Forex Market Moves: August 4, 2023
The forex market was mixed this Friday, as traders digested a number of economic data releases and central bank decisions. The US dollar was the big winner, as it strengthened against most of its major counterparts.
US Dollar Strengthens
The US dollar strengthened on the back of strong economic data and hawkish comments from the Federal Reserve. The US economy added 372,000 jobs in July, beating expectations of 268,000. The unemployment rate remained unchanged at 3.6%.
In addition, the Federal Reserve’s Beige Book, which provides anecdotal evidence on economic conditions, said that “business activity expanded at a moderate pace” in July and August. The report also said that “labor markets remained tight, with many businesses reporting difficulty finding qualified workers.”
The strong economic data and hawkish comments from the Fed boosted expectations that the US central bank will continue to raise interest rates in the coming months. This is good news for the US dollar, as higher interest rates make US assets more attractive to foreign investors.
The euro weakened against the US dollar, as investors worried about the impact of the ongoing energy crisis in Europe. The European Union has been struggling to secure alternative sources of energy after Russia cut off gas supplies to some member states. This has led to concerns about a possible recession in Europe.
Japanese Yen Weakens
The Japanese yen also weakened against the US dollar, as the Bank of Japan (BoJ) maintained its ultra-loose monetary policy. The BoJ has been reluctant to raise interest rates, even as other central banks around the world have started to tighten monetary policy. This has made the yen less attractive to investors, as it has offered lower yields.
British Pound Weakens
The British pound weakened against the US dollar, as investors reacted to the Bank of England’s (BoE) decision to raise interest rates by 25 basis points. The BoE’s decision was widely expected, but some investors had hoped for a larger rate hike. This disappointment led to some selling pressure on the pound.
What to Watch Next
The forex market is likely to remain volatile in the coming days, as traders digest a number of important economic data releases. On August 10th, the US will release its consumer price index (CPI) data for July. This is a key inflation indicator, and it will be closely watched by traders.
The forex market will also be watching the Bank of Japan’s (BoJ) monetary policy meeting on August 9. The BoJ is widely expected to keep its ultra-loose monetary policy in place, but any surprises could send the yen on a volatile move.
Overall, the forex market is likely to remain volatile in the coming days. Traders should be prepared for sharp moves in the major currencies, as they react to economic data releases and central bank decisions.
Some important factors to watch that will effect the forex market in the coming weeks:
- US CPI data for July: This is a key inflation indicator, and it will be closely watched by traders. If the CPI data comes in higher than expected, it could lead to further gains for the US dollar. US CPI Data will be released August 10, at 8:30 A.M. Eastern Time.
- Bank of Japan (BoJ) monetary policy meeting: The BoJ is widely expected to keep its ultra-loose monetary policy in place, but any surprises could send the yen on a volatile move.
- Outcome of the US-China trade talks: If the US and China are able to reach a trade deal, it could boost risk appetite and lead to gains for the euro and other currencies.
- Release of economic data from other major economies: Economic data releases from other major economies, such as the eurozone and China, could also affect the forex market.
- Central bank decisions from other major central banks: Central bank decisions from other major central banks, such as the European Central Bank (ECB) and the Bank of England (BoE), could also affect the forex market.