Here’s a recap of the wild ride on the foreign exchange market this week. Arguably the most successful GBP trade was in favor of sterling strength against the USD. On Friday, GBP/USD made significant gains to near the 1.3450 mark. It recovered from its daily bottoms as the Greenback’s strength faded. This shift reflects broader trends in the currency market as investors recalibrate their expectations ahead of significant economic data releases.
The GBP/USD has been one of the strongest currency pairs recently. This spike is largely attributable to a hawkish pivot by the Bank of England during their last meeting on Thursday. The BoE’s policy decisions have resulted in an unintentional but marked increase in the British Pound’s strength. With the trading week coming to a close, the Pound now finds itself riding some impressive gains.
On the flip side, the USD is witnessing some modest rebound but still is seen weak amid persistent caution among market players. This transition is shaking up the forex market, most notably with their primary currency pairs like EUR/USD. This dyad managed well to cut its losses and its currently residing slightly above 1.1650. Value up, surprisingly, it is still a little behind as traders begin to judge the new changed market.
Attention now turns toward next week’s anticipated US inflation data release, which is expected to influence investor sentiment and affect currency valuations. The USD risks being hit even harder against other major currencies given the prevailing uncertainty with inflation measures.
Not only because of currency movements, gold prices have created a great deal of fascination with the investor community too. Gold recently eclipsed almost $3400. It has since entered into a consolidation phase after retracing much of its previous advance from late highs above $3,410. The market’s response to the United States’ recent announcement regarding a tax on one-kilo and 100-ounce gold bars has been supportive of gold prices, suggesting that investors are viewing these developments with cautious optimism.
GBP/USD is on track to finish the week up substantially. External factors and positive economic signs from the UK are fueling this trend. The British Pound is the strongest it’s been in years. Compare that to the USD which is experiencing some uncertainty as the market prepares for some very important economic data released next week.