course of the week, despite OPEC+ choosing not to ramp-up production plans, as the US may tap into its oil reserves to stabilise the market.

With no notable economic data from Canada next week, oil prices will likely be the key driver of movement in the ‘Loonie’.

Top CAD data releases:

None of note