US Dollar Stumbles on Powell’s Tapering Speech, Pound Fluctuates amid UK Economic Concerns

The US Dollar came under some notable pressure this week, after the Federal Reserve’s Jerome Powell confirmed tapering would start by the end of the year but still offered no firm timetable. 

At the same time, the Pound was infused with volatility this week as a result of fears over the resilience of the UK economy amidst underlying problems. 

Pound Rocked by Economic Concerns 

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

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

The Pound got off to a strong start this week, with the currency clawing back a good portion of the previous session’s losses amidst upbeat market sentiment.  

However, Sterling was then left mostly rangebound through the remainder of the week as concerns over supply chain issues and labour shortages cast uncertainty over the UK’s economic outlook. 

Looking ahead to next week’s session, with notable UK data releases thin on the ground and domestic coronavirus cases on the rise, the Pound could be vulnerable to some losses. 

Euro Strengthens in spite of Setbacks 

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

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

The Euro got off to a mixed start this week, as while a pullback in the US Dollar buoyed the single currency, its gains were capped on the back of some weaker-than-expected PMI releases and German growth warnings from the Bundesbank.  

EUR exchange rates then traded sideways through the second part of the week as the minutes from the European Central Bank’s (ECB) latest policy meeting appeared to reaffirm the bank’s dovish bias. 

In the spotlight for EUR investors next week will be the Eurozone’s latest inflation reading. But with the ECB reluctant to tighten its monetary policy an expected acceleration in inflation actually translate into any gains for the Euro? 

US Dollar Weakens in spite of Fed’s Tapering Announce 

USD/GBP – Down one pence on the week’s opening levels  

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

The US Dollar stumbled out of the gate this week, as a scaling back of Federal Reserve tapering expectations bolstered market risk appetite at the expense of the safe-haven ‘Greenback’. 

The US Dollar then extended these losses through the second half of the week, following a speech from Fed Chair Jerome Powell in which he outlined plans to start tapering the bank’s bond purchases this year but offered no hawkish surprises. 

The publication of the latest US payroll figures will no doubt be the centre of attention for USD investors next week. Will another robust payroll reading help to send the US Dollar sharply higher? 

Australian Dollar Plummets in Risk-Off Trade 

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

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

The Australian Dollar was able to mount a convincing recovery this week, as a more upbeat market mood helped to revive demand for the risk-sensitive currency.  

However, these gains were capped towards the end of the session, amidst concerns over a worrying rise in domestic coronavirus cases. 

The publication of Australia’s latest GDP release will no doubt be the primary focus for AUD investors next week. Expect to see the ‘Aussie’ face some headwinds if growth slowed more than expected in the second quarter after a number of states implemented new lockdown measures. 

Key Data  

Aug 30 EUR German Inflation Rate (Aug) 

Aug 31 EUR Inflation Rate (Aug) 

Sep 1 AUD GDP (Q2) 

Sep 1 GBP Manufacturing PMI (Aug)  

Sep 1 USD ISM Manufacturing PMI (Aug)  

Sep 2 AUD Trade Balance (Jul) 

Sep 3 GBP Services PMI (Aug) 

Sep 3 EUR Retail Sales (Jul)  

Sep 3 USD Non-Farm Payrolls (Aug) 

Sep 3 USD ISM Non-Manufacturing PMI (Aug)