Central bank policy will be a key focus in the FX market this week, with the European Central Bank (ECB) poised to deliver its latest interest rate decision on Thursday, and the latest US inflation figures setting expectations for the Federal Reserve's policy meeting later in the month.
Last week's key rate movements
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GBP/EUR – Down 0.4% on the week
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GBP/USD – Unchanged on the week
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EUR/USD – Up 0.3% on the week
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AUD/USD – Up 0.3% on the week
Pound (GBP)
The UK’s latest GDP figures will be the primary focus for GBP investors this week. Economists predict growth stalled at the start of the third quarter, likely applying pressure to the pound (GBP) at the end of the session as it raises fresh questions over the government's upcoming budget.
Euro (EUR)
An expected interest rate hike from the European Central Bank (ECB) is likely to underpin the euro (EUR) this week, particularly if ECB President Christine Lagarde hints that more tightening may be needed to contain inflationary pressures within the Eurozone.
US dollar (USD)
The latest US consumer price index will act as a key catalyst for US dollar (USD) movement this week, with the ‘greenback’ poised to strengthen if a robust US inflation print helps strengthen bets for a Federal Reserve interest rate hike this month.
Australian dollar (AUD)
The publication of Australia’s latest business and consumer confidence figures may apply pressure to the Australian dollar (AUD) this week if they signal morale is beginning to deteriorate again.
South African rand (ZAR)
South Africa will also publish its latest GDP figures this week. Economists forecast domestic growth will have softened in Q2, which may act as a headwind for the South African rand (ZAR) on Tuesday.
Canadian dollar (CAD)
In the absence of any notable domestic economic indicators, movement in the commodity-linked Canadian dollar (CAD) is likely to be tied to oil price dynamics, potentially buoying the ‘loonie’ if Brent crude pushes back to $100 per barrel.
New Zealand dollar (NZD)
NZD economic data is also limited this week, leaving movement in the New Zealand dollar (NZD) to be primarily driven by risk appetite, with renewed uncertainty in the Middle East likely to exert some pressure on the 'kiwi'.
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