US Dollar Rocked by Dovish Fed, Pound Weakens as BoE also Disappoints

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 ECB Forward Guidance

The Euro wavered in the first half of this week. While a surprisingly resilient GDP release eased Eurozone recession fears, this was offset by ongoing concerns over Ukraine. The European Central Bank’s (ECB) interest rate decision then saw the Euro retreat as the bank implied it may pause its hiking cycle after March.

Germany’s latest industrial data is likely to drive movement in the Euro at the start of next week. Will a sharp rebound in factory orders following November’s abysmal print, help to buoy EUR exchange rates?

Top EUR data releases:

Feb 6 EUR German Factory Orders (Dec)

Feb 6 EUR Retail Sales (Dec)

Feb 7 EUR German Industrial Production (Dec)

 

 

USD – US Dollar Tumbles Following Fed Rate Decision

The US Dollar was met by heavy selling pressure in the first half of this week amid a dovish tilt from the Federal Reserve as it delivered a 25bps interest rate hike. The ‘Greenback’ then rallied in the second half of the week following a startling jump in non farm payrolls.

The latest US consumer sentiment index will be the most high-impact USD data release next week. Could another sharp improvement in sentiment help to buoy the US Dollar?

Top USD data releases:

Feb 9 USD Initial Jobless Claims (4/Feb)

Feb 10 USD Consumer Sentiment (Feb)

 

GBP – Pound Undermined by Dovish BoE

The Pound faced headwinds at the start of this week after the International Monetary Fund (IMF) warned the UK is likely to be the only major economy to shrink in 2023. Sterling then continued to weaken in the wake of the Bank of England’s (BoE) latest interest rate decision. While the BoE raised rates by 50bps, its policy outlook was judged to be dovish.

Looking ahead, the UK’s latest GDP figures will be in the spotlight next week. If the UK managed to avoid a recession in the fourth quarter the Pound could strengthen.

Top GBP data releases:

Feb 10 GBP GDP (Q4)

Feb 10 GBP Business Investment (Q4)

Feb 10 GDP (Dec)

 

AUD – Australian Dollar Fluctuates in Mixed Trade

The Australian Dollar initially stumbled this week as a risk-off mood and lacklustre domestic retail sales weakened AUD sentiment. However, the ‘Aussie’ then received a leg up in the second half of the session after a dovish Fed rate decision buoyed market risk appetite.

AUD investors will be eying the Reserve Bank of Australia’s (RBA) first interest rate decision of the year next week. Will a hawkish rate hike propel the ‘Aussie’ higher?

Top AUD data releases:

Feb 7 AUD Balance of Trade (Dec)

Feb 7 AUD RBA Interest Rate Decision

 

ZAR – Rand Buoyed by Prospect of Weaker US Monetary Policy

The South African Rand got off to a poor start this week as South Africa’s ongoing power crisis took its toll on the emerging currency. The Rand then rebounded sharply in the latter part of the week after a dovish Fed helped to ease global recession fears.

Notable ZAR data is thin on the ground next week. As such movement in the Rand is likely to be dictated by market sentiment. Could a cautious mood see the Rand soften?

 

CAD – Canadian Dollar Firms on Upbeat GDP Release

The Canadian Dollar struck higher at the start of this week on the back of an upwardly revised GDP release. The ‘Loonie’s positive correlation with the US Dollar then helped to carry the currency even higher in the second half of the session.

The publication of Canada’s latest jobs report will likely be the primary focus for CAD investors next week. Will a bump in unemployment last month weaken the ‘Loonie’?

Top CAD data releases:

Feb 6 CAD Ivey PMI (Jan)

Feb 10 CAD Unemployment Rate (Jan)