Weekly currency forecast: US dollar to plunge if US payrolls disappoint

The euro struggled last week, pressured by lacklustre German economic data and a cooling of Eurozone inflation.

Turning to this week, all eyes will be on the latest US payroll report, as another lacklustre reading could cause the US dollar to nosedive.

Pound

The pound struggled to attract support last week amid the absence of any notable UK economic data. However, expectations that the Bank of England’s (BoE) current cutting cycle may be less aggressive than other major central banks helped to put a floor under the currency

Looking ahead, the UK’s latest PMIs could help underpin Sterling if August’s finalised figures confirm a robust expansion in the vital services sector.

Euro

The euro trended broadly lower last week. The weakness in the single currency was initially driven by some lacklustre German economic data. Before confirmation that Eurozone inflation struck a three-year low in August reinforced the EUR selling bias at the end of the week. 

German economic data may remain a key catalyst for movement in EUR exchange rates this week, with the euro poised to extend its losses if Germany’s industrial sector showed signs of slowing in July.

US dollar

Trade in the US dollar was mixed last week. Federal Reserve interest rate cut speculation, and a shifting market mood infused volatility into the ‘greenback’ through the first half of the week. A stronger-than-expected US GDP print and a rise in personal spending then lent the US dollar support in the latter half of the session.

Looking ahead, the latest US payroll figures will be centre stage this week. Expect to see the US dollar nosedive if August’s figures point to continued slack in the US labour market.

Australian dollar

The Australian dollar wavered last week as an uneven market mood and mixed domestic inflation figures infused volatility into the currency.

Australia’s latest GDP figures will be the primary focus for AUD investors this week, with the ‘Aussie’ likely to rise if growth rose in line with expectations in the second quarter.