US Dollar

US Dollar Catapulted to 20-Year High, Euro Rocked by Russian ‘Gas Blackmail’

The US dollar raced to a 20-year high this week, with investors piling into the currency amid risk-off flows and Federal Reserve rate hike expectations. 

At the same time, the Euro was shaken by the news Russia halted gas exports to Poland and Bulgaria, amid fears the export ban could be extended to other countries in Europe. 

Pound Slides as Investors Rein in BoE Rate Hike Bets 

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

GBP/USD – Down three cents on the week’s opening levels 

The Pound struggled to attract support this week with the currency being undermined as GBP investors revised their expectations for several more rate hikes from the Bank of England (BoE) this year.  

These losses were compounded by concerns over the UK’s economic trajectory, following reports that business insolvencies had climbed to a 10-year high.  

All eyes will unsurprisingly be on the BoE when it delivers its latest interest rate decision next week. With a modest hike priced in, could some dovish forward guidance from the bank extend the Pound’s recent losses? 

Euro Slumps as Russia Moves to Block Gas Exports to ‘Unfriendly Countries’  

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

EUR/USD – Down two cents week’s opening levels 

The Euro faced some significant pressure this week, with a notable selloff being triggered by concerns over European energy security, following Russia’s move to block gas exports to Poland and Bulgaria.  

Another record rise in Eurozone inflation then offered limited support to the Euro in the latter half of the week, but was largely offset by weaker-than-expected Eurozone GDP figures. 

Heightened tensions between the EU and Russia could see the Euro remain on the back foot next week, with any losses likely to be compounded by the potential for another contraction in German factory orders in March. 

US Dollar Soars to Multi-Year Highs 

USD/GBP – Up two pence on the week’s opening levels  

USD/EUR – Up two cents on the week’s opening levels  

The US Dollar roared higher this week, with risk-off flows and expectations for a series of aggressive interest rate hikes from the Federal Reserve driving considerable demand for the currency. 

The US dollar was also able to largely shrug off an abysmal US GDP print, which reported a shock contraction of growth in the first quarter. 

A well-telegraphed rate hike from the Fed is likely to underpin the US Dollar next week, with the ‘Greenback’ likely to find additional gains if the US central bank confirms this will be followed by additional hikes in the coming months. 

Australian Dollar Knocked by China Lockdown Fears 

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

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

The Australian Dollar tumbled at the start of this week, with investors steering clear of the risk-sensitive currency amidst fears more of China could be placed in lockdown as Covid cases surged.  

Stronger-than-expected inflation figures helped to mitigate some of these losses, but significant USD strength ultimately saw the ‘Aussie’ close the week lower.  

The Reserve Bank of Australia’s (RBA) latest interest rate decision will be in the spotlight for AUD investors next week. Will a modest rate hike from the bank help to propel AUD exchange rates higher? 

Key Data  

May 2 EUR Economic Sentiment (Apr)  

May 3 AUD RBA Interest Rate Decision 

May 3 GBP Manufacturing PMI (Apr)  

May 4 EUR Services PMI (Apr)  

May 4 USD ISM Non-Manufacturing PMI (Apr) 

May 4 USD Fed Interest Rate Decision  

May 5 AUD Trade Balance (Mar) 

May 5 EUR German Factory Orders (Mar)  

May 5 GBP Services PMI (Apr) 

May 5 GBP BoE Interest Rate Decision 

May 6 USD NonFarm Payrolls