US Dollar Soars to a 20-Year High, Euro Tumbles on Energy Concerns
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 Slumps as Russia Begins Restricting Gas Exports
The Euro faced some significant pressure this week, with a notable selloff being triggered by concerns over European energy security following Russia’s move to block gas exports to Poland and Bulgaria. The Euro then remained offered in the latter half of the week as while the Eurozone reported another record rise in inflation, accompanying GDP figures printed below expectations.
Heightened tensions between the EU and Russia could see the Euro remain on the back foot next week, with any losses likely to be compounded by another expected contraction in German factory orders in March.
Top EUR data releases:
May 2 EUR Economic Sentiment (Apr)
May 4 EUR Services PMI (Apr)
May 5 EUR German Factory Orders (Mar)
USD – US Dollar Storms to Multi-Year Highs
The US Dollar enjoyed strong support through this week’s session, with risk-off flows and expectations for a series of aggressive interest rate hikes from the Federal Reserve helping to catapult the Dollar Index to a 20-year high. This uptrend in the US dollar even persisted in spite of the US reporting a shock contraction in GDP in the first quarter.
It’s set to be a busy session for USD investors next week, with a host of high-impact releases. However, these are likely to be overshadowed by a well-telegraphed rate hike from the Fed, particularly if the US central bank strongly hints at more hikes to follow in the coming months.
Top USD data releases:
May 4 USD ISM Non-Manufacturing PMI (Apr)
May 4 USD Fed Interest Rate Decision
May 6 USD NonFarm Payrolls
GBP – Pound Sinks as Investors Revise BoE Rate Hike Bets
The Pound spent most of this week on the defensive, with the currency being undermined as GBP investors reined in their expectations for further rate hikes from the Bank of England (BoE) this year. These losses were compounded by data from the Confederation of British Industry (CBI) which reported UK retail sales activity plunged to a one-year low this month.
All eyes will unsurprisingly be on the BoE when it delivers its latest interest rate decision next week. With a modest hike priced in, could some dovish forward guidance from the bank send the Pound even lower?
Top GBP data releases:
May 3 GBP Manufacturing PMI (Apr)
May 5 GBP Services PMI (Apr)
May 5 GBP BoE Interest Rate Decision
AUD – Australian Dollar Fluctuates amid China Lockdown Fears
The Australian Dollar tumbled at the start of this week, with investors steering clear of the risk-sensitive currency amidst fears more of China could be placed in lockdown as Covid cases surged. However a hotter-than-expected inflation reading then allowed the ‘Aussie’ to claw back some of these losses later in the week.
The Reserve Bank of Australia’s (RBA) latest interest rate decision will be in the spotlight for AUD investors next week. In light of this week’s inflation figures the bank is now expected to raise interest rates, which could trigger a sharp appreciation of AUD exchange rates.
Top AUD data releases:
May 3 AUD RBA Interest Rate Decision
May 5 AUD Trade Balance (Mar)
ZAR – Rand Maintains Bearish Trajectory Amid USD Strength
The South African Rand remained on the defensive though most of this week as demand for the emerging market currency was undermined by considerable US Dollar strength, in addition to reports that the country could face up to 100 days of power cuts in 2022.
Looking ahead, in the absence of any notable domestic data the direction of the Rand next week is likely to be dictated by market sentiment, potentially leading to further losses if risk appetite remains weak.
CAD – Canadian Dollar Firms on Hawkish BoC Comments
The Canadian Dollar got off to a solid start this week, firming on the back of comments from Bank of Canada (BoC) Governor Tiff Macklem suggesting the BoC would act ‘forcefully’ to contain inflation if needed. This upside in the commodity-linked ‘Loonie’ was then reinforced by buoyant oil prices.
Turning to next week the release of Canada’s latest jobs report could help to bolster CAD exchange rates if domestic unemployment continued to drop in April.
Top CAD data releases:
May 6 CAD Unemployment Rate (Apr)