Traderknows Forex Markets Weekly Summary

Traderknows Weekly Forex Summary: Stable Dollar, Pound Boosted by Growth Data

The Dollar Slightly Rose This Week

This Friday, the dollar rebounded slightly after a previous drop due to weak employment data. Data released earlier showed that jobless claims exceeded expectations, hinting at a cooling trend in the US labor market. This further strengthened the market's expectation that the Federal Reserve might start cutting interest rates in September.

Nevertheless, inflation issues remain a focal point. This week, several Fed officials warned that there is "considerable" uncertainty about the inflation trend in the coming months in the US. These remarks have made the consumer price index data to be released next week much anticipated, in order to gain more clues about the direction of interest rates.

The Pound Rose High on Growth Data

In Europe, the pound to dollar exchange rate rose 0.1% to 1.2534. On Thursday, the pound fell to its lowest level since April 24, but rebounded on Friday after data showed that the UK economy achieved its strongest growth in nearly three years in the first quarter of 2024.

The data indicated that the UK's Gross Domestic Product grew by 0.6% in the three months ending March, marking the strongest growth since the fourth quarter of 2021, and signaling that the UK economy had successfully emerged from a shallow recession in the latter half of last year. Moreover, monthly data showed that the UK economy grew by 0.4% in March, exceeding the expected growth of 0.1%.

Despite the Bank of England keeping the interest rates at a 16-year high on Thursday, two out of nine Monetary Policy Committee members voted in favor of lowering rates, indicating the central bank might lean towards a rate cut.

Other Currency Movements

In the Asian markets, the dollar to yen exchange rate rose 0.2% to 155.70, significantly higher than the low of 152 reached at the beginning of the month. Traders now see the 160 level as the new baseline for potential intervention by the Japanese government.

On the other hand, the dollar to yuan exchange rate rose 0.1% to 7.2249. Reportedly, US President Joe Biden is considering imposing new sanctions on certain Chinese industries, such as electric vehicles and batteries, leading to a weakening of the yuan. Although the economic impact of the tariffs is not yet clear, these measures could provoke retaliation from China, exacerbating tensions between the world's two largest economies.