Pound and Euro Face Headwinds as US Dollar and Japanese Yen Gain Momentum
Market Analysis for Week Number 15 2024
Sunday, April 07, 2024 - Week 15: In the coming days, the US dollar may gain strength on the back of higher inflation expectations and robust economic data, while the Japanese yen could appreciate due to sustained high inflation and the Bank of Japan's gradual monetary policy normalisation. The British pound and the euro may face downward pressure amid growth concerns and dovish central bank stances. Traders should closely monitor the upcoming US inflation data, the ECB's interest rate decision, and various economic releases from the UK and Japan for potential volatility triggers.
Trading involves a possibility of losing money therefore all decisions in market speculation are undertaken at your own financial risk.
USD/JPY: Yen's Resilience Tested by Robust US Data
In the long term, USD/JPY is likely to face downward pressure as the Bank of Japan gradually normalises monetary policy and inflation moderates. In the short term, the yen may appreciate on verbal interventions from Japanese authorities, despite expectations of accommodative BOJ policy. Trading Economics expects USD/JPY at 153.53 by end-Q2 2024.
Last week, USD/JPY saw volatile moves, appreciating sharply on March 25-26 as the yen weakened amid dovish BOJ policy expectations. The pair retreated on March 27-28, as Japanese authorities ramped up verbal interventions to stem yen declines. USD/JPY stabilised around 151.30-151.60 for the remainder of the week.
Key events that may impact USD/JPY volatility in the coming week:
Wednesday, April 10: US Core Inflation Rate (YoY) (3.8% forecast vs. 3.7% prior) and US Inflation Rate (YoY) (3.2% forecast vs. 3.0% prior) - higher inflation may support USD.
Thursday, April 11: US Initial Jobless Claims (221K prior) and US PPI (MoM) (0.6% forecast vs. 0.3% prior) - strong labour market and rising producer prices may boost USD.
Friday, April 12: US Consumer Confidence (79.4 forecast vs. 70.0 prior) - improving consumer sentiment may strengthen USD.
GBP/USD: Pound Pressured by Growth Concerns and Dovish BoE Expectations
In the long term, GBP/USD may face downward pressure as concerns over the UK's growth prospects and the potential for BoE rate cuts weigh on the Pound. In the short term, the currency pair could see volatility driven by US economic data releases, with the Pound potentially weakening if the data supports a less dovish Fed stance. Trading Economics expects GBP/USD at 1.25 by end-Q2 2024.
Last week, GBP/USD saw a sharp decline on March 21, falling from 1.2786 to 1.2649, as robust US jobs data raised expectations of fewer Fed rate cuts this year compared to the BoE. The pair then traded in a range between 1.2561 and 1.2657 for the remainder of the week.
Key events that may impact GBP/USD volatility in the coming week:
Wednesday, April 10: US CPI (YoY) (3.2% forecast vs. 3.0% prior) and Core CPI (YoY) (3.8% forecast vs. 3.7% prior) - higher inflation may support USD.
Thursday, April 11: US Initial Jobless Claims (221K prior) and US PPI (MoM) (0.6% forecast vs. 0.3% prior) - strong data may boost USD.
Friday, April 12: UK GDP (MoM) (0.2% forecast vs. 0.3% prior) and UK Industrial Production (MoM) (-0.2% forecast vs. 0.3% prior) - weak data may pressure GBP.
GBP/JPY: Pound Vulnerable to UK Growth Concerns, Yen Supported by Inflation
In the long term, GBP/JPY may face downward pressure as concerns over the UK's growth prospects and potential BoE rate cuts weigh on the Pound, while the BoJ's gradual monetary policy normalisation supports the yen. In the short term, the currency pair could see volatility driven by economic data releases from both countries, with the Pound potentially weakening if UK data disappoints and the yen strengthening on higher inflation. Trading Economics expects GBP/JPY at 189.25 by end-Q2 2024.
Last week, GBP/JPY experienced volatility, falling sharply from 193.41 to 191.81 on March 21 as the Pound weakened on expectations of fewer BoE rate hikes compared to the Fed. The pair then traded in a range between 190.40 and 191.98 for the remainder of the week.
Key events that may impact GBP/JPY volatility in the coming week:
Tuesday, April 9: Japan Producer Prices (YoY) (0.6% forecast vs. 0.5% prior) - higher inflation may support JPY.
Wednesday, April 10: UK GDP (MoM) (0.2% forecast vs. 0.3% prior) and UK Industrial Production (MoM) (-0.2% forecast vs. 0.3% prior) - weak data may pressure GBP.
Thursday, April 18: Japan Core Inflation Rate (YoY) (2.8% forecast vs. 2.8% prior) and Japan Inflation Rate (YoY) (2.8% forecast vs. 2.8% prior) - sustained high inflation may boost JPY.
EUR/JPY: Euro Weakness and Yen Resilience to Drive Pair Lower
In the long term, EUR/JPY may face downward pressure as the euro weakens on growth concerns and a dovish ECB outlook, while the BoJ's gradual monetary policy normalisation supports the yen. In the short term, the currency pair could see volatility driven by economic data releases from both regions, with the euro potentially weakening if inflation moderates and the yen strengthening on higher inflation. Trading Economics expects EUR/JPY at 162.80 by end-Q2 2024.
Last week, EUR/JPY experienced volatility, falling sharply from 165.18 to 164.34 on March 21 as the euro weakened on expectations of ECB rate cuts. The pair then traded in a range between 163.05 and 164.40 for the remainder of the week.
Key events that may impact EUR/JPY volatility in the coming week:
Tuesday, April 9: Japan Producer Prices (YoY) (0.6% forecast vs. 0.5% prior) - higher inflation may support JPY.
Wednesday, April 10: Euro Area Interest Rate Decision (4.5% forecast vs. 4.5% prior) - a dovish stance may pressure EUR.
Thursday, April 18: Japan Core Inflation Rate (YoY) (2.8% forecast vs. 2.8% prior) and Japan Inflation Rate (YoY) (2.8% forecast vs. 2.8% prior) - sustained high inflation may boost JPY.
EUR/USD: Euro Faces Headwinds from Dovish ECB and Strong US Data
In the long term, EUR/USD may face downward pressure as growth concerns and a dovish ECB outlook weigh on the euro, while the resilient US labour market and elevated inflation support the dollar. In the short term, the currency pair could see volatility driven by US inflation data and the ECB's interest rate decision, with the euro potentially weakening if the ECB maintains a dovish stance. Trading Economics expects EUR/USD at 1.08 by end-Q2 2024.
Last week, EUR/USD experienced volatility, falling sharply from 1.0921 to 1.0855 on March 21 as the dollar strengthened on robust US jobs data. The pair then traded in a range between 1.0763 and 1.0838 for the remainder of the week.
Key events that may impact EUR/USD volatility in the coming week:
Monday, April 8: US Inflation Expectations (3% forecast vs. 3% prior) - higher expectations may support USD.
Wednesday, April 10: US CPI (YoY) (3.2% forecast vs. 3.0% prior), US Core CPI (YoY) (3.8% forecast vs. 3.7% prior), and Euro Area Interest Rate Decision (4.5% forecast vs. 4.5% prior) - higher US inflation and a dovish ECB may pressure EUR.
Friday, April 12: US Consumer Confidence (79.4 forecast vs. 70.0 prior) - improving sentiment may boost USD.
EUR/GBP: Euro Weakness and Pound Resilience to Drive Pair Higher
In the long term, EUR/GBP may face upward pressure as growth concerns and a dovish ECB outlook weigh on the euro, while the UK's persistent inflation and the BoE's hawkish stance support the pound. In the short term, the currency pair could see volatility driven by the ECB's interest rate decision and UK economic data releases, with the euro potentially weakening if the ECB maintains a dovish stance and the pound strengthening on positive data. Trading Economics expects EUR/GBP at 0.8571 by end-Q2 2024.
Last week, EUR/GBP traded in a tight range between 0.8528 and 0.8584, with a brief spike to 0.8540 on March 21 as the pound weakened on expectations of fewer BoE rate hikes. The pair then stabilised around 0.8550-0.8580 for the remainder of the week.
Key events that may impact EUR/GBP volatility in the coming week:
Monday, April 8: UK BRC Retail Sales Monitor (YoY) (1.0% prior) - a higher reading may support GBP.
Wednesday, April 10: Euro Area Interest Rate Decision (4.5% forecast vs. 4.5% prior) - a dovish stance may pressure EUR.
Friday, April 12: UK GDP (MoM) (0.2% forecast vs. 0.3% prior), UK Industrial Production (MoM) (-0.2% forecast vs. 0.3% prior), and UK Trade Balance (£-3.129B prior) - weaker-than-expected data may weigh on GBP.
Gavin Pearson
Retail trader since 2008
Specialises in forex
Funded account from the 5ers.com
Member of the eToro Popular Investors Program
Regular contributor to FXStreet.com analysis and education pages
Returned 27% in 2022 and -2.7% in 2023
Exclusively forex focused
Copy Trading available at eToro
Disclaimer
Past performance is not indicative of future results
Trading involves risk, and you could lose money
-end-