This week’s global foreign exchange market showed diversified fluctuations, with the US dollar becoming the focus currency, driven by strong economic data and safe-haven demand, while other major currencies such as the Japanese yen, pound and euro underperformed. The following is a review and analysis of the trends of each major currency this week.
USD: Dollar strengthens on strong jobs data
The dollar has risen sharply this week, hitting a seven-week high and on track for its best weekly performance since September 2022. The dollar’s rise was mainly due to strong September non-farm payrolls data and hawkish comments from Federal Reserve Chairman Powell.
Data showed that the United States added 254,000 new jobs in September, far exceeding the 140,000 expected. At the same time, the unemployment rate unexpectedly fell to 4.1% from 4.2% in August, indicating that the labor market continues to remain strong. This data weakened market expectations that the Federal Reserve will significantly cut interest rates in November, causing the market to adjust its future monetary policy expectations.
Analyst Views
Analyst Karl Schamotta believes that this employment report has undoubtedly enhanced the market’s confidence in the “no landing” scenario of the U.S. economy, and the Federal Reserve is expected to relax policy more cautiously. At the same time, the market has priced in expectations that the Federal Reserve may gradually cut interest rates before 2025.
Chicago Fed President Goolsby expressed satisfaction with this week’s employment data, believing that it will help increase confidence in the health of the economy and that the U.S. labor market is expected to continue to remain strong in the coming months.
Japanese Yen: Safe-haven currency under pressure, hitting multi-year lows
USD/JPY continued to rise this week, reaching a high of 149.02, marking its best weekly performance since 2009. The dovish stance of the Bank of Japan contrasts sharply with the relatively hawkish stance of the Federal Reserve, causing continued pressure on the yen. Although the market demand for the Japanese yen as a safe-haven currency has increased, it still cannot prevent the Japanese yen from depreciating.
economic events
This week, Japanese Prime Minister Shigeru Ishiba said that the Japanese economy was not ready to raise interest rates, which was a departure from his previous statement, and the market reacted strongly to this. In addition, due to the expansion of conflicts in the Middle East, market risk aversion has increased, but the safe-haven properties of the US dollar have overwhelmed the Japanese yen.
Analyst Views
Analysts believe that the Bank of Japan may need to continue to maintain loose monetary policy in the coming months, which will further limit the appreciation space of the yen. At the same time, the Japanese yen remains one of the top choices for safe havens in global markets, but its status is being challenged by the U.S. dollar.
Euro: Economic weakness weighs on euro performance
This week, the euro fell to $1.09515, hitting a two-month low. Slowing economic growth in the euro zone and weaker-than-expected inflation data in the euro zone have put pressure on the euro. Although the European Central Bank is likely to maintain tightening policy in the future, the weakness of its economic fundamentals makes it difficult for the euro to find support.
economic events
This week, inflation data released by the Eurozone continued to show signs of weak growth, while German industrial production data also dissatisfied. This has intensified market concerns about the economic outlook of the euro zone and dragged down the performance of the euro.
Analyst Views
Analysts pointed out that the weak economic data in the euro zone has intensified the market’s doubts about the European Central Bank’s room to raise interest rates. It is expected that the euro will be difficult to escape downward pressure in the short term. The market needs to pay attention to next week’s Eurozone economic data to determine whether the euro will weaken further.
Sterling: BoE policy uncertainty fuels pound volatility
Sterling has also been under pressure this week, falling to 1.3070 against the dollar, its lowest level since September 12. Policy differences within the Bank of England further exacerbated the volatility of the pound. Although Bank of England chief economist Peel called for a gradual reduction in interest rates, Governor Bailey’s speech showed a more aggressive stance on interest rate cuts, which triggered market speculation on the future policy direction.
economic events
This week, the economic data released by the United Kingdom failed to effectively support the trend of the pound, and the market also has great uncertainty about the future direction of the Bank of England’s monetary policy. In addition, rising risk aversion in global markets failed to boost the pound.
Analyst Views
Analysts believe that the short-term trend of the pound will be mainly affected by the Bank of England’s policy expectations, and the market needs to pay close attention to the Bank of England’s future speeches and economic data. If the Bank of England turns further dovish, the pound could continue to fall.
Canadian Dollar: Fluctuations in crude oil prices affect the trend of the Canadian Dollar
The Canadian dollar has fluctuated greatly against the U.S. dollar this week, mainly affected by fluctuations in global crude oil prices. Crude oil prices have risen sharply as tensions in the Middle East escalate, which has supported the Canadian dollar to some extent. However, weak domestic economic data in Canada limited further gains for the Canadian dollar.
economic events
This week, economic data released by Canada failed to effectively boost market confidence, and the Bank of Canada’s policy expectations still maintained a dovish stance, which further suppressed the Canadian dollar’s rising momentum.
Analyst Views
Analysts pointed out that the future trend of the Canadian dollar will be mainly affected by the fluctuation of crude oil prices, and the market needs to pay attention to the further development of the situation in the Middle East and the policy changes of the Bank of Canada. In the short term, the Canadian dollar’s upside may be limited.
The focus of the foreign exchange market this week is undoubtedly the strong performance of the U.S. dollar, which has become the best-performing major currency this week thanks to improving U.S. economic data and the Federal Reserve’s hawkish stance. At the same time, currencies such as the yen and the euro have performed relatively weakly due to the weakness of their respective domestic economies and differences in central bank policies. In the coming week, the market will continue to pay close attention to global economic data and central bank policy trends to determine the further trend of major currencies.
