US Dollar Undermined by Dovish Fed Comments, Pound Dented by Coronavirus 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 Rebounds from Three-Month Low as ECB Alters Inflation Mandate
The Euro fell sharply through the first half of this week, with the EUR/USD exchange rate striking a new three-month low in response to dovish comments from European Central Bank (ECB) President Christine Lagarde. While the Euro was able to bounce back later in the week, this was mostly down to a pullback in the US Dollar, rather than any underlying strength in the single currency.
The ECB’s latest rate decision will no doubt be the focus for EUR investors next week, particularly in light of Lagarde’s recent hints that the bank may alter its forward guidance and extend its bond buying programme, following the changes to its inflation targets.
Top EUR data releases:
Jul 22 EUR ECB Interest Rate Decision
Jul 23 EUR Manufacturing PMI (Jul)
Jul 23 EUR Services PMI (Jul)
USD – US Dollar Undermined by Dovish Powell Comments
The US Dollar enjoyed strong support through the first half of this week, with USD exchange rates surging in response to a stronger-than-expected US CPI release in June, which reported US inflation surged to 5.4%. However, the US Dollar almost immediately relinquished these gains, as Federal Reserve Chair Jerome Powell testified before Congress and suggested the US economy is ‘still a ways off’ the point at which the Fed can begin tapering its stimulus measures.
In the absence of any other high-impact data releases, the latest Markit PMIs could provide some direction to the US Dollar next week, with another robust expansion of the US private sector likely to reflect well on USD exchange rates.
Top USD data releases:
Jul 22 USD Initial Jobless Claims (17/Jul)
Jul 23 USD Manufacturing PMI (Jul)
Jul 23 USD Services PMI (Jul)
GBP – Pound Slides amid Worrying Rise in Coronavirus Cases
The Pound got off to a poor start this week, as elevated coronavirus cases raised questions over the sustainability of the government’s plans to lift nearly all restrictions in England. Sterling then fluctuated in the second half of the week, amidst some mixed data releases and hawkish comments from a Bank of England (BoE) policymaker.
The unlocking of the final parts of the UK economy may help to underpin GBP exchange rates next week, with some robust PMI releases also potentially extending some support.
Top GBP data releases:
Jul 22 GBP CBI Industrial Trends Orders (Jul)
Jul 23 GBP Manufacturing PMI (Jul)
Jul 23 GBP Services PMI (Jul)
AUD – Australian Dollar Rocked by Fluctuating Risk Appetite
The Australian Dollar traded in a wide range over the past week, with a mixed market mood infusing some volatility into the risk-sensitive currency. One positive spot was Australia’s latest jobs report, which showed domestic unemployment drop to a decade low in June, although this was unable to sustain a rebound in the ‘Aussie’.
Turning to next week’s session, the publication of Australia’s latest retail sales figures will likely be the primary focus for AUD investors, with the ‘Aussie’ potentially weakening if sales growth continued to soften last month.
Top AUD data releases:
Jul 20 AUD RBA Minutes
Jul 21 AUD Retail Sales (Jun)
Jul 23 AUD Services PMI (Jul)
ZAR – South African Rand Tumbles amid Riots
The South African Rand slumped to a two-month low this week, as the riots triggered by the arrest of former President Jacob Zuma spread throughout the country, further undermining the country’s already Covid-hit economy. The Rand was later able to claw back some of these losses amidst a pullback in the US Dollar and upbeat domestic data.
Should the violence ease next week, the focus for ZAR investors is likely to be the conclusion of the South African Reserve Bank’s (SARB) latest policy meeting. Will an upbeat outlook from the bank lend some support to the Rand?
Top ZAR data releases:
Jul 21 ZAR Inflation Rate (Jun)
Jul 22 ZAR SARB Interest Rate Decision
CAD – Canadian Dollar Slips on Weaker Oil Prices
The Canadian Dollar trended lower through much of this week’s session, with the appeal of the commodity-linked currency being repeatedly undermined by softening oil prices. Also exerting some pressure on the ‘Loonie’ was the Bank of Canada (BoC), which struck a cautious tone in its latest policy statement, in spite of further reducing its weekly bond purchases.
Looking ahead, will another contraction of domestic retail sales growth in May put additional pressure on CAD exchange rates next week?
Top CAD data releases:
Jul 23 CAD Retail Sales (May)