US Dollar

Weekly Update: US Dollar Faces Setback on Drop in Core Inflation, Euro Dented as ECB to Accelerate Bond Purchases

The US Dollar’s dominance took a knock this week as a surprise drop in core US inflation weakened US Treasury yields.

At the same time, the Euro gave ground after the European Central Bank (ECB) signalled its readiness to accelerate the pace of its bond purchases.

Pound Firms on Continued Vaccine Optimism

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

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

The Pound trended higher again this week, with the currency continuing to garner support from the UK’s success with its vaccination rollout, with over a third of the adult population having now received at least one jab.

While these gains were tempered amidst concerns that the government’s reopening roadmap could be subject to change, Sterling was able to close the week on a high after the UK’s latest GDP figures reported a smaller-than-expected contraction of growth in January.

The Bank of England’s (BoE) latest rate decision will no doubt be the main catalyst of movement for the Pound next week. Will an upbeat outlook from the bank provide a boost for Sterling sentiment?

Euro Slips as ECB to Increase Bond Purchases

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

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

The Euro was muted through the first half of this week’s session, with the single currency struggling to attract support in the face of USD strength and some underwhelming EUR data releases.

While the Euro attempted to rally in the mid-week, this proved short-lived as the ECB announced it is ready to ‘significantly’ accelerate the pace of its bond-buying programme.

In the spotlight for EUR investors next week will be the latest ZEW surveys from Germany, which may help to boost the Euro if economic sentiment in the Eurozone’s largest economy continued to improve in March.

US Dollar Faces Hurdles Following Dip in Core Inflation

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

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

The US Dollar got off to a strong start this week as the ‘Greenback’ continued to rise in step with US Treasury yields.

However, the US Dollar began to shed these gains following the publication of the latest US consumer price index, which revealed a surprise drop in underlying inflation last month and prompted a sharp drop in yields, although USD exchange rates began to strengthen again by the end of the week as yields rebounded once more.

Turning to next week, the primary focus for USD investors will be the latest rate decision by the Federal Reserve. No policy changes are expected from the Fed this month, but USD investors will be watching for any dovish comments by Fed Chair Jerome Powell regarding the bank’s future monetary policy.

Australian Dollar Fluctuates amid Mixed Risk Appetite

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

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

The Australian Dollar opened this week on the back foot, as the overwhelming strength of the US Dollar weakened market risk appetite and overshadowed some positive AUD data releases.

However, the ‘Aussie’ was able to rebound later in the session, as USD exchange rates weakened and AUD investors welcomed the government’s announcement of a AU$1.2bn package to support the domestic tourism industry.

In the spotlight for AUD investors next week will be Australia’s latest jobs report, where another drop in the unemployment rate last month could help propel the Australian Dollar higher.

Key Data

Mar 16 AUD RBA Minutes

Mar 16 EUR German ZEW Economic Sentiment Index (Mar)

Mar 16 USD Retail Sales (Feb)

Mar 17 EUR Inflation Rate (Feb)

Mar 17 USD FOMC Rate Decision

Mar 18 AUD Unemployment Rate (Feb)

Mar 18 GBP BoE Rate Decision

Mar 18 USD Initial Jobless Claims (13/Mar)

Mar 19 AUD Retail Sales (Feb)