US Dollar Rallies on Strong Services PMI, Euro Firms following Positive Data Releases

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 as Data Exceeds Forecasts

The Euro found success early this week, amid hawkish comments from some European Central Bank (ECB) officials and stronger-than-expected data from both Germany and the wider Eurozone. However, ongoing Russia-Ukraine worries limited EUR’s gains and dragged the currency lower at week’s end.

The ECB interest rate decision is the major event for EUR this coming week. A smaller 50bps rate hike could hurt the common currency, particularly if the ECB signals a more dovish approach moving forwards.

Top EUR data releases:

Dec 13 EUR German ZEW Economic Sentiment (Dec)

Dec 15 EUR ECB Interest Rate Decision

Dec 16 EUR Flash PMIs (Dec)

 

USD – US Dollar Rallies as Services PMI Beats Forecasts

After an initial dip, the US Dollar surged higher on Monday after the latest ISM non-manufacturing PMI showed an unexpected improvement in service-sector activity. However, the ‘Greenback’ lost its gains as the week went on amid falling US Treasury yields and an improving market mood.

This coming week we have the latest US inflation data followed closely by the Federal Reserve rate decision. A cooler inflation rate reading could dent USD, but if the Fed upwardly revises its interest rate projections then the US Dollar could recover.

Top USD data releases:

Dec 13 USD Inflation Rate (Nov)

Dec 14 USD Federal Reserve Interest Rate Decision

Dec 16 USD Flash PMIs (Dec)

 

GBP – Pound Subdued in Absence of Data

Trade in the Pound was muted this week as a notable lack of impactful UK economic data left Sterling to move in line with market sentiment, slipping against its safe peers and rising against riskier currencies. Meanwhile, mixed headlines about the UK’s economic outlook kept GBP subdued. As the market mood improved, GBP regained ground, with the Treasury’s plans to reform financial services regulations adding to the upside at the end of the week.

The Bank of England (BoE) also meets to set interest rates next week, the day after the latest UK CPI is due out. If recession fears see policymakers opt for a smaller rate hike, Sterling could slip.

Top GBP data releases:

Dec 12 GBP GDP (Oct)

Dec 14 GBP Inflation Rate (Nov)

Dec 15 BoE Interest Rate Decision

 

AUD – Australian Dollar Recovers as Sentiment Improves

The risk-sensitive Australian Dollar slumped early in this week’s trade after the strong US services PMI raised fears of another 75bps hike from the Fed. The ‘Aussie’ then fluctuated amid downbeat data and the Reserve Bank of Australia’s (RBA) interest rate decision. When risk appetite returned towards the end of the week, AUD recouped some losses.

Over the coming week, economists expect Australian data to print positive results, which could boost the ‘Aussie’. However, swings in the market mood – particularly in response to the Fed decision – could dominate AUD exchange rate movement.

Top AUD data releases:

Dec 12 AUD Westpac Consumer Confidence Index (Dec)

Dec 13 AUD NAB Business Confidence (Nov)

Dec 15 AUD Unemployment Rate (NoV)

 

ZAR – Rand Recovers as GDP Posts Strong Recovery

The South African Rand firmed this week after the third-quarter GDP growth rate smashed forecasts, with South Africa’s economy expanding 1.6%, rather than 0.6%. In addition, the country’s ruling African National Congress (ANC) party said it would block attempts to impeach President Cyril Ramaphosa, alleviating political instability fears. However, ZAR saw its gains slashed at the end of the week. Power utility Eskom extended power cuts into the weekend, while reports that South Africa could lose preferential access to US markets also worried investors.

Looking ahead, South Africa’s latest inflation rate reading is in focus for the coming week. If prices pressures continue to rise, expectations of further interest rate hikes from the South African Reserve Bank (SARB) could boost the Rand.

Top ZAR data releases:

Dec 13 ZAR Mining Production (Oct)

Dec 14 ZAR Inflation Rate (Nov)

Dec 14 ZAR Retail Sales (Oct)

 

CAD – Canadian Dollar Dragged Down by Weaker Oil Prices

A steady decline in oil prices pulled the crude-linked Canadian Dollar lower this week. Better-than-expected data may have cushioned the downside, along with a 50bps interest rate rise from the Bank of Canada (BoC), but the ‘Loonie’ remained down on the week.

Market-moving Canadian data is thin on the ground this week. As a result, oil price dynamics may continue to drive CAD exchange rates.

Top CAD data releases:

Dec 12 CAD BoC Gov Macklem Speech