Pound

Euro Softens on Dovish ECB Rate Decision, Pound Bolstered by Sharp Rise in UK Inflation

The Euro fell back this week, with the bulk of the currencies losses coming in the wake of the European Central Bank’s (ECB) latest interest rate decision.

At the same time, the Pound firmed this week as a sharp upswing in UK inflation helped to bolster Bank of England (BoE) rate hike bets.

Pound Bolstered by BoE Rate Hike Bets

GBP/EUR – Up one cent on the week’s opening levels

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

A disappointing GDP release and mixed jobs report saw the Pound get off to a shaky start this week.

However, Sterling sentiment was revived in the latter half of the session on the back of the UK’s latest CPI figures as another surge in inflation bolstered bets the Bank of England (BoE) will deliver another interest rate hike at its next policy meeting in May.

The Pound could strengthen next week if April’s UK service PMI prints anywhere close to March’s nine-month high.

Euro Slips Following ECB Rate Decision

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

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

The Euro wavered in the first half of this week, as the relief of Emmanuel Macron’s victory in the first round of the French election was offset by a slump in Germany’s ZEW economic sentiment index.

The Euro then slumped through the second half of the week in the wake of a dovish European Central Bank (ECB) interest rate decision.

The latest Eurozone PMIs will be in the spotlight next week. Their release could place pressure on the Euro if they indicate the war in Ukraine is starting to have a noticeable impact on the bloc’s private sector.

US Dollar Mixed as US Treasury Yields Retreat

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

USD/EUR – Up one cent on the week’s opening levels

The US Dollar traded without any strong direction through the first half of this week, following a weaker-than-expected rise in core US inflation.

The ‘Greenback’ then fell back in the second half of the session as a result in a pullback in US Treasury yields, which appeared to offset Federal Reserve rate hike expectations.

Next week will see the release of the latest US S&P PMIs. While not as influential as the ISM figures another uptick in manufacturing and service sector activity this month could reflect positively on the US Dollar.

Australian Dollar Fluctuates on Mixed Data

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

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

The Australian Dollar traded erratically this week; this saw the ‘Aussie’ initially stumble on the back of a stronger-than-expected inflation reading from China.

An unexpected improvement in domestic business confidence then prompted a spike in the ‘Aussie’ before the currency stumbled again in the latter half of the week on the back of a lacklustre unemployment release.

The release of the minutes from the Reserve Bank of Australia’s (RBA) April policy meeting is likely to be the highlight for AUD investors next week and could push the ‘Aussie’ higher if they reinforce RBA rate hike bets.

Key Data

Apr 19 AUD RBA Minutes

Apr 21 AUD Retail Sales (Mar)

Apr 21 EUR Inflation Rate (Mar)

Apr 21 USD Initial Jobless Claims (16/Apr)

Apr 22 AUD Services PMI (Apr)

Apr 22 GBP Retail Sales (Mar)

Apr 22 EUR Manufacturing PMI (Apr)

Apr 22 EUR Services PMI (Apr)

Apr 22 GBP Manufacturing PMI (Apr)

Apr 22 GBP Services PMI (Apr)

Apr 22 USD Manufacturing PMI (Apr)

Apr 22 USD Services PMI (Apr)