As the week unfolds, major currency pairs such as GBP/USD, EUR/USD, and USD/JPY might experience significant shifts driven by the dollar, despite a relatively light economic data schedule. Investors are increasingly anticipating a rate cut of at least 25 basis points in September, following rising U.S. unemployment and cooling inflation. The Jackson Hole symposium could provide crucial insights from the Federal Reserve Chair about potential rate cuts.
In the coming week, the economic calendar is expected to be less eventful. The most notable event will be the Jackson Hole symposium on Friday, where central bank leaders will gather. The latest U.S. retail sales data released on Thursday surpassed expectations but only gave the dollar a temporary boost. By Friday’s mid-session, the dollar had lost these gains. This decline is attributed to the Fed’s shifting focus from inflation control to employment issues. With the unemployment rate now at 4.3%, above the Fed’s target, traders are paying closer attention to employment data, which explains the dollar’s inability to maintain strength despite strong retail sales.
Upcoming Key Events: Jackson Hole Symposium and Global PMIs
The upcoming week appears relatively calm economically, with the spotlight on the Jackson Hole Economic Policy Symposium on Friday. The global PMIs, scheduled for mid-week, will also be closely monitored.
For U.S. PMIs, particular attention will be given to services inflation and any signs of continued deceleration. A gradual slowdown could support the soft-landing narrative, while weaker-than-expected data in various indicators might lead to a dollar sell-off as markets speculate on possible Fed rate cuts.
In the UK, inflation in the services sector remains a major concern. Persistent strong inflation could create division among the Bank of England’s rate setters, complicating potential rate cuts. Stronger UK inflation data might positively influence the GBP/USD forecast.
The Jackson Hole Symposium on Friday will be pivotal. Historically, this event has been a platform for the Fed to signal major policy changes. The symposium may provide hints about a potential rate cut at the Fed’s September 18 meeting. Recent data, including robust retail sales and jobless claims, suggest a 25-basis point cut is more likely than the previously anticipated 50-basis point reduction. However, the Fed’s increased focus on the labor market means the upcoming non-farm payrolls report on September 6 will be crucial for their final decision. Any strong indication of a September rate cut at Jackson Hole could weaken the dollar and support a modestly bullish GBP/USD outlook.
Conversely, if a hawkish Fed stance emerges, the GBP/USD forecast might shift, especially if it breaks July’s low of 1.2615. Key support levels to watch for potential rebounds include the 1.2850 area and longer-term support around the 1.2700 – 1.2750 range.
