US Dollar Jumps amid Surging Inflation, GBP Soars on Political and Economic Optimism

Find out how the major currencies have been performing and what movement we could see in the days ahead with our weekly exchange rate update.   

EUR – Euro Undermined by USD Strength

The Euro was mostly rangebound through the first half of this week, with some confusion over the European Central Bank’s (ECB) future policy plans offsetting a sharp jump in German economic sentiment. The single currency then faced an aggressive selloff in the latter half of the week as its negative correlation with the US Dollar left EUR weakened as USD exchange rates surged. 

The Eurozone’s latest PMIs will be in the spotlight for EUR investors next week, with the Euro potentially finding support if economic activity in the bloc continued to accelerate in May.

Top EUR data releases:

May 18 EUR GDP (Q1)

May 21 EUR Manufacturing PMI (May)

May 21 EUR Services PMI (May)

 

USD – US Dollar Turbocharged by Soaring Inflation

After spending the first half of the week on the defensive in the wake of last week’s dire payroll reading, the US Dollar rebounded sharply after the publication of the US consumer price index. This revealed that US inflation skyrocketed to a dizzying 4.2% in April, prompting USD investors to revise their expectations for the next Federal Reserve rate hike.

Turning to next week’s session, USD investors will be looking for any comments from Fed policymakers that suggest the bank may need to rethink its belief that the rise in inflation will be ‘transitory’. 

Top USD data releases:

May 19 USD FOMC Minutes

May 20 USD Initial Jobless Claims (15/May)

May 21 USD Services PMI (May)

 

GBP – Pound Surges as SNP Fails to Secure a Majority

The Pound soared early this week amid relief that the Scottish National Party (SNP) failed to secure an outright majority in last week’s elections, with the confirmation that more of the UK economy would reopen on 17 May also boosting Sterling. This upside in GBP exchange rates later began to fade, however, after Boris Johnson warned that the new Indian variant of the coronavirus is of ‘concern’.

Looking ahead, it’s set to be a busy session for GBP investors next week, with a slew of high-impact UK data releases. The UK’s CPI figures on Wednesday could have the most impact, where a sharp acceleration of inflation could bolster Sterling sentiment.

Top GBP data releases:

May 18 GBP Unemployment Rate (Mar)

May 19 GBP Inflation Rate (Apr)

May 21 GBP Services PMI (May)

 

AUD – Australian Dollar Stumbles as Risk Appetite Weakens

The Australian Dollar opened this week’s session on strong footing, with a buoyant market mood and a sharper-than-expected rise in domestic business morale bolstering AUD exchange rates. However the ‘Aussie’ then ran into headwinds as the week went on, with investors shunning the risk-sensitive currency as a risk-off mood prevailed.

The primary focus for AUD investors next week will be Australia’s latest jobs report, with the ‘Aussie’ potentially receiving a boost if the unemployment rate continued to fall last month.

Top AUD data releases:

May 18 AUD RBA Minutes

May 19 AUD Consumer Confidence Index (May)

May 20 AUD Unemployment Rate (Apr)

 

ZAR – Rand Undermined by Souring Market Sentiment

The South African Rand started strongly this week as ZAR investors expressed relief after Moody’s opted not to downgrade South Africa’s credit rating. However, the Rand gave up the majority of these gains in the latter half of the week as tensions in the Middle East, coronavirus concerns, and global inflation fears soured market sentiment.

Coming up next week, the focus for ZAR investors will be the South African Reserve Bank’s latest rate decision. No policy changes are expected this month, but any further hints at possible rate hikes this year could lift the Rand.

Top ZAR data releases:

May 19 ZAR Inflation Rate (Apr)

May 19 ZAR Retail Sales (Mar)

May 20 ZAR SARB Rate Decision

 

CAD – Canadian Dollar Bolstered by Rising Oil Prices

The Canadian Dollar firmed this week, with the commodity-linked currency catching bids as oil prices rallied in the wake of a cyberattack against a key US fuel pipeline.

Turning to next week’s session, the main focus for CAD investors will be the latest Canadian CPI release. Will a surge in domestic inflation bolster Bank of Canada (BoC) rate expectations and boost the ‘Loonie’?

Top CAD data releases:

May 19 CAD Inflation Rate (Apr)

May 20 CAD ADP Employment Change (Apr)

 

ILS – Shekel Nosedives amid Rocket Attacks

The Israeli Shekel fell sharply this week as escalating violence in the Gaza strip and rocket attacks against Tel Aviv stoked fears of a full-scale war between Israelis and Palestinians. 

Looking ahead, should the violence in the region continue, it’s likely next week’s GDP release could be overshadowed.

Top ILS data releases:

May 18 ILS GDP (Q1)