Euro Undermined by Dovish ECB Policy Statement, US Dollar Infused with Volatility amid Fluctuating Risk Appetite

The Euro softened this week, as the European Central Bank (ECB) reiterated its currency dovish stance on monetary policy. 

At the same time, the US Dollar traded in a wide range this week, in response to fluctuating market sentiment. 

Pound Rebounds from Brexit and Tax Hike Driven Losses 

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

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

The Pound got off to a poor start this week, with the currency being undermined by renewed Brexit tensions as well as concerns over the government’s plans to increase national insurance contributions.  

However, Sterling was then able to rebound in the latter half of the week, with the currency benefitting from an upbeat market mood and some weakness in the US Dollar and Euro. 

Looking ahead it’s set to be a busy session for GBP investors next week, with a number of high impact UK data releases to contend with, most notably August’s CPI figures. Will a rebound in inflation offer some support to the Pound? 

Euro Undermined by Dovish ECB 

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

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

The Euro initially opened this week on solid footing, being buoyed by some stronger-than-expected German industrial data.  

But the single currency was unable to sustain these gains for long, stumbling in the second half of the week after a dovish ECB made it clear that is still isn’t ready to start tapering, despite slowing the pace of its pandemic emergency purchase programme (PEPP). 

Looking ahead, the publication of the Eurozone’s latest industrial production figures could offer some support to the single currency next week, if they mirror Germany’s recent upbeat release. 

US Dollar Fluctuates amidst Mixed Market Sentiment 

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

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

The US Dollar found itself back in demand at the start of this week, as a prevailing risk-off mood and rising US Treasury yields saw investors favour the safe-haven currency.  

However, a sudden reversal in risk sentiment saw USD exchange rates subsequently plummet through the second half of the week. 

Turning to next week’s session, the primary focus for USD investors will be on the latest US consumer price index, which could trigger a weakening of USD exchange rates if domestic inflation is shown to have slowed last month. 

Australian Dollar Falters as RBA opts for ‘Dovish’ Taper 

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

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

The Australian Dollar was placed on the defensive this week as a more cautious market mood saw investors largely avoid the risk-sensitive ‘Aussie’.  

This downside in AUD exchange rates also came in response to the Reserve Bank of Australia’s (RBA) latest policy decision after it opted for what analysts called a ‘dovish’ taper. 

Centre stage for AUD investors next week will be the publication of Australia’s latest jobs report. This could send the ‘Aussie’ higher if domestic unemployment continued to drop last month. 

Key Data  

Sep 14 AUD Business Confidence (Aug) 

Sep 14 GBP Unemployment Rate (Jul) 

Sep 14 USD Inflation Rate (Aug)  

Sep 15 AUD Consumer Confidence (Sep)  

Sep 15 GBP Inflation Rate (Aug) 

Sep 16 AUD Unemployment Rate (Aug)  

Sep 16 EUR Industrial Production (Jul) 

Sep 16 USD Retail Sales (Aug)  

Sep 17 GBP Retail Sales (Aug)  

Sep 17 EUR Inflation Rate (Aug) 

Sep 17 USD Consumer Sentiment (Sep)