Weekly currency forecast: Pound to trim gains amid signs of cooling UK economy?

The pound surged higher last week, hitting a one-year high against the US dollar and a 23-month high against the euro, as UK optimism and hawkish Bank of England (BoE) comments boosted Sterling.

We could see GBP trim its gains in the week ahead, if downbeat UK data rekindles bets on an August interest rate cut from the BoE.

Pound

The pound enjoyed an impressive run last week. Stronger-than-forecast British GDP data and hopes of political stability in the UK both lifted Sterling, while hawkish comments from BoE officials saw markets slash bets on an August interest rate cut.

This week, we could see heightened volatility as the UK consumer price index, employment report and retail sales figures are all due out. Could signs of a cooling British economy knock the pound off its perch?

Euro

A notable lack of Eurozone data muted the euro last week, although the common currency’s strong negative correlation with the US dollar helped to keep it afloat.

Looking ahead, the European Central Bank’s (ECB) interest rate decision is in focus this week. The bank is expected to leave rates unchanged, but could any hints at further rate cuts later this year pile pressure on the euro?

US dollar

The US dollar faced heavy selling pressure at the end of last week’s session as cooler-than-forecast US inflation and slumping consumer confidence saw markets ramp up bets on a September interest rate cut from the Federal Reserve.

USD could face further losses in the week ahead, if US retail sales growth stalled in June and new jobless claims ticked higher last week, as expected.

Australian dollar

Mixed data saw the Australian dollar trade without a clear direction last week, as falling consumer confidence was offset by an unexpected rise in business confidence.

Australia’s latest jobs report could drive AUD movement this week. Could lacklustre employment data see the ‘Aussie’ struggle?