There were notable swings in the currency market last week. While the euro benefitted from some hawkish signals from the European Central Bank (ECB) following its latest interest rate decision, the US dollar was rocked by persistent concerns over the future independence of the Federal Reserve.
Last week's key rate movements
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GBP/EUR – Down 0.8% on the week
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GBP/USD – Unchanged on the week
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EUR/USD – Up 1% on the week
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AUD/USD – Up 0.9% on the week
Pound (GBP)
Impactful UK economic data is in short supply this week. This may leave the pound (GBP) vulnerable to shifts in broader market sentiment, particularly if risk appetite sours ahead of Trump’s tariff deadline on Friday.
Euro (EUR)
The euro (EUR) has made a strong start this week following confirmation of an EU-US trade agreement. However, this momentum could falter later in the week if the Eurozone’s latest GDP report confirms that growth stagnated in the second quarter.
US dollar (USD)
It’s shaping up to be a data-heavy week for the US Dollar (USD), with fresh US GDP and payroll figures on the docket, alongside the Federal Reserve’s latest interest rate decision. While the Fed is widely expected to keep rates on hold, the tone of its forward guidance may inject volatility, depending on whether it reinforces or undermines expectations of a September rate cut.
Australian dollar (AUD)
The Australian dollar (AUD) may face some headwinds this week, with the spotlight on Q2 inflation data. A cooler inflation reading could boost rate cut speculation and weigh on AUD exchange rates, as investors recalibrate Reserve Bank of Australia (RBA) expectations.
South African rand (ZAR)
The South African rand (ZAR) looks set for a turbulent week amid rising global trade tensions and speculation surrounding a potential interest rate cut from the South African Reserve Bank (SARB).
Canadian dollar (CAD)
Attention turns to the Bank of Canada (BoC) this week as it delivers its latest policy verdict. While no changes are anticipated, a dovish tone from policymakers could place the Canadian dollar (CAD) under renewed pressure.
New Zealand dollar (NZD)
With no significant domestic data due, the New Zealand dollar’s (NZD) performance will likely be dictated by market risk appetite. Any uptick in trade optimism could lend support to the 'kiwi'.
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