Hawkish Federal Reserve interest rate bets underpinned notable US dollar demand through last week’s session, before dovish signals from the US central bank at the end of the week began to test these gains.
Last week’s key rate movements
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GBP/EUR – Up 0.3% on the week
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GBP/USD – Down 0.6% on the week
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EUR/USD – Down 0.9% on the week
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AUD/USD – Down 1.3% on the week
Pound (GBP)
The publication of the UK’s long-awaited autumn budget will be centre stage for GBP investors this week. If Chancellor Rachel Reeves is unable to convince markets of the merits of her spending and tax plans, the pound (GBP) is likely to weaken.
Euro (EUR)
In focus for EUR investors this week will be the publication of Germany’s latest consumer price index. If November’s preliminary figures report another moderation of inflation, it may apply some pressure to the euro (EUR) in the latter half of the week.
US dollar (USD)
A dovish repricing of Federal Reserve interest rate expectations could overshadow other US economic releases this week, unless a particularly strong retail sales print tips the odds back in favour of the hawks and triggers a fresh rise in the US dollar (USD).
Australian dollar (AUD)
Australia’s consumer price index will be closely watched by AUD investors this week as a robust inflation print could reinforce bets that the Reserve Bank of Australia (RBA) will keep interest rates on hold for longer and lift the Australian dollar (AUD) in the process.
South African rand (ZAR)
Movement in the South African rand (ZAR) is likely to be tied to market sentiment this week amid the absence of any notable domestic data. If the mood remains upbeat, the rand is likely to appreciate.
Canadian dollar (CAD)
The latest GDP data from Canada could provide a boost to the Canadian dollar (CAD) this week. The economy is forecast to rebound modestly in the third quarter after trade tensions with the US resulted in a 0.4% contraction in Q2.
New Zealand dollar (NZD)
The New Zealand dollar (NZD) looks poised to slide this week if the Reserve Bank of New Zealand (RBNZ) delivers another rate cut and leaves the door open to further easing.
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