Weekly currency forecast: Mixed UK data to drive GBP volatility?

Roxane Cody February 12th 2024 - 2 minute read

Last week brought choppy trade to the currency market amid shifting central bank policy expectations.

This week, a handful of high-impact UK data releases could trigger erratic trade in the pound. Meanwhile, the US dollar may face headwinds amid an expected cooldown in US inflation.

Pound

Although the UK’s final services PMI beat expectations last week, signs of easing inflation in the survey saw Sterling stumble. However, hawkish comments from multiple Bank of England (BoE) policymakers helped the pound regain ground.

GBP could see significant volatility this week, as the UK’s latest jobs report, consumer price index, GDP figures and retail sales data are all due out. Economists expect to see mixed results in these releases, so the pound could fluctuate throughout the week.

Euro

The euro wavered slightly lower last week as traders reacted to the latest German and Eurozone economic data. While German factory orders smashed forecasts, the rest of the releases were mostly downbeat.

Looking forward, Germany’s ZEW economic sentiment index is the key focus for EUR investors this week. Could another improvement this month give the single currency a boost?

US dollar

The US dollar started last week strong, striking a near three-month high following hawkish comments from Federal Reserve Chair Jerome Powell. However, USD trimmed its gains as the week went on amid an improving market mood.

This week the spotlight falls on the latest US consumer price index. Could a cooldown in inflation fuel Fed interest rate cut bets, thereby sapping demand for the ‘greenback’?

Australian dollar

Last week the Australian dollar see-sawed. A hawkish tone from the Reserve Bank of Australia (RBA) following its rate decision lent AUD some support, but worries about deflation in China offset the upside.

Looking ahead, Australia’s latest jobs report is the focus for AUD investors this week. Could an uptick in unemployment dampen bets on another rate hike from the RBA, thereby pushing the ‘Aussie’ lower?

Written by
Roxane Cody

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