Currency pair of the week

With a jam-packed calendar this week, including, ISM Manufacturing and Services PMIs, the closely watched JOLTS Job Openings report, and the monthly Non-Farm Payrolls report to come, traders are bracing for volatility. These data points are expected to influence the USD/JPY forecast, especially with both the Fed and BoJ policy decisions looming in December.

The slight cooling of the so-called "Trump Trade," characterised by a strong dollar (and a Bitcoin rally), may not last very long. For now, though, traders are adjusting their expectations somewhat and scaling back hopes for aggressive tax cuts and tariff hikes. It is far too early for us to drop out bearish EUR/USD forecast.

This week, there is not much in the way of US data, but global PMIs on should cause some volatility. The EUR/USD forecast remains bearish, and we continue to expect an eventual breakdown below the $1.05 handle.

This week, inflation data from the US and GDP data from UK will be crucial. With last month’s US CPI outpacing expectations at 2.4% year-over-year, markets remain attentive to signs of persistent inflation.

The GBP/USD is among the major forex pairs to watch this week. After a blowout US jobs report, the market has dropped its calls for another 50 basis point rate increase from the Fed. While key inflation figures this week could provide some short-term volatility, the Fed’s focus has moved on from inflation. Therefore, beyond some short-term volatility, this should not really change the picture for US interest rates pricing and the dollar.

While the broader US dollar trend remains bearish, the GBP/USD outlook is not so certain. With much of the dollar weakness already factored in, a pullback in the cable could be on the horizon as we approach this week’s US employment data.

Unless the RBA is surprisingly more dovish than expected at its meeting on Tuesday, Aussie CPI comes in well below expectations on Wednesday, or we see a sharp reversal in risk appetite, the path of least resistance will remain to the upside, in line with our continued bullish AUD/USD forecast.

This week brings key data releases from around the world, including the latest US inflation report and along with a rate decision from the European Central Bank. After last week’s jobs data, we continue to hold a bearish outlook on the dollar ahead of the upcoming CPI release.

The Loonie is our featured currency pair this week, for not only do we have significantly important data from the US, but there’s also a rate decision across the northern border in Canada.

In the week ahead, the economic calendar is quieter. Aside from the global PMIs on Thursday, we don’t have much else that could drastically move asset prices. So, it could be a long wait until we potentially hear something meaningful from the Fed and other central bank officials at the week’s marquee event: the Jackson Hole symposium on Friday.

The cable is facing a key test this week with inflation and retail sales data to come from both sides of the pond. Market volatility has died down and the US dollar has fallen against the high-beta commodity dollars and risen against low-yielding currencies like the Japanese yen. If we don’t see any upside surprises in US inflation and activity data this week, this should cause the US dollar to fall further.