Weekly Currency Transfer Roundup – March 4, 2024

This week, the US Dollar (USD) experienced a slight decline, continuing its downward trend from last week. Here’s a simple breakdown:

• USD’s Weekly Performance: Dropped by -0.07% against major currencies; closed at 103.885 on the US Dollar Index (DXY).

• Economic Reports:
  • New Home Sales fell short of expectations.
  • Durable Goods Orders were significantly lower than anticipated.
  • Richmond Manufacturing Index and Consumer Confidence also reported weaker figures.
  • GDP and Inflation Data: Showed contraction and remained steady, respectively.

• Labor Market: Unemployment claims were slightly higher than forecast but did not significantly alleviate the pressure on the USD.

• Manufacturing and Market Sentiments: Indicated a decline in manufacturing activity and consumer sentiment.

Federal Reserve Governors Chris Waller and Mary Daly commented on the central bank’s future actions, emphasizing a focus on liquidity and the readiness to adjust interest rates based on economic strength, without an immediate need for cuts. Their statements suggest a cautious approach toward monetary policy adjustments, aiming to stabilize the economy while monitoring market impacts.

Euro Strengthens Against Dollar Following ECB’s Optimistic Yet Cautious Stance

This week, the USD to EUR exchange rate saw a decline, closing at 0.9223 on Friday, marking a -0.32% drop for the day. Over the week, the rate fell by -0.18%, adding to the previous week’s -0.39% loss.

This movement reflects a blend of economic updates and policy signals from Europe.

• ECB President Christine Lagarde’s Remarks: Early in the week, Lagarde’s comments provided a boost to the Euro. She noted progress towards inflation targets but confirmed the ECB’s policy stance would remain unchanged for now. Despite positive wage growth indicators, the ECB awaits more evidence to ensure inflation is under control.

• Economic Data Impact: Various economic reports influenced the exchange rate dynamics:
  • M3 Money Supply and Private Loans data from the Eurozone came in lower than expected.
  • The Core CPI Flash Estimate and CPI Flash Estimate showed higher inflation than anticipated, potentially affecting the ECB’s interest rate decisions.

The fluctuation in the USD to EUR rate over the week was driven by these data points and the broader economic outlook. In the US, GDP data hinted at a robust economy, but inflation slowdown concerns persisted, influencing rate cut expectations. In contrast, signs of economic stagnation in the Eurozone were counterbalanced by higher-than-expected core inflation, which could impact future ECB policy.

For individuals involved in sending money or currency exchange, the week’s developments mean:

• A weaker USD against the EUR reduces the value of dollars converted to euros, affecting international payments and exchanges.
• Economic indicators and central bank policies remain key factors influencing exchange rates, highlighting the importance of staying informed on these trends.

GBP Update: UK’s Economic Data and BoE’s Cautious Rate Outlook

This week, the USD to GBP exchange rate experienced a slight increase of +0.14%, recovering from the previous week’s -0.56% loss. Despite this overall gain, the rate faced a dip on Friday, closing at 0.79028 with a -0.23% decrease for the day.

The fluctuations were influenced by recent economic data from the UK and statements from the Bank of England (BoE).

• UK Economic Reports: Thursday’s release of the M4 Money Supply and Net Lending to Individuals data showed figures below expectations, exerting downward pressure on the GBP. These reports contributed to the USD to GBP exchange rate’s resilience, offsetting broader trends of USD weakness.
• Bank of England’s Stance: BoE chief economist Huw Pill’s comments on Friday marked a significant moment for market watchers. Pill indicated that the BoE is not yet ready to consider interest rate cuts, seeking further assurance that inflation pressures are abating. His cautious outlook suggests that any potential rate cuts are still some time away, reinforcing the need for ongoing restrictive monetary policy to ensure inflation targets are met sustainably.

For individuals engaging in currency exchange or sending money internationally, this week’s developments highlight the impact of central bank policies and economic indicators on exchange rates. The strength of the Sterling against the Dollar was moderated by economic data and the BoE’s cautious stance on interest rates, underscoring the dynamic nature of currency markets.

CAD Update: Bullish Trend Persists Amidst Economic Indicators and Oil Price Surge

This week, the USD to CAD exchange rate sustained its upward trajectory for the third consecutive week, marking a 0.36% increase after a 0.19% gain the previous week. The exchange rate slightly dipped by -0.02% on Friday, closing at 1.35558.

• Economic Reports Impact: Canada’s Current Account and GDP reports influenced the currency’s performance. The Current Account showed a smaller deficit than anticipated, at -1.6B versus the expected -1.9B. However, December’s GDP reading came in flat (0.0%), against a forecasted growth of 0.2%, placing pressure on the CAD.
• Crude Oil’s Role: The week also saw a notable rise in crude oil prices, with a +3.77% increase, closing WTI at $79.27 per barrel. Factors contributing to the oil price hike included the U.S. reporting a smaller-than-expected increase in crude stocks and OPEC+ contemplating extended production cuts. Geopolitical tensions in the Middle East further buoyed crude prices, affecting the CAD due to its commodity-linked nature.

Despite the USD’s overall weakness, the combination of economic data from Canada and the dynamics of crude oil prices played a pivotal role in maintaining the USD/CAD exchange rate’s bullish trend. Investors and currency traders will likely continue to monitor these factors closely in the coming weeks.

AUD Update: Australian Economic Data and Positive Trade Winds from China

The USD to AUD exchange rate experienced a gain of 0.54% this week, marking a rebound after a three-week downtrend. However, the pair faced a decline of -0.48% on Friday, closing at 1.5314.

Influential Economic Reports: Australia’s CPI year-over-year for the last quarter came in at 3.4%, below the anticipated 3.6%, placing downward pressure on the Aussie and favoring the USD/AUD uptick. Retail Sales for the month also disappointed with a 1.1% increase against a 1.6% expectation, further dampening AUD sentiment. Conversely, the Private Capital Expenditure for the quarter showed a better-than-expected rise of 0.8%, offering some support to the AUD.

Impact of External Factors: The Reserve Bank of New Zealand’s dovish outlook initially contributed to the AUD’s weakness. Nonetheless, a surge in the S&P/ASX 200 Index and positive capital expenditure data provided mid-week relief. Additionally, Australia’s economic ties with China brought significant focus to the Chinese Manufacturing and Non-Manufacturing PMI data, influencing AUD movements. Reports on China’s commitment to bolster business and potential tariff lifts on Australian wine injected optimism into AUD’s trajectory.

Despite a challenging start, the USD to AUD rate’s recovery this week was shaped by a mix of domestic economic indicators and developments in China’s policy stance. As trade relations between Australia and China show signs of improvement, the AUD may find firmer ground, though investors remain vigilant of further economic updates from both countries.

INR Strengthens Amid Economic Growth

The USD to INR exchange rate further declined this week, marking a -0.02% drop after a previous -0.18% decrease. Closing at 82.8230 on Friday, the INR remittance rate reflected a -0.07% fall, underscoring the Rupee’s continued strength against the US dollar.

Key Drivers Behind the Rupee’s Performance:

• Economic Growth: India’s economy experienced its fastest growth in over a year during the December quarter, exceeding market expectations. This robust performance has bolstered the medium-term outlook for the Rupee, instilling confidence among investors.
• Asia’s Top Performer: The INR stands out as the best-performing currency in Asia this year, attributed to a narrowing current account deficit and robust forex reserves. Bloomberg data reveals the Rupee’s year-to-date appreciation of 0.48%, a stark contrast to the 1.91% increase in the U.S. Dollar Index.
• Market Impact: The Rupee’s strength, along with the US dollar’s relative weakness, has applied downward pressure on the INR remittance rate. Investors and market watchers attribute this resilience to India’s economic fundamentals and positive growth trajectory.

SGD Update: Slight Gain Amidst Tourism and Sustainability Boosts

The USD to SGD exchange rate saw a modest increase of +0.07% this week, despite a dip on Friday to close at 1.34411. The slight uptick comes amidst a general dip in the greenback’s strength, with the Singapore Dollar benefiting from optimistic local developments.

Notably, an SGD 300 million investment aimed at boosting tourism through high-profile events like Taylor Swift concerts and new attractions anticipates a surge in visitor numbers and spending in 2024.

Additionally, SGD Pharma’s recognition in sustainability rankings underscores Singapore’s commitment to environmental standards, potentially enhancing the SGD’s appeal in eco-conscious markets.

Weekly Currency Event Highlights

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

Australian Dollar (AUD)

• Mon, Mar 4
  • MI Inflation Gauge m/m: Previous not provided.
  • ANZ Job Advertisements m/m: +1.7%.
  • Building Approvals m/m: Forecast +3.8%, Previous -9.5%.
  • Company Operating Profits q/q: Forecast +1.1%, Previous -1.3%.

Swiss Franc (CHF)

• Mon, Mar 4
  • CPI m/m: Forecast +0.5%, Previous +0.2%.
• Thu, Mar 7
  • Unemployment Rate: Forecast and Previous both at 2.2%.

Euro (EUR)

• Mon, Mar 4
  • French Gov Budget Balance: Previous -173.3B.
  • Spanish Unemployment Change: Forecast +50.0K, Previous +60.4K.
• Tue, Mar 5
  • French Industrial Production m/m: Forecast -0.1%, Previous +1.1%.
  • Italian Services PMI: Forecast +52.1%, Previous +51.2%.
  • PPI m/m: Forecast -0.1%, Previous -0.8%.

Japanese Yen (JPY)

• Mon, Mar 4
  • Tokyo Core CPI y/y: Forecast +2.5%, Previous +1.6%.
• Tue, Mar 5
  • 10-y Bond Auction: Previous 0.74|3.6.
• Wed, Mar 6
  • Average Cash Earnings y/y: Forecast +1.3%, Previous +0.8%.

British Pound (GBP)

• Tue, Mar 5
  • BRC Retail Sales Monitor y/y: Forecast +1.6%, Previous +1.4%.
• Wed, Mar 6
  • Construction PMI: Forecast +49.0, Previous +48.8%.

Canadian Dollar (CAD)

• Wed, Mar 6
  • Labor Productivity q/q: Forecast -0.1%, Previous -0.8%.
  • Ivey PMI: Previous +56.5.
• Thu, Mar 7
  • Building Permits m/m: Forecast +2.1%, Previous -14.0%.

Chinese Yuan (CNY)

• Thu, Mar 7
  • Trade Balance: Previous +620B.
  • USD-Denominated Trade Balance: Previous +110.3B.

United States Dollar (USD)

• Tue, Mar 5
  • ISM Services PMI: Forecast +52.9, Previous +53.4%.
  • Factory Orders m/m: Forecast +0.3%, Previous +0.2%.
• Wed, Mar 6
  • Fed Chair Powell Testifies: No forecast provided.
  • ADP Non-Farm Employment Change: Forecast +145K, Previous +107K.

Conclusion

This week saw the US Dollar (USD) navigate mixed fortunes across key currency pairs. The Dollar softened, evidenced by a decline in the US Dollar Index (DXY), reflecting a varied response to economic indicators and policy expectations globally. While the USD lost ground against the Euro, it saw gains against the British Pound, highlighting divergent economic outlooks in Europe and the UK.

The Canadian and Australian Dollars capitalized on the USD’s volatility, with commodity currencies showing resilience. Conversely, the Indian Rupee continued its strong performance, further pressuring the USD. In Asia, the Singapore Dollar gained, buoyed by positive local prospects, illustrating the nuanced dynamics of currency markets this week.

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