The US dollar remained firmly on the defensive last week as fresh concerns over a slowing US labour market overshadowed a rise in inflation and cemented bets for at least three 25-basis-point interest rate cuts from the Federal Reserve before the end of the year.
Last week's key rate movements
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GBP/EUR – Up 0.2% on the week
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GBP/USD – Up 0.4% on the week
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EUR/USD – Unchanged on the week
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AUD/USD – Up 1.2% on the week
Pound (GBP)
GBP investors will be kept busy this week with the release of key UK jobs and inflation data in addition to the Bank of England’s (BoE) latest interest rate decision. If the data and guidance signal rates will stay steady through the remainder of 2025, the pound (GBP) may strengthen.
Euro (EUR)
The primary catalyst of movement for the euro (EUR) this week is likely to be Germany’s latest ZEW economic sentiment index. This could see the single currency weaken if September’s survey reports another deterioration of morale.
US dollar (USD)
The Federal Reserve’s rate decision will be centre stage this week, with the US dollar (USD) poised to weaken as the US central bank is expected to resume its cutting cycle following a lengthy pause. While the majority of investors are betting on a 25bps rate cut, some analysts suggest a 50bps reduction cannot be ruled out.
Australian dollar (AUD)
The Australian dollar (AUD) may face resistance this week if Australia’s latest jobs data highlights fresh weakness in the labour market.
South African rand (ZAR)
The South African Reserve Bank (SARB) will deliver its latest interest rate decision this week. No policy changes are expected this month, but a hawkish outlook from the SARB could propel the South African rand (ZAR) higher.
Canadian dollar (CAD)
The Bank of Canada (BoC) will also hold its latest policy meeting this week. Expect the Canadian dollar (CAD) to soften if persistently weak Canadian inflation prompts the BoC to cut rates again this month.
New Zealand dollar (NZD)
The New Zealand dollar (NZD) may face headwinds later this week as New Zealand’s latest GDP figures are expected to report growth contracted in the second quarter.
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