The US dollar faced heavy selling pressure last week amid growing certainty that Kevin Hassett – an ally of President Donald Trump – will replace Jerome Powell as Chair of the Federal Reserve in May, potentially presiding over an acceleration in interest rate cuts.
Last week's key rate movements
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GBP/EUR – Up 0.2% on the week
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GBP/USD – Up 0.6% on the week
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EUR/USD – Up 0.4% on the week
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AUD/USD – Up 1.2% on the week
Pound (GBP)
British data is thin on the ground until the very end of the week, when the UK’s latest GDP figures are due out. An expected return to growth in October may boost the pound (GBP), although a weaker-than-forecast reading would likely see Sterling slide.
Euro (EUR)
Market-moving Eurozone data is in short supply this week, so the euro (EUR) may be driven by ongoing geopolitical events. Fading hopes for a Russia-Ukraine peace deal and strained US-EU relations could undermine the common currency.
US dollar (USD)
The Federal Reserve interest rate decision is in the spotlight this week. An expected cut could weigh on the US dollar (USD), although investors may focus more on the bank’s forward guidance. A dovish tone could see USD slump, while the ‘greenback’ may strengthen if Fed Chair Jerome Powell remains defiant in the face of pressure to cut rates rapidly.
Australian dollar (AUD)
The main focus for the Australian dollar (AUD) this week is the Reserve Bank of Australia (RBA) decision, where no change to policy is expected. If last week’s lacklustre GDP reading softens the bank’s hawkish stance, the ‘Aussie’ could stumble.
South African rand (ZAR)
An expected improvement in domestic consumer confidence could lend the South African rand (ZAR) modest support this week, although market risk appetite may be the key driver for ZAR exchange rates.
Canadian dollar (CAD)
The Bank of Canada (BoC) is likely to hold interest rates steady at its meeting this week. If it strikes a slightly more hawkish tone in its guidance, following Friday’s forecast-beating jobs data, the Canadian dollar (CAD) could firm.
New Zealand dollar (NZD)
New Zealand’s latest manufacturing PMI is expected to show that activity slowed to a near standstill in November, which could weigh on the New Zealand dollar (NZD) this week.
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