US Dollar

US Stimulus Headlines Stoke US Dollar Volatility, Pound Struggles amid Heightened Brexit Uncertainty

Mixed expectations for the next US stimulus package was a significant source of volatility this week, prompting some swings in not just the US Dollar but many of its peers as well.

Meanwhile, the Pound experienced volatility this week amid conflicting reports over the state of post-Brexit trade talks between the UK and EU.

Pound Fluctuates on Brexit Uncertainty

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

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

The Pound has traded in a wide range over the past week in response to heightened Brexit uncertainty, as while reports suggest that positive progress is being made towards a deal, GBP investors fear some sticking points in talks are still hindering the chances of an agreement.

Also influencing Sterling was the UK’s latest GDP release, which confirmed that the UK returned to growth in the three months to August but that month-on-month growth had notably slowed.

Looking ahead, this volatility in GBP exchange rates is only likely to become more pronounced next week ahead of a self-imposed deadline, although there remains plenty of upside potential in Sterling if a deal is reached.

Euro Undermined by Europe’s Coronavirus Resurgence

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

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

The Euro enjoyed modest gains this week, with weakness in the US Dollar bolstering the single currency due to the negative correlation between the pairing.

This allowed the Euro to advance in spite of Europe’s surging coronavirus cases and comments from European Central Bank (ECB) President Christine Lagarde in which she warned that low inflation poses fundamental challenges to the ECB.

In focus for EUR investors next week will be the latest ZEW surveys from Germany, with the Euro potentially finding support if the uptrend in economic sentiment extended into October.

US Dollar Rocked by Stimulus Headlines

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

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

The US Dollar has fallen back this week, with demand for the safe-haven currency dented as markets cheered Donald Trump’s discharge from hospital and hopes for a new stimulus package.

However, Trump briefly upset the risk-on tone in mid-week trade after calling for a halt to stimulus talks with the Democrats, before reviving hopes by tweeting he would be open to some targeted spending measures.

Turning to next week’s session, we could see the US Dollar infused with fresh volatility as political uncertainty grows as we edge closer to the 2020 Presidential election.

Australian Dollar Struggles amid Shifting Market Sentiment

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

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

Trade in the Australian Dollar has been mixed over the past week as shifting market sentiment rocked the risk-sensitive ‘Aussie’.

This was largely tied to uncertainty surrounding US stimulus talks, although a smaller-than-expected fiscal package from the Australian government didn’t help matters.

In the spotlight for AUD investors next week will be Australia’s latest jobs report. Will another fall in unemployment help to bolster the Australian Dollar?

Key Data

Oct 13 GBP Unemployment Rate (Aug)

Oct 13 GBP Wage Growth (Aug)

Oct 13 EUR ZEW Economic Sentiment (Oct)

Oct 13 USD Inflation Rate (Sep)

Oct 14 AUD Consumer Confidence (Oct)

Oct 14 EUR Industrial Production (Aug)

Oct 15 AUD Unemployment Rate (Sep)

Oct 15 USD Retail Sales (Sep)

Oct 15 GBP Brexit Deal Deadline

Oct 16 EUR Inflation Rate (Sep)