After facing notable selling pressure at the end of last week amid a shock contraction in the US labour market, the US dollar potentially faces fresh headwinds in the coming session if a soft inflation print further weakens Federal Reserve interest rate expectations.
Last week's key rate movements
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GBP/EUR – Unchanged on the week
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GBP/USD – Unchanged on the week
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EUR/USD – Up 0.2% on the week
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AUD/USD – Up 0.5% on the week
Pound (GBP)
The UK's latest GDP figures will likely act as the primary catalyst for movement for the pound (GBP) this week. Consensus estimates predict a robust 0.4% acceleration in growth in the second quarter, which may provide some lift for Sterling in the latter half of the week.
Euro (EUR)
The only Eurozone economic indicator of note this week will be the bloc's latest estimate of GDP in the second quarter, but barring a revision to the preliminary print, its impact on the euro (EUR) may be limited.
US dollar (USD)
The latest US consumer price index will be closely watched by investors this week. If inflation continued to cool in July, it's likely to further diminish Federal Reserve interest rate hike expectations and weaken the US dollar (USD).
Australian dollar (AUD)
The Reserve Bank of Australia (RBA) will deliver its latest interest rate decision this week. No policy changes are expected this month, but the Australian dollar (AUD) may weaken if the bank's guidance strikes a more dovish tone.
South African rand (ZAR)
Domestic jobs data may weigh on the South African rand (ZAR) this week as economists expect unemployment to have risen in South Africa in the second quarter.
Canadian dollar (CAD)
In the absence of any notable domestic data, movement in the Canadian dollar (CAD) is likely to be tied to oil price dynamics, with any fresh hopes for a US-Iran ceasefire potentially pulling crude prices and the 'loonie' lower.
New Zealand dollar (NZD)
Market risk sentiment will likely act as the main driver for the New Zealand dollar (NZD) this week. But the 'kiwi' may also be influenced by domestic business inflation expectations, with a rise potentially boosting Reserve Bank of New Zealand (RBNZ) rate hike bets.
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