Fresh tariff concerns, Federal Reserve policy expectations and escalating geopolitical tensions infused the currency market with significant volatility last week, with the US dollar briefly plunging to a three-year low.
Last week’s key rate movements
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GBP/EUR – Down 1% on the week
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GBP/USD – Up 0.3% on the week
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EUR/USD – Up 1.4% on the week
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AUD/USD – Unchanged on the week
Pound (GBP)
The Bank of England (BoE) is widely expected to keep interest rates on hold at its policy meeting this week. As such, investors will be paying close attention to the bank’s forward guidance. Any hints of a potential rate cut in August could weigh on the pound (GBP).
Euro (EUR)
The euro (EUR) could find support this week if Germany’s latest ZEW economic sentiment index points to improved confidence. As the Eurozone’s largest economy, an upbeat reading from Germany would be a welcome sign for the single currency.
US dollar (USD)
All eyes will be on the Federal Reserve’s interest rate decision this week. If the Fed opts to keep rates unchanged and signals that heightened uncertainty is likely to delay future cuts, the US dollar (USD) may strengthen.
Australian dollar (AUD)
Thursday’s jobs report is in focus for AUD traders, with a rise in employment likely to provide a lift to the Australian dollar (AUD). However, broader risk sentiment remains a key factor, and geopolitical tensions could limit gains.
South African rand (ZAR)
Cooling inflation could spark fresh speculation about a rate cut from the South African Reserve Bank (SARB), potentially pressuring the South African rand (ZAR). Broader risk aversion may also act as a headwind for the currency.
Canadian dollar (CAD)
The Canadian dollar (CAD) may be influenced by the Bank of Canada’s (BoC) latest meeting minutes this week, as markets look for clues on policy outlook. Oil price fluctuations, particularly amid ongoing tensions in the Middle East, could also drive CAD movement.
New Zealand dollar (NZD)
New Zealand’s Q1 GDP data is the key event for NZD this week. A solid growth reading could offer support to the New Zealand dollar (NZD), helping it weather external pressures.
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