US Dollar

US Dollar Slumps on US Economic Worries, Pound Supported as UK Data Beats Forecasts

The US Dollar tumbled this week amid signs that the American economy may not be as strong as markets thought. 

At the same time, the Pound found some success as UK data exceeded expectations, although long-term worries over the UK economy capped gains. 

Pound Buoyed by Unexpectedly Strong Data 

After an initial hiccup on Monday, the Pound climbed higher early in the week, boosted by a far stronger-than-expected UK employment report. 

Cost-of-living concerns pared the Pound’s gains after UK inflation jumped from 7% to 9% – a 40-year high. However, an increase in manufacturing output and a surprise rise in retail sales supported Sterling towards the end of the week.  

The UK PMIs are in focus next week. Could they potentially surprise to the upside, like this week’s data? 

Euro Bolstered by Hawkish ECB Expectations 

The Euro faced headwinds at the start of the week after the Eurozone unexpectedly posted a trade deficit in March. In addition, the European Commission downgraded this year’s growth forecasts from 4% to 2.7%. 

However, better-than-forecast GDP growth in the bloc gave EUR a boost, helping it weather a rather tumultuous week for European markets. A hawkish tone from the European Central Bank’s (ECB) April meeting accounts also provided the Euro with some support. 

Aside from the flash PMIs next week, some poor German data could dampen the single currency’s appeal. Forecasters expect both business and consumer morale to remain low in Europe’s largest economy. 

US Dollar Tumbles as Economic Fears Grow 

The US Dollar started the week on the defensive as a risk-on market mood sapped demand for the safe-haven currency. 

Further losses followed, despite a souring market mood. US retail giants Target and Walmart posted disappointing earnings, which traders took as a sign of weakness in the US economy. US stocks, Treasury yields and the ‘Greenback’ all took a tumble. 

Next week, investors will be looking at the US PMIs to gauge the health of the US economy ahead of the Federal Open Market Committee (FOMC) minutes. Strong PMIs and a hawkish tone from the Fed could help USD recover. 

Australian Dollar Fluctuates ahead of Federal Election 

The Australian Dollar experienced some volatility this week as mixed economic data from China and Australia caused some turbulence for the ‘Aussie’. 

A shifting risk appetite also caused the risk-sensitive currency to waver, as did political uncertainty as Australia heads to the polls this weekend to elect a new government. 

The results of the federal election could have a strong impact on AUD exchange rates. If the country is left with a hung parliament, the ‘Aussie’ may come under pressure. Looking further ahead, strong Australian retail sales at the end of the week could boost AUD.