The resurgence of the USD towards the back end of last week, following the US’s posting strong figures in their latest nonfarm payrolls release, unfortunately for USD sellers, this momentum has fallen flat on its face in the early parts of this morning. However, with plenty of data out next week, including the next highly anticipated interest decision where we finally find out whether the Fed will stick or twist (forecasts are constantly changing).

Considering this year, we were anticipating the USD to lose ground against its major competitors following the extreme strength we have seen the USD command for the last year; it is of no surprise that I seem to spend most of my time talking about the USD. However, I must say they are certainly holding a lot better than early predictions, and although we have touched on multi-month highs in both EUR/USD and GBP/USD, the mixed results in the US have seen in recent months means investors and traders alike are yet to give up on the Dollar being the main safe haven, making it extremely difficult for their competitors to hold onto ground gained.

It is creating an extremely interesting yet difficult economic landscape to decipher, with next week now becoming potentially key in setting up the forecasts for the rest of the year. The US will start their jam-packed week of major data with CPI inflation data, likely to heavily influence the next day’s Federal Funds Rate decision. Forecast to come out at 4.2% y/y, it will be interesting to see if they will continue the trend of the last 2 months in which it has come softer than anticipated, albeit marginally. Should this be the case, or even if it comes out in line with forecasts, we will likely see the Fed opt to hold its base rate at 5.25%. This, in theory, should see the USD weaken against most major currencies. Any noticeable upswing on Tuesday’s CPI results will, however, put the Fed in a difficult position, and should we see another 25bp from the Fed, I would expect the Greenback to strengthen once more.

Thursday, the US will post its latest retail sales figures, unemployment claims, Manufacturing index results, and Consumer Sentiment out on Friday afternoon. This gives us a broad insight into whether the Fed was correct to either pause or hike their rates.

Elsewhere in the world, we have big weeks for both the Eurozone and the BOJ, who will both make their latest monetary policy statements, which, with the JPY seeing 10-year lows against Sterling, is surprising considering they were forecast to see extreme strength in the opening few months of this year. EUR has suffered over recent weeks as well, with them moving into a “technical recession” yesterday and losing more ground against Sterling, and now looking likely, once again, to fall to multi-month lows against GBP. Although, as we have seen in recent months, it can all change in an instant—at least for now, Sterling is King!