US Dollar Plunges as Fed Strikes Dovish Tone, Mixed Outlook from the BoE Drives Volatility in the Pound

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 Stumbles on Vaccine Concerns

The Euro has struggled to attract support this week, with its initial losses being driven by German political uncertainty after the ruling CDU party suffered a historic defeat in regional elections. The negative EUR sentiment then persisted into the latter half of the week as the suspension of the AstraZeneca vaccine in many parts of the EU stoked concerns over further delays to the rollout across the continent.

Turning to next week’s session, the focus for EUR investors will likely be on the Eurozone’s latest PMI releases. Will a modest expansion of the bloc’s private sector this month offer some support to the Euro?

Top EUR data releases:

Mar 24 EUR Manufacturing PMI (Mar)

Mar 24 EUR Services PMI (Mar)

Mar 26 EUR IFO German Business Climate (Mar)

 

USD – US Dollar Undermined by Dovish Fed

The US Dollar enjoyed broad support through the first half of this week, with the currency being bolstered by rising US Treasury yields and a prevailing risk-off mood. But the ‘Greenback’ then faced a sharp sell-off in the latter half of the week, collapsing in response to the more dovish-than-expected tone struck by the Federal Reserve following its latest policy meeting.

Looking ahead, the US Dollar could face some headwinds next week with the publication of the latest US durable goods figures, as economists forecast growth in new orders will have slowed again in February.

Top USD data releases:

Mar 24 USD Durable Goods Orders (Feb)

Mar 25 USD GDP (Q4)

Mar 25 USD Initial Jobless Claims (20/Mar)

 

GBP – Pound Fluctuates on Mixed BoE Outlook

Trade in the Pound was mixed this week in response to the Bank of England’s latest rate decision as the bank was broadly upbeat in its outlook for the economy, but signalled it is still nowhere near ready to start tightening monetary policy. Infusing further volatility into Sterling throughout the session were vaccine jitters after the NHS warned it is facing a ‘significant shortage’ in April.

Its looks to be a busy session for GBP investors next week, amidst a slew of high impact UK data releases, with a key focus likely to be the latest consumer price index as markets look for any evidence that inflationary pressures are starting to build.

Top GBP data releases:

Mar 23 GBP Unemployment Rate (Jan)

Mar 24 GBP Inflation Rate (Feb)

Mar 24 GBP Services PMI (Mar)

 

AUD – Australian Dollar Rallies on Stellar Employment Figures

The Australian Dollar opened this week on the defensive as broad USD strength and vaccine concerns dampened the appeal of the risk-sensitive ‘Aussie’. However, the currency was able to take full advantage of the pullback in the US Dollar in the second half of the session after Australia’s latest jobs report revealed a sharper-than-expected drop in domestic unemployment last month.

Coming up next week, the Australian Dollar may garner support from the publication of Australia’s latest PMI figures, assuming they show economic activity continued to grow in March.

Top AUD data releases:

Mar 23 AUD Manufacturing PMI (Mar)

Mar 23 AUD Services PMI (Mar)

 

ZAR – Rand Soars in Risk-On Trade

The South African Rand roared higher against the majority of its peers this week as the slump in the US Dollar made the emerging market currency much more attractive to investors. However, these gains were tempered somewhat by the publication of South Africa’s latest retail sales after they reported a surprise slump in sales growth at the start of 2021.

Likely dominating the spotlight for ZAR investors next week will be the South African Reserve Bank’s (SARB) latest rate decision. No policy changes are expected this month, but could some dovish forward guidance weaken the Rand?

Top ZAR data releases:

Mar 24 ZAR Inflation Rate (Feb)

Mar 25 ZAR SARB Rate Decision

 

CAD – Canadian Dollar Slumps as Inflation Misses

The Canadian Dollar came under some notable selling pressure this week after Canada’s latest consumer price index revealed domestic inflation accelerated at a slower pace than expected last month. Further undermining the appeal of the ‘Loonie’ were weak oil prices, with WTI crude holding below $65 throughout most of the week.

In the absence of any notable CAD data releases next week, any movement in the Canadian Dollar is likely to remain tied to oil, leading to further losses if crude prices continue to slide.