FX Weekly Forecast: US Dollar to Strike New Multi-Month Lows as Inflation Cools?

US Dollar (USD)

The US Dollar (USD) looks poised to test new multi-month lows this week with the publication of the latest core PCE price index. The Federal Reserve’s preferred indicator for inflation is forecast to have fallen again in October. This is likely to reinforce Fed rate cut speculation and extend the USD selling bias. Although there is a chance for USD exchange rates to rebound later in the week if Fed Chair Jerome Powell pushes back against the rate cut narrative in his speech on Friday. 

Pound (GBP)

After appreciating sharply last week, the Pound (GBP) may struggle to maintain this momentum this week in the absence of any high impact UK data releases. However, Sterling may still be able to draw support from the recent series of hawkish remarks from Bank of England (BoE) policymakers.

Euro (EUR)

Acting as the main catalyst of movement in the Euro (EUR) this week is likely to be the Eurozone’s latest consumer price index. November’s preliminary CPI figures are expected to report inflation continues to cool. If EUR investors believe this will push the European Central Bank (ECB) to begin discussing interest rate cuts, then the single currency is likely to plummet.

Australian Dollar (AUD)

Downbeat domestic retail sales data could apply some pressure to the Australian Dollar (AUD) in the first half of this week. Otherwise, movement in the ‘Aussie’ is likely to remain tied to market risk appetite, with AUD exchange rates likely to advance so long as the US Dollar remains on the defensive.

South African Rand (ZAR)

Following last week’s selloff, the South African Rand (ZAR) may remain on the back foot this week after state utility Eskom reintroduced loadshedding measures over the weekend. These scheduled power cuts continue to cause significant disruption to South African economic activity and risk the country slipping into a recession.

Canadian Dollar (CAD)

The publication of Canada’s latest GDP figures could weigh on the Canadian Dollar (CAD) this week as economists forecast that domestic growth will have stalled again in the third quarter. Canada’s jobs report may also pressure the ‘Loonie’ amid expectations unemployment will have risen this month.

New Zealand Dollar (NZD)

Driving movement in the New Zealand Dollar (NZD) this week will be the Reserve Bank of New Zealand’s (RBNZ) latest interest rate decision. Will another interest rate hold, and some dovish forward guidance trigger a plunge in the ‘Kiwi’ on Wednesday?

Matthew Andrews

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