Weekly Round-Up & The Week Ahead
Reece Dye
Head of Corporate Clients
Weekly round-up and a look at the week ahead for EUR, GBP, and USD.
DAILY ANALYSIS
USD
The US Dollar experienced a volatile week, initially continuing its recent downtrend before staging a notable rebound towards the end of the period. This recovery was largely fueled by incoming economic data, particularly the unexpected decline in weekly unemployment claims to 217,000, signalling continued resilience in the labor market. While the Manufacturing PMI unexpectedly fell, the Services PMI showed an increase, contributing to a mixed but overall firming picture for the US economy. This data tempered expectations for immediate Federal Reserve rate cuts, providing the Greenback with support. Looking ahead, the USD is poised for significant movement this week with a packed calendar. The FOMC Interest Rate Decision and Press Conference on Wednesday will be the primary focus, followed by crucial inflation data via the Core PCE Price Index on Thursday, and the highly anticipated Non-Farm Payrolls report on Friday. These releases will be critical in shaping the near-term trajectory of the US Dollar.
GBP
The British Pound staged a strong three-day rally against the US Dollar early last week, reaching a weekly high around 1.3577, driven by a general risk-on sentiment. However, it softened towards the week's close as the US Dollar regained some ground. The market's attention is increasingly shifting towards the Bank of England's (BoE) monetary policy stance. A relatively quiet week ahead for data, with the S&P Global Manufacturing PMI Final due on Friday. The overarching driver for GBP will be the strong market expectation of a Bank of England interest rate cut at its upcoming August meeting, which continues to weigh on the currency's medium-term outlook.
EUR
The Euro displayed a more neutral performance last week, consolidating after prior gains against the US Dollar. The European Central Bank (ECB) kept all key interest rates unchanged at its July meeting, a decision that was widely anticipated and marked a pause in their aggressive easing cycle. While Eurozone inflation has returned to target, ECB President Christine Lagarde maintained a cautious tone, emphasizing "data-dependent" policy and highlighting downside risks from global trade disputes and the Euro's recent appreciation. The Eurozone Composite PMI Output Index rose to 51.0 in July, indicating an 11-month high in private sector growth. For the week ahead, while no major ECB policy announcements are scheduled, the Euro's performance will remain sensitive to developments in US-EU trade deal negotiations and broader global risk sentiment.
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