US Dollar

Euro Rallies as ECB Announces New Inflation Target, US Dollar Underpinned by Souring Market Mood

After struggling through much of the session, the Euro was granted a reprieve on Thursday, as the European Central Bank’s (ECB) altered its inflation mandate, raising the ceiling but remaining more hawkish than the Federal Reserve. 

At the same time, rising coronavirus concerns and a selloff in equity markets prompted investors to favour the safe-haven US Dollar. 

Pound Rocked by Conflicting BoE Comments 

GBP/EUR – Unchanged on the week’s opening levels 

GBP/USD – Down one cent on the week’s opening levels 

Boris Johnson’s announcement that almost all coronavirus restrictions in England would be lifted on 19 July, helped to propel the Pound higher at the start of this week.  

However, these gains faded towards the end of the session as surging coronavirus cases and rising hospitalisations began to cast doubts over the government’s reopening plans, while an underwhelming GDP release raised concerns over the trajectory of the UK’s economic recovery. 

Looking ahead, some high-impact UK data releases could offer direction to the Pound next week, with positive inflation and unemployment figures potentially bolstering Sterling sentiment. 

Euro Rebounds from Three-Month Low as ECB Alters Inflation Mandate 

EUR/GBP – Unchanged on the week’s opening levels 

EUR/USD – Unchanged on the week’s opening levels 

The Euro spent a large portion of this week’s session on the defensive, with the single currency even striking a new three-month low against the US Dollar as it was undermined by some lacklustre economic releases from Germany.  

However, the Euro was able to mount a convincing recovery in the latter half of the week, after the ECB altered its inflation target, in a move which has helped to bolster the bank’s credibility. 

Turning to next week’s session, will June’s finalised CPI figures, put some pressure on EUR exchange rates after confirming Eurozone inflation slowed to 1.9%? 

US Dollar Firms amid Cautious Market Mood 

USD/GBP – Unchanged on the week’s opening levels  

USD/EUR – Unchanged on the week’s opening levels  

The US Dollar enjoyed strong support over the past week, with investors favouring the safe-haven currency amid a prevailing risk-off mood.  

The ‘Greenback’ faced a small setback in the middle of the week, as the latest Federal Open Market Committee (FOMC) minutes proved more dovish than expected, but this ultimately did little to discourage USD bulls. 

In the spotlight next week will be the US consumer price index, with economists predicting another surge in US inflation last month. Will this put more pressure on the Federal Reserve to tighten its monetary policy and boost the US Dollar as a result? 

Australian Dollar Slumps as Risk Appetite Sours 

AUD/GBP – Down one pence on the week’s opening levels 

AUD/USD – Down one cent on the week’s opening levels 

The Australian Dollar initially strengthened through the first half of this week, rise in response to the Reserve Bank of Australia’s (RBA) announcement it would begin tapering bond buying programme from September.  

But, the ‘Aussie’ was unable to sustain these gains for long, as souring market sentiment sapped demand for the risk-sensitive currency, sending it to a new 2021 low against the US Dollar. 

Turning to next week’s session, the primary focus for AUD investors will be on Australia’s latest jobs report, with the ‘Aussie’ likely to face some headwinds if unemployment started to rise again last month as lockdown measures were reintroduced. 

Key Data  

Jul 13 AUD Business Confidence (Jun)  

Jul 13 EUR German Inflation Rate (Jun) 

Jul 13 USD Inflation Rate (Jun)  

Jul 14 AUD Consumer Confidence (Jul)  

Jul 14 GBP Inflation Rate (Jun)  

Jul 14 EUR Industrial Production (May) 

Jul 15 AUD Unemployment Rate (Jun)  

Jul 15 GBP Unemployment Rate (May) 

Jul 15 GBP Wage Growth (May) 

Jul 15 USD Initial Jobless Claims (10/Jul)  

Jul 16 EUR Inflation Rate (Jul) 

Jul 16 USD Retail Sales (Jun)