Weekly currency forecast: Pound to fluctuate amid high-impact data? 

A global selloff infused the currency market with significant volatility last week, with the US dollar and the pound both touching multi-month lows. 

This week, GBP and USD could face more volatility as the latest UK and US consumer price indexes are due out. 

Pound  

The pound plunged to multi-month lows last week as markets began betting on two more interest rate cuts from the Bank of England (BoE) by the end of the year. Sterling clawed back some losses by the end of the week, but remained lower overall. 

This week could bring more big swings, with the latest UK labour data, inflation, and second-quarter GDP figures all due out. If the data weakens the case for more BoE rate cuts, Sterling could regain lost ground. 

Euro  

The euro enjoyed some support last week, as upbeat German industrial data and EUR’s negative correlation with a struggling US dollar both boosted the common currency’s appeal. 

Looking forward, Germany’s latest economic sentiment index may see the euro stumble this week. Morale in the Eurozone’s largest economy is expected to have deteriorated this month as the country teeters on the brink of recession. 

US dollar  

The US dollar faced notable volatility last week, striking its lowest level since January, amid rumours of an emergency rate cut from the Federal Reserve due to a rout in global markets. USD bounced back from its worst levels but still ended the week lower. 

We could see the ‘greenback’ test recent lows once again this week, if an expected cooldown in US inflation fuels bets on a bumper 50bps rate cut from the Fed next month. 

Australian dollar  

After initial volatility, the Australian dollar surged higher last week. The Reserve Bank of Australia (RBA) left interest rates unchanged at its policy meeting, but RBA Chair Michele Bullock said the bank ‘will not hesitate’ to hike rates again if needed. 

The ‘Aussie’ could relinquish some of these gains in the week ahead, if a forecast slowdown in Australian employment growth last month dampens bets on another RBA interest rate increase.