What’s been happening?

The US dollar roared higher over the past couple of weeks. The sharp appreciation of USD was driven by safe-haven flows as well as expectations of another interest rate hike from the Federal Reserve, following its hawkish pause at its September meeting.

In contrast, the pound plummeted to multi-month lows as the UK’s economic outlook grew increasingly gloomy and the Bank of England (BoE) surprised markets by keeping interest rates on hold.

Meanwhile, trade in the euro was choppy in the second half of September. The single currency’s negative correlation with the US dollar acted as a major headwind, while mixed data also infused volatility.

What do you need to look out for?

Looking ahead, the second half of August may see the pound remain on the back foot amid heightened concerns over the UK’s cost of living crisis and the current political vacuum. 

For USD investors the focus will likely be on the Fed’s Jackson Hole Symposium. Any stronger hints regarding the bank’s policy outlook could inspire movement in the US dollar.

Meanwhile, the movement in the euro is likely to remain tied to concerns over European energy security. While the single currency also likely to be pressured if the Eurozone’s latest PMI figures point to another contraction in the bloc’s private sector.