The prospect of peace in the Middle East looks set to act as a key catalyst for movement in the FX market this week, with the US and Iran set to sign a deal to end the war on Friday.
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 – Unchanged on the week
Pound (GBP)
In addition to the Bank of England’s (BoE) latest interest rate decision, the pound (GBP) will also be influenced by the Makerfield by-election this week, particularly as the latter has the potential to reshape the UK government. GBP could therefore face volatility.
Euro (EUR)
Germany’s latest ZEW economic sentiment index could act as a headwind for the euro (EUR) this week if it reports that morale in the Eurozone’s largest economy remains negative.
US dollar (USD)
The announcement of a US-Iran peace deal is likely to limit demand for the safe-haven US dollar (USD) this week, although hawkish guidance from the Federal Reserve following its latest interest rate decision could place a floor under the ‘greenback’ later in the session.
Australian dollar (AUD)
While positive risk flows will no doubt offer support for the Australian dollar (AUD) this week, cautious guidance from the Reserve Bank of Australia (RBA) following its latest policy meeting could limit the currency’s upside potential.
South African rand (ZAR)
The South African rand (ZAR) is poised to strike new multi-month highs this week, buoyed by the prospect of peace in the Middle East as well as a sharp fall in oil prices.
Canadian dollar (CAD)
The Canadian dollar (CAD) likely faces an uphill battle this week as retreating oil prices make the commodity-linked currency less attractive to investors.
New Zealand dollar (NZD)
The New Zealand dollar (NZD) may enjoy strong support this week as data is expected to show that domestic GDP accelerated sharply in the first quarter.
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