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Weekly Update: Euro Knocked by Record Slump in GDP, US Dollar Hit by Sharp Sell-Off

The Euro faced some pressure this week, with a record slump in Eurozone GDP taking some of the recent shine off the single currency.

However, the US Dollar struggled even more this week, with trade characterised by a persistent USD sell-off, not helped by a plunge in US growth in the second quarter.

 

Pound Sterling Benefits from Weakness of its Peers

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

GBP/USD – Up three cents on the week’s opening levels

The Pound rocketed higher this week, even passing a key $1.30 barrier of resistance against the US Dollar.

However, this was more to do with the weakness of its peers rather than a story of GBP strength, with Sterling also benefiting from some end-of-month flows and the absence of any gloomy Brexit headlines.

Looking ahead, the main catalyst of movement in the Pound next week will be the Bank of England’s (BoE) latest policy meeting, with GBP investors looking for any hint towards negative interest rates.

 

Euro Undermined by Dire GDP Reading

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

EUR/USD – Up two cents on the week’s opening levels

The Euro broadly maintained its upward trajectory over the past week but found its march higher undermined by gloomy GDP figures.

These revealed the Eurozone suffered a record slump of growth in the second quarter, with EUR investors particularly concerned by Germany’s larger-than-expected contraction.

Turning to next week, the focus for EUR investors looks to be Germany’s latest industrial figures, with another robust expansion of factory orders and industrial production in June likely to lift the Euro.

 

US Dollar Collapses to New Multi-Month Lows

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

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

The US Dollar suffered heavy selling pressure over the past week and investors are taking an increasingly bearish stance against the US currency.

The latest drop comes as a result of a record plunge in US GDP in the second quarter. On top of this, the Federal Reserve’s dovish outlook and tweets from Donald Trump suggesting a delay to the US election later in the year added to USD exchange rate woes.

Coming up this week, the publication of the ISM PMI releases for July will drive USD exchange rates at the start of the session, while the latest US payroll figures will also be a key focus for investors.

 

Australian Dollar Strengthened by Strong Risk Appetite

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

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

Trade in the Australian Dollar was mixed over the past week against a backdrop of broad USD weakness and fluctuating risk appetite.

The publication of Australia’s consumer price index particularly setback the ‘Aussie’ as it revealed the country fell into a state of deflation in the second quarter.

Looking ahead, the Reserve Bank of Australia’s (RBA) latest rate decision will be closely watched by AUD investors next week. Will a dovish outlook from the bank send AUD exchange rates lower?

 

Key Data

Aug 3 USD ISM Manufacturing PMI (Jul)

Aug 4 AUD Retail Sales (Jun)

Aug 4 AUD RBA Rate Decision

Aug 5 EUR Retail Sales (Jun)

Aug 5 USD ISM Non-Manufacturing PMI (Jul)

Aug 6 EUR German Factory Orders (Jun)

Aug 6 GBP BoE Rate Decision

Aug 6 USD Initial Jobless Claims (01/Aug)

Aug 7 EUR German Industrial Productions (Jun)

Aug 7 USD Non-Farm Payrolls (Jul)

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