The US Dollar got off to a poor start this week, before a stronger-than-expected US inflation print helped to revived Federal Reserve interest rate expectations.
In contrast, the Pound reversed its initial gains as GBP investors were left disappointed by the UK’s latest GDP figures.
Pound Dented by Disappointing GDP
GBP/EUR – Unchanged on the week’s opening levels
GBP/USD – Down one cent on the week’s opening levels
The Pound trended broadly higher through the first half of this week as the appeal of the increasingly risk-sensitive currency was buoyed amid an improving market mood.
However GBP exchange rates then stumbled later in the week as a rebound in the UK’s latest GDP figures failed to offset recession fears.
There will be a number of high-impact UK data releases to keep GBP investors busy next week. The most influential of which may be the UK’s consumer price index. Will another deceleration in inflation drag Sterling lower?
Euro Rebounds on ECB Minutes
EUR/GBP – Unchanged on the week’s opening levels
EUR/USD – Unchanged on the week’s opening levels
The Euro got off to a mixed start this week. While the single currency was pressured by some underwhelming German factory data, it benefitted from its negative correlation with the US Dollar.
EUR exchange rates then firmed later in the week as the minutes from the European Central Bank’s (ECB) September policy meeting proved more hawkish than expected.
Next week, Germany’s latest ZEW economic sentiment index could see the Euro firm if morale in the Eurozone’s largest economy continued to improve this month.
US Dollar Rocked by Mixed Fed Expectations
USD/GBP – Up one pence on the week’s opening levels
USD/EUR – Up one cent on the week’s opening levels
The US Dollar was met by heavy selling pressure at the start of this week, as dovish remarks from multiple Fed policy makers caused expectations for another rate hike bets to weaken.
However, the ‘Greenback’ then mounted a comeback later in the week as a stronger-than-expected US inflation print helped keep hopes for another Fed rate hike alive.
Looking ahead, next week US retail sales figures could act as a headwind for the US Dollar if a slowdown in sales growth is seen as further undermining Fed rate hike expectations.
Australian Dollar Dented by Downbeat Mood
AUD/GBP – Down one pence on the week’s opening levels
AUD/USD – Down on cent on the week’s opening levels
The Australian Dollar opened this week on the front foot, trading with modest gains as upbeat domestic data and a pullback in the US Dollar bolstered the appeal of the currency.
However, the ‘Aussie’ then plummeted in the second half of the week as market risk appetite soured.
The publication of Australia’s latest jobs report will be the primary focus for AUD investors next week. Expect the ‘Aussie’ to come under pressure if job growth disappoints again in September.
Key Data
Oct 17 AUD RBA Minutes
Oct 17 GBP Average Earnings (Aug)
Oct 17 EUR German ZEW Economic Sentiment Index (Oct)
Oct 17 USD Retail Sales (Sep)
Oct 18 GBP Inflation Rate (Sep)
Oct 18 EUR Inflation Rate (Sep)
Oct 19 AUD Unemployment Rate (Sep)
Oct 19 USD Initial Jobless Claims (14/Oct)
Oct 20 EUR German PPI (Sep)
Oct 20 GBP Retail Sales (Sep)