Forecasting the upcoming week: US Dollar loses momentum ahead of key US inflation data

The week ahead will bring a fresh test for major currency pairs as investors digest the first Federal Reserve (Fed) policy decision under Chair Kevin Warsh and look ahead to the United States (US) Personal Consumption Expenditures (PCE) data, global PMI releases, and central-bank commentary.

The US Dollar Index (DXY) trades near the 100.70 price zone on Friday after reaching a 13-month high of 101.13 earlier in the day. The Greenback rose sharply this week following the Fed's decision to leave interest rates unchanged in the 3.50%-3.75% range, and removing its previous reference to “additional rate adjustments” . A hotter-than-expected PCE report, the Fed's favorite inflation gauge, could reinforce the Fed's hawkish stance and extend the upward USD's trend.

EUR/USD declined over 0.80% this week to the 1.1480 level amid a broadly strong US Dollar. The Eurozone calendar will keep its eyes on flash PMI data, which should give investors a clearer view of whether activity remains fragile across manufacturing and services. Germany will also be important, with flash PMIs, the Ifo Business Climate survey, and GfK Consumer Confidence due during the week. Any signs of weaker German business sentiment could weigh on the Euro, especially after ECB officials warned about uncertainty around energy prices, inflation transmission, and second-round wage effects.

GBP/USD is trading near 1.3230, with a strong weekly decline, after the Bank of England (BoE) left interest rates unchanged at 3.75% in a 7-2 vote, with two policymakers supporting a hike to 4.00%. Next week, the United Kingdom (UK) flash PMIs and final Q1 Gross Domestic Product (GDP) data will be key for the Pound Sterling.

USD/JPY remains near intervention levels at 161.30, focused on the balance between Fed caution and the Bank of Japan’s (BoJ) tightening bias. The BoJ recently raised interest rates to 1.00%, while officials continue to warn that inflation risks could require further action. Japan’s flash PMIs, Tokyo CPI, and comments from BoJ officials will be watched closely.

AUD/USD fell this week toward the 0.7020 level, a significant domestic test as Australia releases flash PMIs, monthly CPI, and labor market data. A stronger CPI print or resilient employment data could support the Aussie, while weaker numbers may leave AUD/USD vulnerable to renewed US Dollar strength.

Gold (XAU/USD) struggles near the $4,155 level as geopolitical uncertainty and concerns over the Middle East could limit downside for the precious metal.

West Texas Intermediate (WTI) Oil fell for a second consecutive week near $76.50 per barrel as the US-Iran agreed a peace deal, weighing on Oil prices. Markets will watch whether Oil flows continue to normalize, as lower energy prices could ease inflation fears and influence central-bank expectations.

Anticipating economic perspectives: Voices on the horizon

Monday, June 22

• ECB President Lagarde
• Fed’s Waller
• ECB President Lagarde

Tuesday, June 23

• ECB’s Lane
• BoC Governor Macklem
• ECB’s Elderson
• ECB’s Vujčić
• BoE’s Taylor
• BoE’s Dhingra

Wednesday, June 24

• ECB’s Nagel
• BoE’s Breeden
• ECB’s Cipollone
• BoE’s Dhingra

Thursday, June 25

• ECB’s Philip
• ECB’s Cipollone
• Fed’s Williams
• Fed’s Goolsbee

Friday, June 26

• ECB’s Nagel
• Fed’s Williams
• ECB’s Vujčić

Saturday, June 27

• ECB’s Schnabel
• RBA Governor Bullock

Central banks’ meetings and policy decisions to shape markets

No major Fed, BoE, BoJ, or RBA interest rate decisions are scheduled for the week, leaving investors focused on speeches, incoming data, and the market interpretation of the latest policy meetings.