US Dollar Tumbles on Dovish Fed Rate Hike, Euro Rallies on UBS-Credit Suisse Merger

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 Rebounded as Europe’s Banking Sector Stabilises

After some initial jitters following the UBS-Credit Suisse takeover, the Euro rallied sharply this week thanks to its negative correlation with the US Dollar. However, the single currency then trimmed a good portion of these gains later in the week, amid a market correction and mixed Eurozone’s PMIs.

Assuming there is no more drama in Europe’s banking sector, the release of the Eurozone’s latest PMI figures will be the focus for EUR investors next week. Could an improvement in private sector growth help to boost the Euro?

Top EUR data releases:

Mar 27 EUR German IFO Business Climate (Mar)

Mar 30 EUR German Inflation Rate (Mar)

Mar 31 EUR Inflation Rate (Mar)

 

USD – US Dollar Plummets on Dovish Fed Rate Hike

The US Dollar struck a one-month low this week after nosediving in the wake of the Federal Reserve’s latest interest rate decision. While the Fed raised rates by 25bps, it also hinted its hiking cycle is likely to end earlier than previously thought. Tempering the US Dollar’s losses, however, was the Fed’s dismissal of rate cuts in 2023.

The release of the latest core PCE price index will be in the spotlight for USD investors next week. Could another uptick in the Fed’s preferred measure of inflation suggest the bank still has work to do and help lift the US Dollar?

Top USD data releases:

Mar 30 USD Initial Jobless Claims (25/Mar)

Mar 30 USD GDP (Q4)

Mar 31 USD Core PCE Price Index (Feb)

 

GBP – Pound Fluctuates on BoE Rate Speculation

The Pound traded in a wide range this week amid speculation over the Bank of England’s (BoE) latest interest rate decision. Initial doubts over a hike quickly faded following a stronger-than-expected UK inflation print.

The BoE ultimately opted to raise rates by 25bps and left the door open for additional hikes in the future, which lent some support to Sterling in the latter half of the week.

Looking ahead, confirmation the UK avoided slipping into a recession at the end of 2022 may offer some support to the Pound next week.

Top GBP data releases:

Mar 27 GBP CBI Distributive Trades (Mar)

Mar 31 GBP GDP (Q4)

 

AUD – Australian Dollar Undermined by Dovish RBA Minutes

The Australian Dollar got off to a poor start this week, retreating following the release of dovish minutes from the Reserve Bank of Australia’s (RBA) March policy meeting. AUD exchange rates attempted to rebound later in the week after the Fed rate decision bolstered market risk appetite, but this quickly sputtered out amid a slump in commodity prices.

The only AUD data of note next week will be Australia’s latest retail sales release. Will a slowdown in sales growth last month – following January’s bumper reading – leave the ‘Aussie’ with limited support?

Top AUD data releases:

Mar 28 AUD Retail Sales (Feb)

 

ZAR – South African Rand Rallies in Upbeat Trade

The South African Rand opened the week on the defensive, with jittery investors steering clear of the emerging market currency amid a risk-off impulse. The Rand then rallied later in the week, on the back of stronger-than-expected domestic inflation and easing Fed rate hike expectations.

The South African Reserve Bank’s (SARB) latest interest rate decision will be in the spotlight next week. The SARB is expected to deliver a 25bps hike, but Rand could stumble if the bank indicates this will be the end of its tightening cycle.

Top ZAR data releases:

Mar 30 ZAR PPI (Feb)

Mar 30 ZAR SARB Interest Rate Decision

 

CAD – Canadian Dollar Offered Fleeting Support by Oil Price Rise

The Canadian Dollar initially held its ground this week, with the commodity-linked currency being supported by an uptick in oil prices. However the ‘Loonie’ then stumbled later in the week as it was undermined by its positive correlation with the US Dollar

Turning to next week, the publication of Canada’s latest GDP figures will be the only CAD data of note. Could a contraction of growth in February lead the ‘Loonie’ to give ground?

Top CAD data releases:

Mar 31 CAD GDP (Feb)