Following last week's optimism, fresh concerns over the war in the Middle East could trigger renewed volatility in the currency market this week, with the US dollar likely to benefit from any flight to safety.
Last week's key rate movements
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GBP/EUR – Unchanged on the week
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GBP/USD – Up 0.5% on the week
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EUR/USD – Up 0.4% on the week
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AUD/USD – Up 1.4% on the week
Pound (GBP)
There are several high-impact UK economic releases set to influence the pound (GBP) this week. The spotlight, however, will likely be on last month’s consumer price index, where a sharp rise in inflation could revive Bank of England (BoE) interest rate hike bets.
Euro (EUR)
The Eurozone’s PMI figures will likely act as a key catalyst of movement for the euro (EUR) this week, with the single currency poised to fall if the war in the Middle East continued to suppress private sector growth this month.
US dollar (USD)
The direction of the US dollar (USD) will no doubt be dictated by Middle East developments this week, with the potential collapse of the ceasefire between the US and Iran likely to underpin the appeal of the safe-haven currency.
Australian dollar (AUD)
Australia’s latest PMIs may act as a headwind for the Australian dollar (AUD) this week, as economists forecast growth in the private sector will have contracted again this month.
South African rand (ZAR)
Movement in the South African rand (ZAR) will likely be dictated by market risk sentiment this week, potentially leaving the emerging market currency vulnerable to losses amid renewed tensions in the Middle East.
Canadian dollar (CAD)
The commodity-linked Canadian dollar (CAD) may strengthen this week if oil prices continue to rally, with any upside in the currency likely to be reinforced if Canadian inflation accelerated in line with forecasts last month.
New Zealand dollar (NZD)
New Zealand will publish its consumer price index this week, with the New Zealand dollar (NZD) set to firm if sticky first-quarter inflation stokes bets for a Reserve Bank of New Zealand (RBNZ) rate hike.
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