The Euro received a shot in the arm this week amidst renewed hopes for a negotiated end to the war in Eastern Europe, following ‘constructive’ talks between Ukraine and Russia.
At the same time, the US Dollar fluctuated through last week’s session as the hopes for a diplomatic solution to the Ukraine crisis sapped safe-haven demand.
Pound Finds Fleeting Gains on Peace Hopes
GBP/EUR – Down two cents on the week’s opening levels
GBP/USD – Unchanged on the week’s opening levels
After initially stumbling as a result of some dovish comments from Bank of England (BoE) Governor Andrew Bailey, the Pound was spurred higher by the hopes for a negotiated end to the war in Ukraine.
While stronger-than-expected UK GDP figures offered some support to Sterling in the second half of the week, this was quickly overshadowed by renewed cost-of-living concerns.
A lull in high-impact data could leave the Pound to struggle next week, particularly if the focus remains on the UK’s cost-of-living crisis.
Euro Surges on Ukraine Peace Talk Optimism
EUR/GBP – Up one pence on the week’s opening levels
EUR/USD – Up one cent on the week’s opening levels
The Euro was catapulted higher first half of this week, following reports of progress in Ukraine-Russia peace talks, with EUR investors seizing on Moscow’s promise to scale back ‘military activity’ near Kyiv.
However, the Euro then stumbled again in the second half of the week as Vladimir Putin threatened to cut off European gas supplies, leading EUR investors to largely ignore a record jump in Eurozone Inflation.
Centre stage next week will be Germany’s latest industrial data. If factory orders and industrial production continued to rise in February, the Euro may be able to extend its rally, even if Ukraine optimism fades.
US Dollar Fluctuates in Mixed Trade
USD/GBP – Up one pence on the week’s opening levels
USD/EUR – Down one cent on the week’s opening levels
The US Dollar struggled through the first half of this week as risk-on flows sapped demand for the safe-haven currency.
The ‘Greenback’ was then able to recoup a good portion of these losses in the latter half of the session as the mood soured again, with this recovery being supported by a larger-than-expected drop in the US unemployment rate last month.
In terms of data, the main catalyst of movement in the US Dollar next week will likely be the ISM non-manufacturing PMI, where an expansion in the US service sector may help to shore up support for the ‘Greenback’.
Australian Dollar Gains Tempered by Weak Chinese Data
AUD/GBP – Up one pence on the week’s opening levels
AUD/USD – Unchanged on the week’s opening levels
The Australian Dollar initially strengthened this week, with the risk-sensitive being carried higher as an upbeat market mood prevailed.
The ‘Aussie’ faced a brief setback as a result of some lacklustre Chinese PMIs but quickly recaptured its previous levels at the end of the week amidst a sharp rise in commodity prices.
In the spotlight for AUD investors next week will be the publication of the Reserve Bank of Australia’s (RBA) latest Chart Pack. This summary of macroeconomic and financial market trends could buoy the ‘Aussie’ if the outlook for Australia’s economy is largely positive.
Apr 4 AUD Retail Sales (Feb)
Apr 4 EUR German Trade Balance (Feb)
Apr 4 USD Factory Orders (Feb)
Apr 5 AUD Services PMI (Mar)
Apr 5 GBP Services PMI (Mar)
Apr 5 USD Non-Manufacturing PMI (Mar)
Apr 6 AUD RBA Chart Pack
Apr 6 EUR German Factory Orders (Feb)
Apr 7 EUR German Industrial Production (Feb)
Apr 7 USD Initial Jobless Claims (2/Apr)