On Friday, the US Dollar Index (DXY) continued its downward trend, sinking below the 100.00 mark for the first time in four years, largely due to a series of disappointing economic indicators from the US. The preliminary Michigan Consumer Confidence Survey for August dropped to 51 from 55.2, noticeably missing expectations, and this decline capped a week marked by slower inflation and a lackluster retail sales report.
This drop in consumer confidence has led to diminished expectations for an interest rate hike by the Federal Reserve (Fed) in September. Next week, the dollar will miss out on key economic data. Instead, all eyes will be on Wednesday’s release of the Federal Open Market Committee (FOMC) minutes from their July meeting, which will detail the divisions among members that unsettled markets recently.
Looking at other currencies, the UK is set to announce employment figures on Tuesday, followed by inflation data on Wednesday and retail sales on Friday. Meanwhile, Japan will release its GDP for the second quarter on Sunday, and China’s economic activity data from July will come out on Monday. Additionally, interest rate decisions by the People’s Bank of China on Thursday are expected to influence resource currencies, with preliminary PMIs for major economies concluding the week on Friday.
The EUR/USD pair finished the week in the low 1.1500s, marking a two-month high and getting close to the 1.1600 level. There aren’t many surprises expected in the eurozone’s upcoming calendar, with Germany’s ZEW survey set for Tuesday. The preliminary PMI on Friday will serve as a significant domestic test, as the market keeps an eye on the ECB’s next moves.
For GBP/USD, the exchange rate closed near a three-month high of 1.3560. The labor market report from the UK is due on Tuesday, with inflation data following on Wednesday—the consumer price index (CPI) is anticipated to rise towards 3%. Retail sales figures will be out on Friday, and surging inflation could complicate the Bank of England’s (BoE) policy, potentially offering fresh support for the pound. Conversely, if the figures come in soft, it might create some domestic challenges after weeks of strong performance.
In the case of USD/JPY, the pair ended the week fluctuating around the low 159.00 yen range. The weakened yen somewhat balanced the dollar’s decline, which came after a strong surge earlier this month. Japan’s schedule is busier than usual, with second quarter GDP data set to come out on Sunday—a 0.5% increase compared to the previous quarter—plus domestic inflation figures later this week.
The Australian dollar against the US dollar hovered around 0.7080, its highest in two months. With the Reserve Bank of Australia (RBA) meeting already wrapped up, focus is shifting to the jobs report planned for Thursday, where job growth is expected to show a significant slowdown from June’s pace. Moreover, China’s industrial production and retail sales on Monday, coupled with the People’s Bank of China’s decisions on Thursday, will influence Australia’s economic trajectory.
Finally, West Texas Intermediate (WTI) crude oil wrapped up the week in the low $80s per barrel, seeing some stabilization on Friday after a week of volatility. Without any significant oil-specific data on the horizon, oil prices are closely linked to developments in the Strait of Hormuz, where traffic recovery has been slow despite the waterway being declared open.
Gold finished the week just under $4,380, showing strength amid a weakening dollar and decreased expectations of a rate hike from the Fed, inching closer to the $4,400 mark. A dovish interpretation of the forthcoming FOMC meeting minutes could further bolster gold prices, especially since there are no major US economic indicators scheduled for release next week.
