THE USD

The US dollar has shown immense growth in the second quarter. The USD has surpassed most other currencies. The currency garnered significant gains against the Japanese Yen and Australian dollar.

The Financial markets have erased any hopes of having a rate cut from the central bank the market is more focused on the aggressive expectations for the Federal Reserve. From June 1st till date, trades have added additional 4 rake hikes.

However, in March before the collapse of the Silicon Valley Bank, the markets seemed to be more dovish on the Fed's one-year predictions. However, in the short-term traders still predict more hawkish rate hikes. As for the long-term, there is hope for markets to recover from the aggressive trade hikes, especially with the collapse of the SVB. 

Non-farm Payroll

June's non-farm payrolls report indicated that wage growth was higher than expected. This will probably not sit well with Fed Chairman Jerome Powell. However, despite the underlying inflation in the US, the Labour market has held its ground.

The data showed that the Nonfarm payroll had increased by a little margin. Analysts predicted a 250,000 increase, but the data showed a 209,000 increase. This means the possibility of the Federal Reverse hiking rates without causing economic damage is low. 

In the wake of predictions hitting the market about the Fed getting to the end of its policy tightening cycle, the USD dropped to a two-month low. Traders are more convinced that the US central bank will loosen its grip on the aggressive rate hikes in July. This was brought about by the US monthly jobs report published on Friday. The report showed that the economy had an increase in the Non-Farm Payroll report. However, the increase didn't exceed or reach expectations. This has caused a little tension in the market sector, as this means that the Fed might not be able to aggressively increase interest rates.

GBP/USD

The pair is currently trading with a positive bias at 1.2876, hitting an all-time high Since April 2022. The USD has been on a bearish trend for the past week, this prolonged bearish trend has been a catalyst to the high performance of the GBP pair witnessed recently.

On Monday, two Fed officials stated that the end of monetary policy tightening is gradually coming to an end, this led to the downward trend of the USD.  Meanwhile, the GBP keeps trading bullish, and it's being pushed up by traders' anticipation of the Bank of England having a hawkish rate hike to fight inflation. 

In the early hours of Thursday last week, Andrew Bailey, the Governor of the Bank of England notified BBC stating that there will be a fall in inflation,  however, he didn't drop any remarks in respect to the rate outlook. Meanwhile, the monthly result of the BoE's published by the Decision Marker Panel indicated that the UK businesses showed that one year ahead Consumer Price Index (CPI) inflation fell to 5.7% in June. 

Jerome Powell the FOMC Chairman stated that a strong labour market will give rise to more tightening policy. Consequently, the USD might become bearish if data shows a significant drop in both employment and available jobs in the private sector.

On Monday, Andrew Bailey stated that inflation is still on the high side, the goal is to reduce it to a 2% target. Analysts predict a further 130 bps rate hike by BoE in the next year. This thus gives the GBP/USD pair the catalyst and support it needs ahead of the UK monthly employment report. 

Traders are focused on the wage growth data,  which is predicted to show the Average Earnings and bonuses inclusive. This data is predicted to have increased to 6.8% from 6.5% in May. Except for the US dropping significant economic data, the GBP/USD pair is predicted to have a bullish run in the coming months. 

EUR/USD

The Euro seems to be trading sideways against the USD. Christine Lagarde, the European Central Bank President, has given clues that rate hikes are appropriate when trying to combat inflation. This means that soon,  the Eurozone economies like Germany, will see some rate hikes. 

On Monday, the Euro had a drawback, but the currency held onto the gains it has against the USD. The USD had a heavy drawback after the official US employment data was released. 

However, traders still speculate that US rates will increase. But with the data release, there is little doubt concerning the extent and period of any other rate hike.

There is no significant economic data to look forward to this week, except for their US Consumer Price Index figures due on Wednesday, and the German Inflation and sentiment numbers due on Tuesday.

The Euro has continued to show immense strength, it even exceeded the $1.10 level. The pair is speculated to trade at $1.08 at the end of this quarter. Traders speculate the ECB still has more work to do concerning the increasing inflation in the Eurozone. In June, data showed Germany's inflation rate at 6.4%, however, significant indicators remain very high, exceeding the ECB's 2% target. Interest rates are currently at 3.5%, and traders still predict a further increase to 4% by early next year.