We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
USD
The US Dollar’s domination has finally faltered after a few weeks of unending strength. The USD weakened against 17 of the top 19 currencies. The most notable weaknesses were against the Brazilian Real (BRL) (-3.53%) and the Swiss Franc (CHF) (-2.98%), while the most significant strengths were against the Indian Rupee (INR) (0.17%) and the Turkish Lira (TRY) (2.68%).
Last week, the US retail sales for the month of April slowed, as expected, but this was still not a great data point for the currency. Another notable event from last week was communication from Fed Chair Jerome Powell. Powell stated that the Fed will continue to focus on bringing inflation down to its target range and his belief that the economy is strong enough to handle the tightening in the Feds policy. Basically, this points to the US Fed raising rates by 50 basis points in at least the next three of their meetings. Even with these hawkish comments, the USD weakened, which is understandable since the run in the USD has been quite strong over the previous few weeks.
This week, there will be two main events in the US. The first is the FOMC minutes on Wednesday, which we expect to indicate the intention of raising rates for the foreseeable future. Then, the US GDP growth rate estimates will be released on Thursday. This is expected to turn negative, but we should take note that we are looking at the data from a high base of growth, thus a slowdown is not too much of a shocker.
EUR
The Euro had another mixed performance, strengthening against 10 of the top 19 currency pairs. The most notable gains were against the TRY (4.29%) and the INR (2.22%), whilst the most significant losses were against the BRL (-2.11%) and the CHF (-1.42%).
The main data point from last week was an uptick in the GDP growth estimates from the Eurozone, as well as month-on-month inflation slowing, which could point to the EU having hit peak inflation and a possible slowdown in price rises coming earlier than for other countries. This should be monitored closely since any surprise to the upside in inflation would be EUR negative.
This week there is minimal data from the EU, apart from the Eurogroup meeting on Monday as well as the conflict in Ukraine.
GBP
Moderate gains were made by the British Pound last week, with the GBP gaining ground against 13 of the top 19 currency pairs. The Pound strengthened the most against the TRY (4.6%) and the INR (1.99%) while weakening the most against the BRL (-1.8%) and the CHF (-1.17%).
For data, UK inflation hit 40-year highs, mainly driven by surging energy and transportation costs. The effects of this will remain prominent, and the government together with the BoE will have to work hard to keep the economy going without plunging the UK into recession. On Friday, the UK retail sales data was released, which surprised on the upside, and was a positive point for the GBP.
This week we don’t have a lot of data from the UK, so we look to global issues to move the currency.
ZAR
The South African Rand performed well, strengthening against 16 of the top 19 currencies. The largest upside moves were against the TRY (5.1%) and the INR (2.34%), with the largest downside movements against the BRL (-1.59%) and the CHF (-0.66%).
Last week, the South African inflation data was released and came in, as expected, at 5.9% YoY. The focus for last week was the interest rate decision, where the SARB raised the interest rate by 50bps, to 4.75%. This was mostly priced in, but the market reacted positively to the news, and the ZAR strengthened across the board.
This week, we will monitor to see if the ZAR can maintain its hold on the gains from last week. There is minimal significant data from South Africa this week, so we anticipate global factors to be the main catalyst for movements in the ZAR.
AUD
In the leadup to elections, the Australian Dollar gained ground last week. The AUD strengthened against 14 of the top 19 currency pairs. The largest gains were against the TRY (4.70%) and the INR (2.13%), whilst the largest losses were against the BRL (-2.38%) and the CHF (-1.07%).
All eyes were on the Australian election that was held over the weekend. The Labour leader, Anthony Albanese, came out on top, although it remains to be seen if he can obtain a majority in parliament.
This week, we look to see if the election results sway the currency in any specific direction, the majority in parliament will also be a factor to consider in the coming weeks.
NZD
The NZD performed well last week, strengthening against 17 of the top 19 currency trading pairs. The NZD weakened against the BRL (-2.80%) and the CHF (-0.62%), while the currency strengthened most drastically against the TRY (5.15%) and the INR (2.64%).
The main data event from New Zealand was the budget that was released on Thursday.
This week, we have the RBNZ interest rate decision which will be released on Wednesday. The interest rate is expected to rise by 50 basis points, which could explain the current bout of NZD strength, since some in the market could be frontrunning the rate hike.
