Euro Fluctuates as ECB Confirms Rate Hike Plans, US Dollar Bolstered by Inflation Surge

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 Rocked by ECB’s Forward Guidance

The Euro traded in a wide range this week, fluctuating through the first half of the week as underwhelming German industrial data was offset by an upwardly revised Eurozone GDP release. This volatility was then stoked in the wake of the European Central Bank’s (ECB) latest interest rate decision. The Euro initially jumping as it confirmed a 25bps rate hike in July before a slashing of the bank’s growth forecasts push EUR exchange rates lower.

The Euro could face headwinds next week however, if Germany’s ZEW economic sentiment index reveals investor morale in the Eurozone’s largest economy remains broadly downbeat.

Top EUR data releases:

Jun 14 EUR German Inflation Rate (May)

Jun 14 EUR German ZEW Economic Sentiment (Jun)

Jun 17 EUR Inflation Rate (May)

 

USD – US Dollar Strengthen as US Inflation Accelerates

The US Dollar wavered through much of this week, with fluctuating US Treasury yields and mixed market sentiment leaving the currency with only limited support. The publication of the US consumer price index then pushed USD exchange rates higher at the end of the week after reporting US inflation unexpectedly strengthened last month.

Centre Stage next week will be the Federal Reserve’s latest interest rate decision. Another 50bps increase is on the cards, but with the hike largely priced in any movement in the US Dollar will be tied to the bank’s forward guidance.

Top USD data releases:

Jun 15 USD Retail Sales (May)

Jun 15 USD Fed Interest Rate Decision

Jun 17 USD Industrial Production (May)

 

GBP – Pound Fluctuates amid UK Political Jitters

The Pound was rocked by political uncertainty this week, following Boris Johnson’s narrow victory in a non-confidence vote held on Monday. Sterling then continued to fluctuate in the second half of the week amidst multiple warnings over UK growth.

The Bank of England’s (BoE) latest interest rate decision will be centre stage for GBP investors next week. While the BoE is expected to continue to raise rates a cautious outlook could weigh on the Pound.

Top GBP data releases:

Jun 13 GBP GDP (Apr)

Jun 14 GBP Average Earning (Apr)

Jun 16 GBP BoE Interest Rate Decision

 

AUD – Australian Dollar Spikes on Larger-than-Expected RBA Rate Hike

The Australian Dollar got off to a strong start this week, as the Reserve Bank of Australia (RBA) surprised markets by delivering a 50bps rate hike following its June policy meeting. However the ‘Aussie’ struggled to hold on to these gains as the week went on, amidst a prevailing risk-off mood.

In the spotlight for AUD investors next week will be Australia’s latest unemployment figures. Will another drop in the jobless rate last month help to buoy the Australian Dollar?

Top AUD data releases:

Jun 14 AUD Business Confidence (May)

Jun 15 AUD Consumer Confidence (Jun)

Jun 16 AUD Unemployment Rate (May)

 

ZAR – Rand Firms as GDP Beats Expectations

The South African Rand rallied this week, with initial gains coming on the back of South Africa’s stronger-than-expected first quarter GDP figures. However the Rand was unable to consolidate these gains, falling back in the latter half of the week on underwhelming industrial data and amid a souring market mood.

The release of South Africa’s latest retail sales will likely be the main catalyst of movement in the Rand next week. Will a rebound in sales growth in April help to boost the Rand?

Top ZAR data releases:

Jun 15 ZAR Retail Sales (Apr)

 

CAD – Canadian Dollar Buoyed by Rising Oil Prices

The Canadian Dollar trended broadly higher this week, with the commodity-linked currency being underpinned by a continued uptick in oil prices. The ‘Loonie’ then faced some pressure in the latter half of the week after the Bank of Canada (BoC) warned of increased financial stability risks, before a surprise drop in unemployment helped to temper these losses.

In the absence of any notable CAD data releases next week, the direction of the Canadian Dollar is likely to remain tied to oil price dynamics.