Euro Weakens Amid Economic Concerns, USD Rises on Strong Data: What to Expect from Upcoming Central Bank Moves

This week, global markets are closely watching how major currencies and commodities respond to evolving economic conditions and central bank signals. The Euro faces headwinds from weak economic sentiment in the Eurozone, while the U.S. Dollar continues to gain traction amid strong economic data. Other currencies, such as the British Pound, Australian Dollar, and Japanese Yen, grapple with a mix of inflation concerns, economic growth issues, and central bank policies. Commodities like crude oil, gold, and silver are also experiencing fluctuations driven by demand uncertainties and geopolitical risks.

EUR (Euro):

The Euro has been under pressure due to weak economic sentiment in the Eurozone and concerns over Germany’s industrial production, which saw a decline in August. The upcoming ZEW Survey (Oct) could provide further insight into the economic sentiment and influence market direction. Additionally, ECB's Lagarde speech and the ECB Bank Lending Survey will be closely watched for any clues on future monetary policy. Forecast: The Euro could remain range-bound or slightly weaker if the data points to further economic slowdown and cautious ECB rhetoric. Inflation readings are expected to remain stable, but low growth concerns will dominate sentiment.

USD (U.S. Dollar):

The U.S. dollar has been benefiting from safe-haven flows amid global uncertainties and strong economic data, including resilient retail sales and improving job numbers. This week, markets will focus on speeches by several Fed officials, as well as data on the Empire State Manufacturing Index and Retail Sales (Sep), which are expected to come in positive. Forecast: If retail sales and other economic data continue to be strong, the USD could strengthen further, especially if Fed officials maintain their hawkish stance on interest rates.

GBP (British Pound):

The Pound is navigating through mixed signals as the UK economy faces high inflation but weak economic growth. Key data points this week include the Average Earnings and ILO Unemployment Rate. Additionally, the BoE Monetary Policy Report Hearings may give some indication of future interest rate hikes or pauses. Forecast: If wage growth remains robust and unemployment stays stable, this could provide a floor for the GBP. However, a cautious BoE stance may limit significant gains.

AUD (Australian Dollar):

The AUD has been volatile due to concerns over China’s economic slowdown (Australia’s largest trading partner) and the impact of tightening monetary policy. The Employment Change (Sep) and Unemployment Rate (Sep) reports will provide key insights. Forecast: The Australian dollar may remain pressured if employment data disappoints. China’s trade and GDP figures could also weigh on sentiment.

JPY (Japanese Yen):

The JPY has been weak due to the Bank of Japan's (BoJ) ultra-loose monetary policy. However, the ongoing concern over Japan's trade balance and inflation figures could signal a need for policy adjustments. Forecast: The JPY could remain under pressure unless the CPI (Sep) or Trade Balance (Sep) surprises the market with stronger-than-expected data.

WTI (Crude Oil):

WTI crude prices have been fluctuating due to concerns over global demand, particularly from China, and geopolitical risks. A stable OPEC+ policy and the balance of U.S. inventory data will also play a role. Forecast: Crude oil prices are likely to stay range-bound unless there are new developments on the geopolitical front or significant changes in global demand forecasts.

Gold:

Gold has been experiencing volatility due to the U.S. dollar strength and rising bond yields. However, geopolitical tensions and inflation fears continue to provide some support. Forecast: If Fed officials continue their hawkish tone, gold may face more downward pressure. However, geopolitical concerns and inflation fears could act as a support level, keeping it relatively stable in the near term.

Silver:

Like gold, silver has been impacted by rising bond yields and a stronger U.S. dollar. However, its industrial demand component means it’s also sensitive to global manufacturing data, which has been weakening. Forecast: Silver is expected to remain range-bound but may experience additional volatility if industrial production data, particularly from China and Europe, disappoints.

As economic data unfolds and central banks provide more guidance, markets will be shaped by shifts in sentiment and policy expectations. The direction for currencies and commodities will depend on whether upcoming data confirms current concerns or brings positive surprises. With key indicators and central bank speeches ahead, the potential for volatility remains high, keeping investors alert to any developments that could influence market trends.

The weekly market update is published every Monday. If missed due to unforeseen circumstances, it will be posted the following day.

This is for informational purposes only and should not be interpreted as specific investment advice.

While the information is believed to be accurate, it is not guaranteed and is subject to change without notice.

Past performance does not guarantee future results.

Diversification does not guarantee a profit or protect against loss.

Special risks are inherent to currency fluctuations, foreign political and economic events

Delma Exchange is licensed by the Central Bank of the UAE