Weekly Currency Transfer Roundup – February 19, 2024

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The US Dollar (USD) climbed for the fourth week, reaching a three-month high despite a minor dip on Friday. Stronger-than-expected inflation data contributed to the rise, affecting the dollar’s value. Mixed results in manufacturing and job claims also had an impact.

Positive reports on producer prices and consumer sentiment added to the dollar’s strength. These reports indicate the potential for a delay in interest rate cuts by the Federal Reserve, further supporting the dollar.

In summary, positive economic indicators led to a strong performance for the US Dollar this week.

Euro Update: Exchange Rate Steady Ascent Amid Economic Shifts

This week saw the US Dollar (USD) continue its upward trend against the Euro (EUR) for the fifth consecutive week, with a slight gain. Despite this steady climb, the exchange rate dipped slightly on Friday, closing at 0.9276.

A few key economic developments played a significant role in this week’s currency fluctuations:

• Key Influencers on the Euro:
  • Industrial Production in Europe outperformed expectations with a 2.6% increase, compared to the anticipated -0.2%.
  • Italy’s trade balance showed a healthy surplus of 5.61 billion, well above the forecast of 3.65 billion, lending strength to the Euro against the Dollar.

The week was characterized by a mix of economic data releases and central bank announcements that influenced the USD to EUR exchange rate. Despite varying economic sentiments within the Eurozone, including a rise in German economic sentiment but a less positive evaluation of the current situation, the exchange rate remained relatively stable. The European Central Bank’s cautious stance on policy easing also contributed to this stability. Interestingly, the exchange rate was not significantly affected by the European Parliament testimony by ECB President Christine Lagarde or by mixed ZEW surveys from Germany and the Eurozone.

GBP Update: Navigating Through Economic Indicators and Central Bank Optimism

This week, the USD to GBP exchange rate enjoyed its fifth consecutive week of gains, with a notable increase of +0.23%. Despite this overall positive trend, the rate experienced a slight dip on Friday, closing at 0.79366.

Here’s a breakdown of the key economic indicators and events that influenced the GBP’s performance against the USD:

• Positive Labor Market Reports: The claimant count change was better than expected at 14.1K, and the 3-month Average Earnings Index rose by 5.8%, signaling strength in the UK labor market.
• Inflation and Economic Data:
  • The annual inflation rate in the UK fell to 4.0%, slightly below expectations.
  • Core CPI, PPI Input, and RPI releases also contributed to the GBP’s decline against the USD.
  • The UK’s Q4 GDP data indicated a contraction of 0.3% quarter-over-quarter, and a 0.2% contraction year-over-year, underperforming market expectations.
  • December’s monthly GDP data showed a 0.1% decline, further suggesting a weaker economic performance.

• Retail Sales Surprise: Contrary to expectations, retail sales in December surged by 3.4%, providing a boost to the GBP.

The GBP’s downward pressure resulted from disappointing inflation data, leading to speculation about an early rate cut by the Bank of England. BoE Governor Andrew Bailey’s optimistic outlook acknowledged signs of economic improvement and the possibility of avoiding a technical recession. Bailey emphasized stronger growth forecasts, despite supply-side constraints, and downplayed the likelihood of a significant GDP contraction. The GBP’s performance underscores the sensitivity of currency values to economic data.

CAD Update: Navigating Through Economic Signals and Oil Price Trends

This week, the USD to CAD exchange rate saw a modest increase of 0.18%, recovering from last week’s slight decline of -0.05%. The rate closed on Friday at 1.34810, marking a gain of approximately +0.12%.

Key Points from This Week:

• Manufacturing Sales Impact: Canadian manufacturing sales were down by -0.7%, slightly worse than the expected -0.5%. This weaker performance contributed to a stronger USD against the CAD.
• Limited Canadian Economic Reports: With few economic updates from Canada, the USD to CAD exchange rate was largely influenced by the performance of the USD and fluctuations in crude oil prices.
• Crude Oil’s Role: WTI crude oil prices climbed for the second consecutive week, with a +2.11% increase. This rise in crude oil prices played a significant role in the movement of the USD to CAD exchange rate.
• Factors Affecting Crude Oil Prices:
  • Mixed EIA (Energy Information Administration) data
  • Geopolitical tensions
  • OPEC+ production cuts
  • Decrease in Russian crude exports
  • Increase in EIA crude stockpiles
  • Unexpected disruptions in U.S. refineries

Canada’s major crude oil exports strengthen the CAD when oil prices rise. Economic data, geopolitical issues, and oil supply and demand changes impact USD to CAD exchange rates. Understanding oil prices’ influence on the CAD is crucial for those involved in USD to CAD exchanges. Significant oil market movements directly impact exchange rates.

AUD Update: Economic Trends and Central Bank Optimism

This week witnessed a decline in the USD to AUD exchange rate, with a -0.16% drop. The rate saw a further -0.15% fall on Friday, ending the day at 1.5300.

Economic Highlights:

• Australian Employment Change: The report came in significantly lower than expected at just 0.5k jobs added, versus the forecasted 26.4k. This disappointing outcome contributed to the Australian Dollar’s (AUD) vulnerability.

• Unemployment Rate: Contrary to the grim job addition numbers, the unemployment rate was reported at an unexpectedly low 4.1%, which didn’t align with the anticipated positive momentum in employment growth.

Influential Statements from RBA Governor:

During the week, Reserve Bank of Australia (RBA) Governor Michele Bullock’s remarks had a notable impact on the AUD’s performance. In her parliamentary address, Bullock highlighted:

• Optimism About Managing Inflation: She conveyed confidence in the RBA’s strategy to tackle inflation effectively, mentioning that the global economy is performing better than expected.
• Concerns Over Economic Hardships: Initially worried about severe economic downturns, the RBA now finds itself in a stronger position to manage inflationary pressures.
• Inflation Trends: While acknowledging the stubborn nature of inflation, especially in the services sector, Bullock pointed out that it is on a downward trajectory.

Bullock’s comments provided a boost to the Australian Dollar, influencing the USD to AUD exchange rate amidst a quiet period due to bank holidays in China for the Lunar New Year celebrations. This scenario underscores the sensitivity of currency exchange rates to central bank communications and economic indicators.

INR Update: Economic Resilience and RBI’s Optimistic Outlook Amid Global Challenges

This week, the USD to INR exchange rate saw a marginal increase of +0.02%, with the rate ending on a positive note on Friday, gaining 0.03% to close at 82.9920.

Key Economic Insights:

• RBI Governor’s Statement: Shaktikanta Das, the Governor of the Reserve Bank of India (RBI), shared optimistic views on India’s economic resilience and its status as the fastest-growing major economy. He anticipates the economy to sustain a growth rate of at least 7% for the fourth consecutive year. Despite this positive outlook, Das acknowledged challenges such as continuous shocks to food prices and geopolitical tensions affecting inflation management.
• Trade Deficit Narrowing: January witnessed a near 12% reduction in India’s goods trade deficit, dropping to $17.49 billion. This improvement primarily resulted from a decrease in imports, which fell to $54.41 billion from December’s $58.25 billion. However, exports slightly declined from $38.45 billion in December to $36.92 billion in January.
• Impact of External Factors: The reduction in exports has been partly attributed to the ongoing conflict in the Red Sea region. Meanwhile, forecasts by CLSA anticipate foreign portfolio inflows into India to increase to about 1% of GDP, a significant rise from the 0.4% observed during 2014–2022.

Market Dynamics: Governor Das’s remarks emphasize India’s economic resilience amid global uncertainties, with trade data and forecasted foreign inflows indicating changing dynamics. These developments offer insights for USD/INR traders and currency market analysts. The RBI’s balanced stance, along with trade and investment shifts, underscore the interplay of macroeconomic indicators and global events influencing the INR’s trajectory. Close monitoring of these factors is essential for informed decisions in currency exchange.

SGD Update: SGD Strengthens Amid Singapore’s Economic Growth and Sectoral Insights

The USD to SGD exchange rate has been on an upward trajectory for the seventh consecutive week, registering a modest increase of +0.05% this week, following a +0.24% rise the previous week. The Singapore Dollar (SGD) gained ground on Friday, with the exchange rate closing at 1.34668, marking a +0.07% rise.

Singapore’s Economic Performance:

• Growth Revision: Singapore’s economy grew by 1.1% in 2023, a slight adjustment from the initial estimate of 1.2%. The growth was led by the “other services industries,” which saw a 3.9% expansion year-on-year.
• Sectoral Contributions: The information and communications, along with transportation and storage sectors, also contributed positively to the growth. However, the manufacturing sector faced challenges, contracting by 4.3%, which is a reversal from the 2.7% growth in 2022.
• Construction and Finance Sectors: Notably, the construction sector witnessed a growth of 5.2%, and the finance and insurance sector grew by 5.4% year-on-year.

2024 Growth Forecast:

The Ministry of Trade and Industry (MTI) has kept its GDP growth forecast for 2024 at 1% to 3%. Expectations include:

• Manufacturing and Trade: A gradual increase in growth, supported by global electronics demand.
• Tourism and Aviation: Continued recovery in air travel and tourism demand, benefiting the related sectors.

For 2024, the growth in advanced economies is expected to slow down in the first half due to tight financial conditions but may see a recovery in the latter half as monetary policies possibly ease and inflationary pressures diminish. However, Singapore’s economy faces potential global headwinds, including geopolitical tensions and the effects of monetary tightening.

Weekly Currency Event Highlights

Keep these events on your calendar for the upcoming week as they may affect your currency.

AUD (Australian Dollar)

• Tue, Feb 20
  • 0:30: Monetary Policy Meeting Minutes
• Wed, Feb 21
  • 1:30: Wage Price Index q/q – 0.9% (Previous: 1.3%)
• Wed, Feb 21
  • 22:00: Flash Manufacturing PMI
  • 22:00: Flash Services PMI
• Wed, Feb 21
  • 23:30: MI Leading Index m/m – 0.0%

CAD (Canadian Dollar)

• Mon, Feb 19
  • All Day: Bank Holiday
  • 13:30: IPPI m/m – -0.1% (Previous: -1.5%)
  • 13:30: RMPI m/m – 0.7% (Previous: -4.9%)
• Tue, Feb 20
  • 13:30: CPI m/m – 0.4% (Previous: -0.3%) and other CPI measures
• Wed, Feb 21
  • 13:30: NHPI m/m – 0.1% (Previous: 0.0%)
• Thu, Feb 22
  • 13:30: Core Retail Sales m/m – 0.7% (Previous: -0.5%)
  • 13:30: Retail Sales m/m – 0.8% (Previous: -0.2%)
• Fri, Feb 23
  • 13:30: Corporate Profits q/q – 4.7%

CHF (Swiss Franc)

• Tue, Feb 20
  • 7:00: Trade Balance – 2.35B (Previous: 1.25B)
• Fri, Feb 23
  • 8:30: Gov Board Member Schlegel Speaks

CNY (Chinese Yuan)

• Mon, Feb 19
  • Tentative: Foreign Direct Investment ytd/y – -8.0%
• Tue, Feb 20
  • 1:15: 1-y Loan Prime Rate – 3.45% (Previous: 3.45%)
  • 1:15: 5-y Loan Prime Rate – 4.10% (Previous: 4.20%)
• Fri, Feb 23
  • 1:30: New Home Prices m/m – -0.45%

EUR (Euro)

• Mon, Feb 19
  • 11:00: German Buba Monthly Report
• Tue, Feb 20
  • 9:00: Current Account – 20.3B (Previous: 24.6B)
• Wed, Feb 21
  • Tentative: German 10-y Bond Auction – 2.23|1.8
  • 15:00: Consumer Confidence – -16 (Same as Previous)
• Thu, Feb 22
  • 8:15: French Flash Manufacturing PMI – 43.5 (Previous: 43.1)
  • 8:15: French Flash Services PMI – 45.7 (Previous: 45.4)
  • 8:30: German Flash Manufacturing PMI – 46.1 (Previous: 45.5)
  • 8:30: German Flash Services PMI – 48.0 (Previous: 47.7)
  • 9:00: Flash Manufacturing PMI – 47.0 (Previous: 46.6)
  • 9:00: Flash Services PMI – 48.8 (Previous: 48.4)
  • 10:00: Final Core CPI y/y – 3.3% (Same as Previous)
  • 10:00: Final CPI y/y – 2.8% (Same as Previous)
  • 12:30: ECB Monetary Policy Meeting Accounts
• Fri, Feb 23
  • 7:00: German Final GDP q/q – -0.3% (Same as Previous)
  • 9:00: German ifo Business Climate – 85.5 (Previous: 85.2)
  • 10:00: German Buba President Nagel Speaks
  • All Day: Eurogroup Meetings

GBP (British Pound)

• Mon, Feb 19
  • 0:01: Rightmove HPI m/m – 1.3%
• Tue, Feb 20
  • Tentative: Monetary Policy Report Hearings
• Wed, Feb 21
  • 7:00: Public Sector Net Borrowing – -18.4B (Previous: 6.8B)
  • 11:00: CBI Industrial Order Expectations – -27 (Previous: -30)
  • 14:00: MPC Member Dhingra Speaks
• Thu, Feb 22
  • 6:30: MPC Member Greene Speaks
  • 9:30: Flash Manufacturing PMI – 47.5 (Previous: 47.0)
  • 9:30: Flash Services PMI – 54.5 (Previous: 54.3)
• Fri, Feb 23
  • 0:01: GfK Consumer Confidence – -18 (Previous: -19)
  • 8:00: MPC Member Greene Speaks

JPY (Japanese Yen)

• Tue, Feb 20
  • 23:50: Trade Balance – -0.23T (Previous: -0.41T)
• Thu, Feb 22
  • 0:30: Flash Manufacturing PMI – 48.2 (Previous: 48.0)
• Fri, Feb 23
  • All Day: Bank Holiday

NZD (New Zealand Dollar)

• Tue, Feb 20
  • Tentative: GDT Price Index – 4.2%
• Wed, Feb 21
  • 21:45: Trade Balance – -200M (Previous: -323M)
• Thu, Feb 22
  • 2:00: Credit Card Spending y/y – 4.3%
  • 21:45: Retail Sales q/q – -0.2% (Previous: 0.0%)
  • 21:45: Core Retail Sales q/q – -0.1% (Previous: 1.0%)

USD (United States Dollar)

• Mon, Feb 19
  • All Day: Bank Holiday
• Tue, Feb 20
  • 15:00: CB Leading Index m/m – -0.3% (Previous: -0.1%)
• Wed, Feb 21
  • 13:00: FOMC Member Bostic Speaks
  • 19:00: FOMC Meeting Minutes
• Thu, Feb 22
  • 13:30: Unemployment Claims – 217K (Previous: 212K)
  • 14:45: Flash Manufacturing PMI – 50.1 (Previous: 50.7)
  • 14:45: Flash Services PMI – 52.0 (Previous: 52.5)
  • 15:00: Existing Home Sales – 3.97M (Previous: 3.78M)
  • 15:00: FOMC Member Jefferson Speaks
  • 15:30: Natural Gas Storage – -49B
  • 16:00: Crude Oil Inventories – 12.0M
• Fri, Feb 23
  • Tentative: Fed Monetary Policy Report
  • 22:00: FOMC Member Cook Speaks

Conclusion

The US Dollar had a mixed week, gaining slightly against major currencies. Positive inflation data and potential postponement of rate decreases strengthened it. However, disappointing retail sales and manufacturing data held it back. The Euro and British Pound fluctuated, with the Euro benefiting from positive economic data and the Pound weakened by low inflation and GDP figures. The Canadian Dollar rose with crude oil prices, while the Australian Dollar responded to employment data and statements from its central bank. The Indian Rupee gained from positive economic indicators, and the Singapore Dollar was affected by revised growth forecasts and external demand outlook

So, stay alert and enjoy the financial dance! Happy transferring!