Weekly currency forecast: High-impact events could drive notable volatility

Last week, the euro and US dollar enjoyed success amid signs of stubborn inflation, while the pound failed to find a clear direction due to a lack of British economic data.

The coming week brings a slew of high-impact events, including the UK Spring Budget, the European Central Bank (ECB) policy decision, and the latest US non-farm payrolls report. As a result, we could see notable currency volatility.

Pound

A lack of UK economic data left the pound to trade without a clear trajectory last week, with Sterling wavering in different directions against its peers.

This week, all eyes are on Chancellor Jeremy Hunt’s Spring Budget, which he will unveil on Wednesday. Rumoured tax cuts could boost the pound, as long as Hunt doesn’t rattle markets with unfunded spending commitments.

Euro

After some mixed movement, the euro eventually found success at the end of last week’s session after hotter-than-forecast Eurozone inflation data tempered expectations for an imminent interest rate cut from the European Central Bank.

The ECB convenes on Thursday to set monetary policy, which is the focus for EUR investors this week. If the bank rules out an April rate cut, EUR could climb. Otherwise, we may see the single currency stumble.

US dollar

The US dollar wavered higher last week, thanks to a risk-off mood and signs that inflation in American remains stubborn. However, a downbeat manufacturing PMI dented the ‘greenback’ at the end of the week.

The week ahead brings some high-impact US events, including the ISM services PMI and a testimony from Federal Reserve Chair Jerome Powell. The spotlight, however, is on Friday’s non-farm payrolls figure. A slowdown in job creation could see USD stumble.

Australian dollar

A weaker-than-forecast inflation reading saw the Australian dollar slide last week, as markets priced in a rate cut from the Reserve Bank of Australia (RBA) later this year. However, AUD recouped some losses thanks to a recovery in domestic retail sales and an improving market mood.

Turning to the week ahead, Australia’s GDP figures for the fourth quarter of 2023 could lift the ‘Aussie’. Forecasters expect to see an acceleration in economic growth at the end of last year.