Currency pair of the week

The GBP/USD could be impacted significantly by UK CPI data this week. For now, markets are calm as Iran tensions have eased, but the situation remains volatile, likely to keep risk appetite low. The GBP/USD outlook is bearish as US dollar is likely to remain supported on any short-term dips.

The latest US CPI and ECB policy decision are coming up this week, which could shape the near-term trend for the EUR/USD. The latest Eurozone data on Monday showed German industrial production surprised to the upside and investor sentiment improved more than expected. Meanwhile, attention remains on US dollar, which has been unable to find meaningful support despite a robust jobs report.

A couple of Fed speakers and US core PCE price index are among the macro factors traders will be watching this week. The EUR/CHF is a more interesting euro pair to watch, while the EUR/USD technical outlook hinges on the 200-day average.

The USD/JPY will face a major test in the week ahead, with both the Bank of Japan and US Federal Reserve set to make monetary policy decisions a day apart. The USD/JPY has managed to recover strongly, rising from around 146.50 to above 149.00 in a few days. The recovery has been driven in part because of a rebound in bond yields a stronger dollar.

The US dollar is steady after Friday’s drop. We have BOC rate decision, Powell testimony and NFP jobs report among the macro highlights for this week.

The USD/CAD will be among the busier of major currency pairs in what will likely be relatively quieter week, at least in so far as macro data is concerned. Given the closure of US markets for Presidents' Day and the majority of major data releases already published in preceding weeks, the week ahead will present few noteworthy macroeconomic highlights, aside from a select few.

For FX traders, this week's US CPI and retail sales are among the key data highlights. Pound traders also face busy week with several market moving data to come from the UK. GBP/USD technical analysis points modestly lower.

NFP, Powell and FOMC all paint a bullish US dollar story. This week's data highlights are ISM services PMI and monthly jobs report from Canada. The USD/CAD technical analysis point to bullish break above 1.35 handle.

EUR/USD outlook supported by weakening US dollar, which will be put under the spotlight by GDP and core PCE inflation data this week. Weaker Eurozone inflation data could paradoxically lift EUR/USD to 1.10 as technical analysis shows path of least resistance remains to the upside.

The EUR/USD is likely to be among the more active currency pairs this week, which I am expecting to potentially rise to 1.10 handle amid improved risk sentiment and recent falls in US yields and dollar. Although the economic situation in the eurozone remains far from convincing, markets may have gotten ahead of itself with regards to ECB rate cuts being priced in as early as April.

The US dollar has started the new week trading mixed, rising to a fresh 2023 high against the Japanese yen but falling against the likes of the Aussie and pound. The dollar index closed higher last week. This week, we will have some important economic data to look forward to, including CPI from both the UK and US, which puts the GBP/USD outlook into focus.

The AUD/USD is our featured currency pair of the week, in what will be a quieter week for economic data compared to the previous week. Still, it could be a busy one for the Aussie given that we have a rate decision from the RBA as well as economic data from China and the US to look forward to.

After topping out at 1.3142 in July, the cable has shed over 1,100 pips at its lowest point in early October. This was in response to the sharp repricing of “higher for longer” US interest rates narrative. The further resilience of US data we have seen over the past couple of weeks hasn’t led to any further appreciation in interest rate expectations, keeping the dollar in consolidation mode.

Sentiment remains bearish towards risky assets, with global indices continuing to fall at the start of the new week following a tumultuous and eventful last week. Interestingly, the US 10-year bond yield has now broken above the key 5.00% level for the first time since June 2007, which could keep the downside limited for the US dollar. The EUR/USD was flattish on the session at the time of writing, ahead of a busy week.

Sentiment remains cagey with worries over the Middle East continuing to keep the markets in an overall risk-off mode. However, there has been no fresh news to drive the US dollar even higher at the start of this new week. Position squaring is probably the main reason why it has retreated a little. That’s not to say it has topped. Ongoing Middle East tensions should keep the dollar supported on the dips, against the more risk-sensitive currencies.

With the unfortunate events over the weekend triggering a “risk off” response in the markets, and key US data to come later in the week, both the Japanese yen, still deemed by many as a haven currency, and the US dollar will be in focus this week. Additionally, there is the potential for further Japanese intervention given that the USD/JPY trades not too far from the 150.00 level.

The EUR/USD’s corrective bounce towards the end of last week faded, as we had expected, with the dollar continuing to find support even though we saw some notably weaker data. In other words, nothing has changed since last week. There will be lots of key US data to look forward to this week, which should keep the EUR/USD in sharp focus.