US Dollar Slumps as Inflation Continues to Cool, Euro Bolstered by Hawkish ECB Comments

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 Underpinned by Hawkish ECB

The Euro found support through the first half of this week, with the single currency being underpinned by hawkish European Central Bank (ECB) rhetoric. The publication of Germany’s 2023 GDP figures then offered some additional support at the end of the week.

Germany’s latest ZEW survey is likely to be the focus for EUR investors next week. A continued improvement in economic sentiment this month could help bolster the Euro at the start of the week.

Top EUR data releases:

Jan 17 EUR German Inflation Rate (Dec)

Jan 17 EUR German ZEW Economic Sentiment (Jan)

Jan 18 EUR Inflation Rate (Dec)

 

USD – US Dollar Tumbles as US Inlfation Continues to Cool

The US Dollar got off to a poor start this week. The ‘Greenback’ stumbled amid risk-on flows and disappointment that a speech by Federal Reserve Chair Jerome Powell didn’t touch on monetary policy. The release of the US consumer price index then extended this selloff after December’s release reported domestic inflation continues to cool.

The publication of the latest US retail sales release may act as the main catalyst of movement for the US Dollar next week. Will another contraction in sales growth place more pressure on USD exchange rates?

Top USD data releases:

Jan 18 USD Retail Sales (Dec)

Jan 18 USD PPI (Dec)

Jan 19 USD Initial Jobless Claims (14/Jan)

 

GBP – Pound Dented by Deteriorating Economic Outlook

The Pound struggled to attract support this week. Sterling sentiment was supressed by an increasingly bleak outlook for the UK economy. However, GBP exchange rates found some relief at the end of the week after the UK’s latest GDP figures reported a surprise expansion in November.

GBP investors will be kept busy with a number of high-impact UK data releases next week, the most notable of which is likely to be the UK’s latest CPI release. Could another strong inflation reading spook markets and pull Sterling lower?

Top GBP data releases:

Jan 17 GBP Unemployment Rate (Nov)

Jan 17 GBP Wage Growth (Nov)

Jan 18 GBP Inflation Rate (Dec)

 

AUD – Australian Dollar Wavers Following Mixed Data

The Australian Dollar traded without any strong directional bias this week. This saw the currency fluctuate against most of its peers amid an uncertain market mood and mixed domestic data, with an upbeat retail sales print being offset by lacklustre trade figures.

Looking ahead, movement in the ‘Aussie’ will likely be driven by the publication of Australia’s latest employment figures. Another strong increase in employment growth could help to push the Australian Dollar higher toward the end of the session.

Top AUD data releases:

Jan 19 AUD Unemployment Rate (Dec)

 

ZAR – Rand Buoyed by USD Weakness

The South African Rand trended broadly higher this week as USD selling pressure and South African Reserve Bank (SARB) rate hike bets helped to bolster the appeal of the emerging market currency. However, the Rand’s gains were tempered in the latter half of the week after Eskom announced it would have to implement stage-six loadshedding measures.

South Africa’s latest inflation reading will likely act as a key catalyst of movement in the Rand next week. Will another robust inflation print send the Rand higher?

Top ZAR data releases:

Jan 18 ZAR Inflation Rate (Dec)

Jan 18 ZAR Retail Sales (Nov)

 

CAD – Canadian Dollar Struggles Despite Oil Price Rally

The Canadian Dollar’s fortunes were mixed this week, despite a strong uptick in oil prices, which would normally reflect positively on the commodity-sensitive currency. The Canadian Dollar’s underperformance was linked to falling Canadian government bond yields in additional to CAD’s positive correlation with the US Dollar.

Canada’s latest CPI release will be the primary focus for CAD investors next week. Will another cooling of inflation dent Bank of Canada (BoC) rate hike expectations and weaken the ‘Loonie’?

Top CAD data releases:

Jan 17 CAD Inflation Rate (Dec)

Jan 18 CAD PPI (Dec)

Jan 20 CAD Retail Sales (Nov)