GBP/USD… ends a four-day losing streak — just barely! Such a turnaround would’ve seemed implausible a month ago, before Federal Reserve Chair Jerome Powell’s September pivot. The US Dollar Index (DXY) saw violent moves this week. That wiped out almost all of its gains from last week’s move and then some, falling back below the 97.60 level. This drop represents a third straight week of losses for the DXY, indicating a significant change in the mood of the markets.
Throughout the week, market participants recognized a return of positive sentiment. After the Greenback hit new three-week lows, traders were forced to reassess their market positions. Annualized German inflation numbers are forecast to increase modestly to 2.1% YoY. This rate will nicely remain below the projected 2.0-2.3% through 2025. These are the kinds of economic indicators that matter — they’re the ones that shape traders’ expectations and create momentum in the markets.
The GBP/USD trading pair will face a truncated trading week. This is due to the fact that in London markets are closed Monday for an extra long weekend. Therefore, there are no important economic data releases due for the currency pair throughout that time. Despite the recent increase, GBP/USD pressure is seen back under pressure as the Pound Sterling battles to sustain bidding support.
The USD/JPY currency pair surprised nobody by extending its streak of negligible week-on-week movement, hovering near the 147.50 area all week. This stability follows a five-week period where the Dollar-Yen pairing has been remarkably stable. Traders are now eagerly waiting the next Tokyo Consumer Price Index (CPI) inflation data due August 28. The preliminary inflation metric has consistently remained above the Bank of Japan’s (BoJ) target band since March, indicating persistent inflationary pressures.
As the week closes, GBP/USD’s recovery on Friday helped pare back most of the week’s losses. The future does show a bias to the downside as these market forces remain in flux. With very little economic data likely to have an impact in the US and Japan next week, it’s difficult to see much currency pair movement.