Any fears that USD weakness would waiver over the Bank holiday were quashed in the early part of this week as both Sterling and Euro held onto their recent gains. An opportunity missed that would set a trend for the week to come, with both EUR and GBP making significant gains against the Dollar. EUR/USD reached its highest levels for a year, and GBP/USD its highest level since last June. Momentum has certainly changed in the G3 currency dynamic, and importers in Europe and the UK must be breathing a sigh of relief, with rates improving the best part of 15% & 10% since the lows of last September for GBP/USD and EUR/USD respectively. This was a dark time for the import/export prices across the globe, but fortunately, it seems to be settling at a much more manageable level.

Data-wise, this week hasn’t helped the US with a Dollar sell-off. The latest CPI figures in the US were released on Tuesday and came out softer than anticipated, further confirming the fact that the US economy is beginning to falter following a year of intensive base rate hikes. It is now becoming increasingly likely that they will begin cutting rates this year, with a 70% chance that they will cut rates by at least 25bp by Christmas. This has, of course, encouraged the sharp sell-off of the safe haven currency and not even poor UK GDP figures could stop Sterling gaining further ground yesterday. Now traders eagerly await retail sales figures out in the US today; further poor figures from the US will exacerbate the sell-off into the weekend, and we could see Cable test new highs.

As we look ahead to next week, it is likely to be relatively stagnant up until PMI Friday. With major inflation data in the G3 dominating the scene on Friday, this will likely be the flashpoint for the currency markets and will be highly anticipated, as traders begin positioning themselves ahead of the next interest rate decisions. In a difficult economic landscape, there is also sure to be surprises in store and opportunities for traders to get favourable rates.