The dollar gained again last week. Yet weekly currency moves stayed small.
US inflation data arrives on Wednesday, and UK GDP follows on Thursday. Together, they bring both economies into focus as GBP/USD sits near 1.32, the bottom of its range.
This trading week ahead also compares sterling with two other pairs. EUR/USD dropped below 1.12, while USD/CAD reacted to a weak Canadian jobs report.
Why the Dollar Stayed Firm
The Fed minutes released last week leaned hawkish. Most participants considered another rate increase likely to be appropriate by year end. They also saw the risks to inflation as tilted to the upside.
However, those minutes cover September’s meeting. They describe the discussion before the subsequent weak US jobs report, rather than officials’ response to that report.
Those minutes reinforced expectations of further tightening. Meanwhile, elevated Treasury yields added support, and the dollar extended its winning streak.
The US Dollar Index gained about 0.3% on the week and closed above the former resistance level at 101.39. However, the weekly candle was small, with a notable upper wick. That shape can suggest that buying momentum is starting to fade.
Energy Keeps Inflation Risk Alive
Energy adds another layer. Reports of possible US strikes on Iran pushed crude oil sharply higher on Thursday. Then President Trump said he planned no attack before the US midterm elections, which eased supply fears on Friday.
Still, that reassurance looks fragile. Trump later left open the possibility of earlier action, and Brent settled above $104 a barrel.
Higher energy prices can keep inflation elevated. In turn, that can strengthen the case for tighter policy. Meanwhile, hiring and consumer confidence have shown signs of weakening.
What Wednesday’s CPI Could Change
US CPI is central to this week’s dollar outlook. In the previous report, headline prices rose 0.4% on the month and 3.4% on the year.
The calendar forecast calls for a 0.6% monthly headline increase and a 0.2% rise in core CPI. Core CPI excludes food and energy, so the two measures can tell different stories.
A result above expectations could strengthen the case for further tightening. By contrast, a softer result could challenge it. However, the mix of headline and core inflation matters alongside the size of any surprise.
Thursday’s PPI and retail sales figures add different evidence. PPI tracks producer selling prices, while retail sales measure spending at retailers. Together, they add context on prices and demand, rather than provide two direct measures of inflation.
GBP/USD: Two Economies, One Support Test
GBP/USD sits at the bottom of its trading range, near 1.32. That large round number is a psychologically significant level, so many traders watch it closely.
The 200-week exponential moving average (EMA) is also approaching the same area. This average smooths weekly prices while giving recent observations more weight. Its proximity adds technical context, but it cannot establish whether support will hold.
Similar Rates Shift the Focus to Data
UK and US policy rates sit at similar levels. Therefore, a large current policy-rate gap offers a less convincing explanation for this pair than for some others.
However, similar current rates do not mean identical expected rate paths or bond yields. Inflation and growth data matter because they can change those expectations. This week brings evidence from both economies within roughly a day.
How US Inflation and UK Growth Could Interact
US CPI comes first, on Wednesday morning. UK GDP follows early on Thursday, after a previous monthly reading of 0.4% growth. Later that day, BOE Governor Bailey speaks.
The releases address different parts of the policy debate:
- US CPI: headline and core readings help assess the persistence of price pressure.
- UK GDP: monthly output adds evidence about the strength of economic activity.
- Central bank speeches: comments may clarify how officials interpret the latest outlook.
The calendar forecast points to a 0.1% monthly UK GDP decline. Therefore, the comparison with expectations matters as well as whether growth is positive or negative.
Mixed results do not guarantee that the pair stays within its range. Markets can place more weight on one release than another.
For traders, the order of events matters. Thursday’s UK data lands in a market that has already absorbed CPI.
How Sterling Compares With EUR/USD and USD/CAD
EUR/USD: A Fiscal Problem
EUR/USD fell again last week and traded below the 1.12 handle. It then clawed back some losses before the weekly close.
France’s heavy public debt, and the political obstacles to budget cuts, weighed on confidence in eurozone assets. Fiscal concerns have also pushed up borrowing costs in Italy and Greece. Meanwhile, higher oil prices added further pressure.
The pair has also dropped below its 200-week EMA. Its weekly chart shows a sequence of lower highs and lower lows. Still, last week’s small candle had a long lower wick, showing a recovery from the week’s low without confirming a reversal.
This adds a distinct layer to the euro’s outlook. Sterling has its own domestic risks, while both pairs remain sensitive to US data and rates.
USD/CAD: A Jobs Miss Shifts the Rate Path
The US dollar initially slipped against the Canadian dollar last week. Then Friday’s Canadian employment report came in materially weaker than expected.
The implied probability of an October 28 Bank of Canada hike fell from 40% before the report to 25% afterward. That repricing weakened one potential source of support for the Canadian dollar. However, market probabilities change and do not represent a central bank commitment.
USD/CAD sits just above 1.4250, a previous reference area. Meanwhile, US releases remain relevant to the dollar side of the pair. The selected calendar below is not an exhaustive list of Canadian or global events.
Price action around that area provides context, but it cannot isolate the effect of the jobs report from other influences.
Key Events This Week (ET)
The selected events below include economic releases and scheduled speeches. All times use Eastern Time and may change.
- Wed Oct 14, 8:30 AM: CPI and Core CPI (USD)
- Wed Oct 14, 8:30 PM: Employment Change and Unemployment Rate (AUD)
- Thu Oct 15, 2:00 AM: GDP m/m (GBP)
- Thu Oct 15, 8:30 AM: PPI, Core PPI, Retail Sales and Core Retail Sales (USD)
- Thu Oct 15, 10:00 PM: BOE Gov Bailey Speaks (GBP)
- Thu Oct 15, 11:30 PM: Fed Chairman Warsh Speaks (USD)
Wednesday: Australian Jobs
Australia’s employment data arrives late on Wednesday, Eastern Time. The calendar forecasts 20,000 additional jobs and an unchanged unemployment rate of 4.6%.
Meanwhile, the figures add evidence for the RBA’s policy debate. The payroll change and unemployment rate need not send the same signal.
Thursday: Data, Then Two Central Bank Chiefs
Thursday is the busiest day. UK GDP opens it, and US PPI and retail sales follow at 8:30 AM. In the previous release, retail sales rose 1.2% on the month.
Late in the day, Bailey and Warsh both speak. As a result, any comment on the policy path could shift rate expectations after a full day of data.
What This Means for Traders
Small weekly changes do not mean prices stayed quiet throughout every session. This week brings several opportunities to reassess the outlook, without guaranteeing larger moves.
GBP/USD connects the week’s US and UK releases. It sits near range support, while the data adds context on the two economies and their expected policy paths.
EUR/USD and USD/CAD add contrast. The first reflects fiscal stress in Europe, while the second reflects a shift in Canadian rate expectations.
The sequence also matters: UK GDP follows US CPI, and Thursday’s speeches come after both countries release data. Each event adds information to a picture that may already have changed.
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Frequently Asked Questions
Why Could Volatility Pick Up This Week?
Weekly currency changes were small last week, although that does not measure every intraday move. This week brings US CPI, UK GDP and central bank speeches. Surprises may change rate expectations, but a busy calendar does not guarantee greater volatility.
Why Does 1.32 Matter for GBP/USD?
The 1.32 area marks the bottom of the pair’s recent trading range. It is also a large round number, and the 200-week EMA is approaching it. However, a technical level describes market context and cannot guarantee that the range will hold.
How Could US CPI Affect the Dollar?
A hotter-than-expected reading could strengthen expectations of further tightening. By contrast, a softer reading could weaken that case. However, the currency reaction also depends on the report’s details and prior market expectations.
Why Did the Canadian Dollar Weaken After the Jobs Report?
Friday’s employment report came in materially weaker than expected. The implied probability of an October 28 Bank of Canada hike subsequently fell from 40% to 25%. That change helps explain the Canadian dollar’s weakness, alongside other market influences.
Disclaimer
This article serves educational purposes only. It does not constitute investment advice, a recommendation, or a solicitation to trade any financial instrument. ThinkCapital’s challenge programs use simulated trading in a virtual environment; they do not place real capital in live markets. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Technical levels discussed here describe current market structure; they do not predict future results.
