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FOREX: Greenback Extends Weekly Decline, GBPUSD Recovers Back to 1.25

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  • In a very volatile session for G10 currency markets, it is best to run through it in chronological order. Initial moves were USD negative in APAC as headlines crossed from US President Trump around not wanting to use tariffs on China, providing the sense there is potential for negotiations between the two sides and an imminent tariff hike may not be on the cards.
  • This theme has prevailed throughout the session (later bolstered by weaker than expected US PMI), cementing USD index losses in the region of 0.7%, and extending the weekly decline to around 2%.
  • Elsewhere in APAC, the Bank of Japan hiked rates as widely expected, prompting some initial Yen optimism. USDJPY traded as low as 154.85 in the aftermath, however, ongoing caution from Governor Ueda over the BOJ’s easy stance eventually filtered through to a strong USDJPY recovery, briefly rising to a session high of 156.57 as the US session began.
  • In Europe, stronger-than-expected flash PMI data in Germany and the UK in particular have boosted sentiment for EUR and GBP, with both taking advantage of the softer dollar backdrop to extend recovery highs to 1.0521 and 1.2502 respectively. GBPUSD has narrowed the gap substantially to the 50-day EMA, at 1.2522 and an important resistance, while the medium-term trend does remain bearish.
  • Single currency strength helped EURCHF rise above 0.9500 and reach a 5-month high in the process. Importantly, the cross has breached a cluster of highs around this mark, which may signal scope for a stronger recovery towards the August 15 high at 0.9581, before a Fibonacci retracement level at 0.9655.
  • While Trump remarks continue to drive short-term sentiment in FX markets, central banks come back into focus next week, with the Riskbank, BOC, Fed and ECB meetings all scheduled. US Q4 growth data is also on the calendar.
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  • In a very volatile session for G10 currency markets, it is best to run through it in chronological order. Initial moves were USD negative in APAC as headlines crossed from US President Trump around not wanting to use tariffs on China, providing the sense there is potential for negotiations between the two sides and an imminent tariff hike may not be on the cards.
  • This theme has prevailed throughout the session (later bolstered by weaker than expected US PMI), cementing USD index losses in the region of 0.7%, and extending the weekly decline to around 2%.
  • Elsewhere in APAC, the Bank of Japan hiked rates as widely expected, prompting some initial Yen optimism. USDJPY traded as low as 154.85 in the aftermath, however, ongoing caution from Governor Ueda over the BOJ’s easy stance eventually filtered through to a strong USDJPY recovery, briefly rising to a session high of 156.57 as the US session began.
  • In Europe, stronger-than-expected flash PMI data in Germany and the UK in particular have boosted sentiment for EUR and GBP, with both taking advantage of the softer dollar backdrop to extend recovery highs to 1.0521 and 1.2502 respectively. GBPUSD has narrowed the gap substantially to the 50-day EMA, at 1.2522 and an important resistance, while the medium-term trend does remain bearish.
  • Single currency strength helped EURCHF rise above 0.9500 and reach a 5-month high in the process. Importantly, the cross has breached a cluster of highs around this mark, which may signal scope for a stronger recovery towards the August 15 high at 0.9581, before a Fibonacci retracement level at 0.9655.
  • While Trump remarks continue to drive short-term sentiment in FX markets, central banks come back into focus next week, with the Riskbank, BOC, Fed and ECB meetings all scheduled. US Q4 growth data is also on the calendar.