- Last week, the US Dollar weakened against 10 of the top 19 currencies we monitor. The largest moves to the downside were against the Mexican Peso (MXN) (-2.98%) and the Brazilian Real (BRL) (-2.37%), whilst the most notable gains were against the Polish Zloty (PLN) (0.94%) and the GBP (0.61%).
- Inflation data released last week in the US was lower than anticipated. The market has been closely watching these figures and is now looking ahead to the forthcoming US interest rate decision scheduled for this week. This anticipation has led to a considerable surge in the strength of the US Dollar. However, it appears that the market is cautious about overcommitting to this trend, as it awaits further guidance from the upcoming monetary policy decision.
- This week, the spotlight shines on the upcoming US Federal Reserve interest rate decision on Wednesday, which is set to be the major event. Market consensus anticipates that the Fed will maintain interest rates at the current level of 5.5%. However, it's important to note that the actual event itself will hold the key to any currency market movements. Recent data has hinted at a slight possibility that the Fed might consider one more rate hike, although we believe that the current valuation of the US Dollar already incorporates this expectation. The prevailing consensus leans towards the Fed refraining from increasing rates, potentially leading to a USD selloff following the announcement. Following the rate decision, the Federal Open Market Committee (FOMC) will hold a press conference where they will provide insights into the possible path of future Fed actions. This press conference is poised to be the primary focal point in global markets this week, so it's advisable to brace for increased volatility in the wake of these developments.
- Last week, the Euro weakened against 13 of the top 19 currencies we monitor. The most significant losses were against the MXN (-3.32%) and the BRL (-2.60%), whilst the largest moves to the upside were against the PLN (0.58%) and the Norwegian Krone (NOK) (0.56%).
- The European Union (EU) raised its benchmark interest rate once again, reaching 4.5%, signalling a tightening of monetary policy. However, there's speculation that this might mark the end of the rate-hiking cycle for the EU, as it attempts to balance economic growth and inflation. It's worth noting that many other global markets appear to have already reached their peak interest rates. Nevertheless, the market remains cautious, awaiting data from the US to determine if a similar trend is emerging on a global scale. The recent decision by the European Central Bank (ECB) highlights the careful approach being taken by central banks worldwide in response to economic conditions.
- Following the recent rate hike, our attention turns to the Euro area inflation data on Tuesday, with expectations that it will maintain its stability at 5.3% (YoY). Any deviation from this expectation could potentially trigger significant market volatility. Furthermore, we are closely monitoring the market's response to the US interest rate decision later in the week. This decision comes on the heels of the EU rate hike and has the potential to introduce additional volatility into the market.
- Last week, the British Pound (GBP) weakened against 17 of the top 19 currencies we monitor. The greatest moves to the downside were against the MXN (-3.56%) and the BRL (-2.97%), whilst the moves to the upside were against the PLN (0.32%) and the NOK (0.30%).
- The UK GDP for July came in lower than expected, showing a decline of 0.5% (MoM) compared to the previous month. This data release has prompted caution in the market, with investors awaiting the upcoming US interest rate decision before making any definitive currency bets. The UK's economic performance remains uncertain, and the focus now shifts to global monetary policy developments to guide currency trading decisions.
- The week's data releases commence with the release of inflation data on Wednesday, and we anticipate an increase in both the year-on-year and month-on-month figures. This sets the stage for the Bank of England (BOE) interest rate decision scheduled for Thursday, where the prevailing expectation is another rate hike as part of an effort to tackle the mounting inflation in the country. Finally, as we approach Friday, our attention shifts to the UK retail sales data. It is anticipated that this data will exhibit a modest improvement compared to the previous month, further reinforcing the argument for yet another rate hike in the UK.
- Last week, the South African Rand strengthened against 14 of the top 19 currencies we monitor. The most impactful gains were against the PLN (1.77%) and the NOK (1.59%), whilst the greatest losses were against the MXN (-2.17%) and the BRL (-1.40%).
- The recent strengthening of the South African Rand (ZAR) appears to be driven by global shifts in risk sentiment rather than domestic events. Speculation surrounding the upcoming South African Reserve Bank (SARB) interest rate decision, which may include another rate hike to bolster the ZAR, has contributed to this trend. Furthermore, the belief that the US will not pursue further rate hikes has also played a role in the ZAR's slight uptick. While recent local economic data, such as manufacturing and mining production figures, have shown mixed results, the ZAR's strength seems to be more connected to these broader global factors and expectations regarding interest rates.
- This week, our focus will encompass a blend of global and local developments that hold sway over the financial landscape. On the domestic front, the South African Rand will be influenced by the release of inflation data slated for Wednesday. This data is poised to reveal an increase in both the month-on-month and year-on-year inflation figures. On Thursday, our attention shifts to the interest rate decision, with current market expectations leaning toward SARB maintaining rates at the 8.25% mark. Such a decision could potentially trigger a depreciation of the currency, given the backdrop of ongoing rate hikes by larger global economies. Concurrently, the ZAR's trajectory will be intricately linked to the global central bank policy updates. As major central banks across the globe make their rate decisions, we anticipate heightened volatility in the currency markets. These central bank rate decisions will serve as the catalyst for significant fluctuations in major currencies throughout the week.
- Last week, the Australian Dollar strengthened against 17 of the top 19 currencies we monitor. The greatest gains were against the PLN (1.80%) and the NOK (1.77%), whilst the moves to the downside were against the MXN (-2.15%) and the BRL (-1.37%).
- The Australian Dollar demonstrated a notable strengthening last week, marking a positive turn of events after a period of poor performance. This improved outlook for the Aussie currency has been eagerly awaited, as it has languished in a weakened state for quite some time. Key economic indicators, such as the Westpac consumer confidence index and NAB business confidence, showed promising results, indicating a potential upward trajectory for the Australian economy. Additionally, employment data for August exhibited substantial gains in part-time and full-time employment, alongside a steady unemployment rate. These developments suggest a more robust economic landscape and contribute to the AUD's recent resurgence.
- Our attention this week is drawn to the release of the Reserve Bank of Australia’s meeting minutes. This eagerly awaited document should offer valuable insights into the central bank's strategies for addressing the unexpectedly high inflation levels in the country. Furthermore, as we noted earlier, the central bank decisions unfolding worldwide will play a pivotal role in shaping market dynamics. These collective actions by central banks across the globe are expected to contribute to heightened currency market volatility in the days ahead.
