What Happened to G10 Currencies Last Week? And What Next?
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USD
Last week, the US dollar erased all its early losses, with the DXY index closed slightly higher at 90.05 as the latest data strengthened concerns about surging inflation and more heated economic activity from pent-up demand.
Consumer spending rose at an 11.3% annualized rate in the first quarter, positioning the economy for strong growth as rising vaccinations eases the COVID-19 pandemic’s grip.
For the coming week, the highlight will be on US NFP, which is set to release on Friday. The US economy is expected to add more jobs than previously amid a vaccination rollout in the US.
EUR
Last week, the EUR/USD advanced in early of the week, but failed to maintain the profit after ECB board member, Fabio Panetta said that the ECB should not reduce the pace of asset purchases as the economic recovery is in an early phase and inflation remains too low.
For the coming week, the focus for the EUR will be on German and Eurozone PMI data. Although it is final data, PMI is one of the leading indicators to measure the activity. Other important data to watch are Eurozone preliminary CPI and retail sales.
GBP
Last week, the GBP soared after BoE’s Vlieghe comments on a possible hike rate in 2022. Vlieghe stated that “My central scenario is that the economy evolves similarly to the MPC’s central projection in May, but with somewhat more slack than in the central projection. In that scenario, the first rise in bank rate is likely to become appropriate on well into next year, with some modest further tightening thereafter.” Investors are optimistic about the BoE hike rate.
For the coming week, we expect that the GBP will remain positive amid a fresh hawkish statement. On the economic calendar, investors will keep an eye on UK PMI data.
NZD
Last week, the NZD advanced after a hawkish policy statement by The Reserve Bank of New Zealand (RBNZ). The RBNZ stated that it possibly do a 0.25% rate hike to 0.5% by September 2022 and expect the OCR would reach 1.5% by the end of 2023.
At the May meeting, the RBNZ held its interest rate at a record low of 0.25% and maintained the Large Scale Asset Purchase (LSAP) Programme of up to $100 billion and the Funding for Lending Programme (FLP) operation unchanged.
For the coming week, in the absence of significant fundamental drivers, we expected that the NZD will remain benefit from a hawkish tone from the RBNZ. However, the global risk sentiment also could do an impact on the currency. Any negative risk sentiment could limit the upside.
CAD
Last week, the CAD failed to benefit from a weaker dollar, and despite rising oil prices. The USD/CAD closed the week at 1.2075 as the US dollar rose on Friday amid inflation fears.
For the coming week, we expect that the CAD will be supported by reopening hopes in Canada amid the fast vaccination rollout.
On the economic front, the Canadian GDP for Q1 is set to print higher as Canadian retail sales and trade were good. However, Canadian employment data for May is expected to decline amid a recent lockdown.
AUD
Last week, the AUD is one of the worst-performing currencies after Melbourne has forced into its fourth lockdown amid a resurgence of COVID-19 cases. It also may become a reason for the Reserve Bank of Australia (RBA) to stick to its dovish tone for longer.
For the coming week, the highlight will be on the RBA rate decision. With the Reserve Bank of New Zealand and the Bank of Canada both adopting a hawkish stance, the RBA is under pressure, and though we believe this will be an ‘in-between’ meeting, any surprises will almost certainly be on the hawkish side.
JPY
Last week, the JPY is the weakest currency amid a positive risk tone, rising stock markets. Investors are interested in high-beta currency and dumped the JPY.
For the coming week, the strength for the JPY is likely on global risk sentiment and US Treasury yields. Negative risk sentiment could support the JPY.

CHF

Last week, the CHF traded mixed across the board amid mixed bias on the currency. Concerns about rising inflation support the currency, while the positive market mood limits the gains.

For the coming week, we expect that the CHF will remain mixed, however, if the risk tone turns negative, the CHF is expected to show some strength.