US Dollar

Weekly Update: US Dollar Rallies as US Treasury Yields Surge, Euro Stumbles on Disappointing Data

The US Dollar was the strongest performer this week, with the currency roaring higher on the back of surging US bond yields.

At the same time, the Euro found itself on the defensive through much of this week’s session in response to some disappointing Eurozone data releases.

Pound Steady Following Budget Response

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

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

The Pound made some modest gains this week as GBP investors broadly welcomed Chancellor Rishi Sunak’s 2021 Budget, in spite of some concerns over future tax hikes.

However, tempering Sterling gains in the latter half of the week were concerns that recent UK coronavirus statistics are showing signs that the rate of decline is slowing, something which would set back the government’s lockdown easing plans.

Turning to next week, the publication of the UK’s latest monthly GDP reading will be watched closely by GBP investors as it will reveal just how big a hit the UK economy took from the latest lockdown.

Euro Stumbles on Lacklustre Data

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

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

The Euro’s negative correlation with the US Dollar saw the single currency placed on the defensive through much of this week as the session was themed by broad USD strength.

Also exerting pressure on the Euro were some lacklustre data releases, including a stalling of Eurozone inflation and a sharp drop in German retail sales growth.

In the spotlight next week, we have the European Central Bank’s (ECB) latest rate decision. No policy changes are expected this month but a more upbeat outlook from the bank could help to boost the appeal of the Euro.

US Dollar Soars as US Treasury Yields Skyrocket

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

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

The US Dollar rocketed higher this week amidst the continued rise in US Treasury yields, which were boosted by US stimulus optimism and the hopes for a strong rebound in domestic growth this year.

This upswing in both bond yields and the US Dollar was turbocharged in the latter half of the week after Federal Reserve Chair Jerome Powell dismissed concerns over the recent surge in yields.

Looking ahead, the focus for USD investors next week will likely be on the latest US consumer price index, in which a rise in inflation in February could bolster the US Dollar.

Australian Dollar Weakens in Spite of Positive Data 

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

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

The Australian Dollar was on the back foot through this week’s trading session, mostly in response to a tepid market mood and broad USD strength.

This overshadowed some positive domestic data, which included a larger-than-expected expansion of GDP in the last quarter of 2020 as well as a record trade surplus in January.

The publication of Australia’s latest business and consumer confidence figures could offer some support to AUD exchange rates next week, on the assumption that sentiment will have continued to improve as Australia continues to ease its coronavirus restrictions.

Key Data

Mar 08 EUR German Industrial Production (Jan)

Mar 09 AUD Business Confidence (Feb)

Mar 09 EUR GDP (Q4)

Mar 09 AUD Consumer Confidence (Mar)

Mar 10 USD Inflation Rate (Feb)

Mar 11 EUR ECB Rate Decision

Mar 11 USD Initial Jobless Claims (6/Mar)

Mar 12 GBP GDP (Jan)

Mar 12 GBP Industrial Production (Jan)

Mar 12 GBP Trade Balance (Jan)

Mar 12 USD Consumer Sentiment (Mar)