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Weekly currency forecast: US dollar to soar following Federal Reserve decision?

Currencies Direct June 10th 2024 - 2 minute read

After a difficult week, the US dollar managed to rally last Friday as strong US jobs data dampened bets on Federal Reserve interest rate cuts this year. This also lent GBP support while weighing on EUR and AUD.

This week, the Fed will meet to set interest rates. No change to policy is expected, but a hawkish tone from the US central bank could see USD strengthen.

Pound

The pound managed to rise against its weaker rivals last week, despite a lack of market-moving UK economic data. Sterling was supported by speculation that the Bank of England (BoE) may leave interest rates higher for longer.

Such speculation could be dampened this week by the release of the UK’s latest labour market report. Any signs of rising unemployment or slowing wage growth could prompt bets on a possible July rate cut from the BoE.

Euro

The euro faced volatility in the wake of the European Central Bank’s (ECB) decision last week. The ECB cut rates for the first time in eight years but indicated that it may wait before pursuing further cuts. Nevertheless, EUR fell against its stronger rivals.

Market-moving Eurozone data is thin on the ground this week, potentially leaving the euro vulnerable to volatility in the wake of the latest European elections. Significant gains by far-right Eurosceptic parties and a snap French election are causing anxiety among EUR investors.

US dollar

The US dollar initially faced pressure last week, following a softer manufacturing PMI and signs of slack in the US labour market. However, USD surged higher on Friday when the latest non-farm payrolls report smashed forecasts, denting Federal Reserve rate cut bets.

The Fed meets this week for its latest monetary policy meeting, where it is expected to leave rates unchanged. If the bank strikes a hawkish tone, the ‘greenback’ could soar – particularly if US inflation on Wednesday also shows signs of stubborn price pressures.

Australian dollar

Mixed data and a shifting market mood saw the ‘Aussie’ waver through much of last week. However, the risk-sensitive currency plunged at the end of the week after the strong US payrolls figure sparked widespread risk aversion.

This week, Australia’s latest jobs report could help AUD recover. Economists expect the country’s unemployment rate to have fallen in May.

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Currencies Direct

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