**FX Market Weekly Outlook: UBS’s Perspective and Broader Analysis**
*Based on insights from Eamonn Sheridan at ForexLive, with additional context and analysis from broader FX research and market commentary.*
—
As the foreign exchange market enters a fresh week, investors and traders pay close attention to the key macroeconomic events and policy signals that could influence the major currency pairs. The week ahead is set to be a significant one, with policy meetings, inflation data, and central bank communications all on the agenda. Major players such as UBS have issued their views, providing a roadmap for what to expect in the days ahead.
### EUR/USD: A Week of Challenges and Possible Recovery
UBS’s outlook on the euro against the US dollar suggests continued caution, given the euro’s recent struggle to gain a foothold. Last week, the euro suffered losses after the European Central Bank (ECB) delivered its anticipated rate cut but stopped short of providing a dovish outlook that could have supported the currency. Instead, the ECB’s cautious approach left markets questioning just how much easier policy may become, contributing to further euro weakness.
**Key considerations for EUR/USD this week:**
– **Macro Data:** Investors will be eyeing the German ZEW Survey and Eurozone CPI revisions. Although revisions rarely have a material impact, they can sometimes surprise if the previous readings were close to a inflection point. The ZEW Economic Sentiment will give a read on current business confidence in Germany, which is crucial given that the country remains the eurozone’s largest economy.
– **US Data:** In the United States, the Producer Price Index (PPI), Consumer Price Index (CPI), and retail sales data come mid-week. The Federal Reserve is also due to deliver its latest policy decision. Markets are not looking for a rate change, but the focus will be on the updated dot plot and Chair Powell’s tone.
– **ECB Communication:** With the ECB having just cut rates, further dovish signals could weigh on the euro. On the other hand, if officials become concerned about euro weakness adding to imported inflation, this could support the currency.
– **Net Positioning:** According to CFTC data, net long positions in the euro have moderated, which may signal less immediate downside risk if US data underwhelms or the Fed tones down its hawkish message.
UBS notes that further downside in the EUR/USD could be limited unless US inflation significantly overshoots expectations or the Federal Reserve surprises with a strong hawkish tone.
### GBP/USD: Sterling Shows Resilience Amid Volatility
The British pound has shown notable resilience even as the global environment has been volatile and the UK economy continues to show mixed signs. Sterling ended last week relatively unchanged against the dollar, despite a raft of data and political news flow.
**Main drivers for GBP/USD to watch:**
– **UK Jobs and Wage Data:** On Tuesday, the UK labor market report is due, with particular focus on wage growth. Strong wage inflation could
Read more on AUD/USD trading.