August Exchange Weekly FX Market Outlook – 02/06/2025

We enter June with FX markets firmly focused on inflation prints, central bank signals and the broader macroeconomic mood. Following a slower week due to the UK bank holiday, this week builds momentum with data from the UK, US, Eurozone, and other G10 economies. Geopolitical events and shifting rate expectations continue to drive volatility across key currency exchange pairs.

While no major releases started the week due to Monday’s bank holiday, the UK calendar is still worth watching.

• Final Services PMI (Wednesday): Although not usually market-moving, any significant revision may influence sentiment around the UK’s services sector resilience.
• BoE Speakers: Remarks from Haskel, Mann, and Dhingra throughout the week could sway GBP depending on tone. Diverging views might inject volatility into sterling crosses.
• Retail Sales (Friday): This will be a key test of consumer resilience amid sticky inflation. A weak read could support dovish BoE bets, pressuring the pound.

Sterling remains sensitive to growth sentiment and interest rate projections. Keep an eye on GBP/USD and GBP/EUR ranges ahead of Friday’s data.

The US dollar takes centre stage this week with crucial labour market readings.

• JOLTS Job Openings (Tuesday): Gives early insight into hiring demand.
• ISM Services PMI (Wednesday): A read on the health of the largest sector in the US economy.
• Nonfarm Payrolls (Friday): The headline act. A softer-than-expected figure could increase odds of a Fed cut by September, potentially weakening the dollar. A strong result might delay cuts, keeping the USD supported.

The USD continues to reflect the balance between sticky inflation and a cooling labour market. Expect movement on EUR/USD, GBP/USD and USD/JPY in response.

The euro faces a critical week with several key data points and a major central bank meeting on deck:

• Thursday – Retail Sales: A read on consumer spending to close the week. Weak numbers would further validate the ECB’s policy path and raise questions about the strength of the Eurozone economy.
• Tuesday – Flash CPI: Eurozone inflation figures will set the tone. A softer print would support expectations of policy easing, potentially weakening the euro.
• Thursday – ECB Policy Rate Decision: Markets widely anticipate a 25bps cut, marking the start of the ECB’s easing cycle. A dovish press conference from President Lagarde would likely reinforce euro-negative sentiment.

The Reserve Bank of Australia is expected to hold rates steady, but markets will dissect the accompanying statement. A dovish lean, especially in response to China demand concerns, could drive AUD volatility.

The Bank of Canada may not move rates, but any dovish shift in tone could pressure CAD, particularly if inflation or consumer spending appear to be slowing.

USD/JPY continues to flirt with intervention territory. Watch for jawboning from Japanese officials. Any official action or strong warnings may result in sharp reversals in yen pairs.

• Ongoing tensions in the Middle East and South China Sea continue to support safe-haven flows into USD and JPY.
• Oil prices remain elevated, helping support CAD and NOK, while weighing on global inflation expectations.
• Chinese growth concerns remain a drag on AUD and NZD sentiment.

With multiple central bank speakers and inflation prints scheduled, volatility is expected. Pairs like GBP/USD and EUR/USD remain reactive to policy signals and consumer data, and daily ranges have widened in recent weeks.

For businesses managing FX risk, now is an ideal time to review exposure. Hedging strategies and forward contracts can provide protection and predictability in unpredictable conditions. August Exchange continues to support clients with tailored currency exchange solutions, ensuring better value and transparency than high-street banks or traditional brokers.

In 2022, the Russian ruble became the world’s best-performing currency for part of the year, despite global sanctions. This was largely due to capital controls, energy exports, and forced currency conversion policies.