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The US dollar rose modestly yesterday even after we saw another big revision in US jobs data, which doesn’t bode well for the US dollar heading into the business end of the week. The BLS revised its US annual benchmark payrolls by a record -911K for March 2025 which was both more than expected and a record. The news saw gold hit yet another record high, although the major currency pairs didn’t move too much in immediate response, perhaps because a big revision was already expected. The focus turns to inflation data, putting the likes of the EUR/USD and GBP/USD into sharp focus.
  

Focus turns to inflation: PPI today and CPI tomorrow

With employment data disappointing it is all about August inflation figures now to alter interest rate expectations, starting with PPI data shortly. As things stand, the market is fully pricing in a Fed rate cut next week, with at least one — and possibly two — additional cuts by year-end depending on the data. Both headline and core PPI measures are expected to print 0.3% m/m readings each, following their above-forecast 0.9% readings the month before. Tomorrow, CPI is also expected to print 0.3% m/m on both fronts, lifting the y/y CPI rate to 2.9% from 2.7% recorded in July. Ahead of the inflation data, markets overall remain broadly in risk-on mode, with the US dollar under sustained pressure as rate-cut expectations build. This backdrop is keeping equity indices and risk assets supported, as traders position for a potential cut and more dovish signals from the Federal Reserve next week.
 

Can GBP/USD head towards its summer peak?

Sterling is holding firm, even if the mood is turning a little bit cautious as attention moves towards the Chancellor’s Autumn budget. The GBP/USD pair has been benefitting from both stronger-than-expected UK data and sustained dollar weakness. The coming days bring a raft of key releases that could impact the GBP/USD direction meaningfully. UK data includes GDP and industrial production on Friday, and ahead of those we will have US inflation data as mentioned above.

From a technical perspective, the GBP/USD chart is still looking bullish, despite yesterday’s reversal after it tested key resistance between 1.3540 and 1.3588. This technical area has held firm on several occasions in recent weeks. A breakout above this zone would likely pave the way for a continuation towards the July high at 1.3788. Support below here is seen around 1.3500 handle, followed by 1.3435/60 range.

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EUR/USD’s path of least resistance is still to the upside

The EUR/USD exchange rate has been in a holding pattern in the last couple of days, after refusing to move too sharply ahead of US CPI. From a technical standpoint, though, the prevailing trend remains bullish, and this was underscored by its ability to break above its short-term bearish trend line on Monday. That move has potentially opened the door to a continuation towards the July peak of 1.1830 — the next key level on the topside. Support now rests at just below 1.1700, an area which previously acted as resistance. This area was being tested at the time of writing. A further support zone is seen between 1.1560 and 1.1620. Crucially, the pair remains above its rising trend line, keeping the technical bias skewed to the upside, all thanks to a weaker US dollar.
 

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How to trade the US dollar this week?

Much will now depend on upcoming US economic releases. Should the data continue to support the case for rate cuts, weakness in US dollar is likely to persist, underpinning the likes of the GBP/USD, EUR/USD, and AUD/USD and keeping risk sentiment buoyant. At least that is what I expect to see anyway. For that reason, I continue to expect we will see more gains in foreign currencies. But what if inflation data is hot this week? Well, I don’t envisage a major dollar rally on the back of such scenario because the main concern now is not inflation but weakness in jobs. Thus, any inflation-related gains for the dollar are likely to be short-lived. With that in mind, dip buying in the likes of the EUR/USD and GBP/USD is my preference than looking for short setups.

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