US Dollar Nosedives Following ‘Dovish’ Fed Rate Hike, Euro Undermined by Gas Shortage Fears

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 Dented by Gas Shortage Concerns

The Euro stumbled this week, the single currency being undermined by another reduction in Russian gas flows to Europe, amid fears a shortage could trigger a Eurozone recession. The release of the Eurozone’s GDP and inflation figures then helped the single currency to claw back some of its losses as they both printed much stronger than expected.

Looking ahead, the primary focus for EUR investor next week is likely to be on Germany’s latest industrial figures as another disappointing release is likely to stoke fears that the Eurozone’s largest economy is on the brink of a recession.

Top EUR data releases:

Aug 1 EUR German Retail Sales (Jun)

Aug 4 EUR German Factory Orders (Jun)

Aug 5 EUR Industrial Production (Jun)

 

USD – US Dollar Plummets on Fed Rate Hike

The US Dollar suffered a sharp selloff this week in the wake of the Federal Reserve’s latest interest rate decision. While it raised rates by another 75bps, the Fed’s hints that future hikes could be smaller prompted a collapse in USD exchange rates in the middle of the week. The US Dollar then extended these losses as the latest US GDP figures revealed the US slipped into a technical recession in the second quarter.

Turning to next week, the main catalyst of movement in the US Dollar is likely to be the release of the latest US payroll figures. With an expected slowdown in US employment growth potentially dragging on USD exchange rates.

Top USD data releases:

Aug 1 USD ISM Manufactuing PMI (Jul)

Aug 3 USD ISM Non-Manufactuing PMI (Jul)

Aug 5 USD Non Farm Payrolls (Jul)

 

GBP – Pound Buoyed by BoE Rate Hike Bets

The Pound strengthened this week, bolstered as GBP investors grew increasingly confident the Bank of England (BoE) will accelerate the pace of its interest rate hikes at its next meeting. However Sterling’s ascent was far from smooth, with concerns over the UK’s ‘summer of discontent’ and ongoing political uncertainty tempering the currency’s gains.

Centre stage next week will be the BoE’s latest interest rate decision. A 50bps rate hike could extend the Pound’s gains but only if the bank’s accompanying economic forecasts aren’t too bleak.

Top GBP data releases:

Aug 1 GBP Manufactuing PMI (Jul)

Aug 3 GBP Services PMI (Jul)

Aug 4 GBP BoE Interest Rate Decision

 

AUD – Australian Dollar Firms as Risk Appetite Improves

The Australian Dollar wavered through the first half of this week as the currency was undermined by a weaker-than-expected inflation print. However AUD exchange rates then rallied in the second half of the week after a sharp downturn in the US Dollar bolstered market risk appetite.

The Reserve Bank of Australia’s (RBA) latest interest rate decision will be in the spotlight for AUD investors next week, with another 50bps rate hike from the bank potentially underpinning the ‘Aussie’.

Top AUD data releases:

Aug 2 AUD RBA Interest Rate Decision

Aug 4 AUD Trade Balance (Jun)

Aug 5 AUD RBA Policy Statement

 

ZAR – Rand Firms in Upbeat Trade

The South African Rand trended broadly higher this week, as a prevailing risk-on mood and pullback in the US Dollar buoyed the appeal of the emerging market currency.

With ZAR data thin on the ground next week the Rand could struggle to extend its gains, unless market sentiment remains upbeat.

 

CAD – Canadian Dollar Buoyed by Rising Oil Prices

The Canadian Dollar trended higher through the first half of this week, with the commodity-linked currency drawing support as oil prices ticked higher. The publication of some stronger-than-expected Canadian GDP figures then helped to reinforce these gains at the end of the session.

The publication of Canada’s latest jobs report will likely be the focus for CAD investors next week. Will another drop in unemployment in July lend support to the ‘Loonie’ in the latter half of the week?

Top CAD data releases:

Aug 4 CAD Trade Balance (Jun)

Aug 5 CAD Unemployment Rate (Jul)