The New Zealand dollar and British pound emerged as this week's strongest-performing major currencies, while the Canadian dollar struggled to keep pace with its peers. Looking ahead, traders now face another busy economic calendar, with central bank decisions, employment data and business activity surveys likely to determine whether these trends continue or begin to reverse.
Let's recap what drove the market over the past week before exploring the biggest economic events that could shape forex markets in the days ahead.
What moved the forex market this week?
The New Zealand dollar and British pound emerged as this week's strongest-performing major currencies, posting gains against most of their peers. Improving market sentiment and relatively supportive economic fundamentals helped both currencies extend their recent momentum.
Meanwhile, the Canadian dollar struggled throughout the week, falling against nearly every major currency. Softer economic expectations and cautious sentiment towards Canada's outlook kept the loonie on the back foot.
The US dollar traded with mixed performance despite another busy week of economic releases. While resilient data continued to support the broader economy, traders remained cautious ahead of upcoming employment and inflation figures.
Elsewhere, the euro remained relatively steady as investors assessed the region's economic outlook, while the Japanese yen experienced modest volatility as markets continued monitoring expectations surrounding future Bank of Japan policy.
Attention now shifts to another busy week of economic releases, with central bank commentary, labour market data and business activity surveys likely to determine whether these trends continue or begin to reverse.
What could move the forex market next week?
The New Zealand dollar and British pound enter the week with the strongest recent momentum, while the Canadian dollar has struggled against most of its major peers. Meanwhile, the US dollar and the euro face busy economic calendars that could determine whether recent trends continue or reverse.
Let's explore these five currencies in more detail. Below are two images (the Eco Surprise and Eco Strength indices from Edgefinder) that provide an overview of how the respective economies line up relative to one another.
NZD – Strong Momentum Could Continue if the RBNZ Delivers
The New Zealand dollar has been one of the strongest-performing currencies over the past week, outperforming the US dollar, Canadian dollar, Japanese yen and euro. This momentum now faces its biggest test with Wednesday's Reserve Bank of New Zealand interest rate decision.
Markets expect the Official Cash Rate to remain unchanged at 2.25%, meaning traders will focus more on the central bank's guidance than the decision itself. Thursday's Business NZ PMI is also expected to remain below the 50-point expansion level, highlighting that parts of the economy are still struggling.
If the Eco Surprise and Eco Strength indices continue to favour New Zealand, a more optimistic tone from the RBNZ could help extend the kiwi's recent gains. However, a dovish outlook may encourage traders to take profits after the currency's strong run.
GBP – Recent Strength Could Be Supported by Improving Activity
The pound also enters the week as one of the market's strongest currencies, with gains against the US dollar, Canadian dollar, euro and Japanese yen.
Although the calendar is relatively light, Monday's Construction PMI is expected to improve from 38.2 to 41.0, suggesting activity within the sector continues to recover. Housing market releases later in the week are forecast to remain broadly stable.
If economic surprises continue to favour the UK, sterling could maintain its positive momentum. However, with fewer high-impact releases than other major currencies, broader market sentiment may play a greater role in determining price action.
USD – Busy Calendar Could Decide Whether the Dollar Regains Leadership
The US dollar once again has one of the busiest calendars of the week.
Monday's ISM Services PMI is expected to remain at a healthy 54.0, reinforcing the resilience of the services sector. Markets will also monitor trade data, ADP employment figures and several Federal Reserve speakers throughout the week for clues about the future path of interest rates.
Should the Eco Surprise and Eco Strength indices continue to favour the US economy, another round of resilient economic data could help the dollar regain momentum. Conversely, softer employment or business activity figures may allow higher-beta currencies to continue outperforming.
CAD – Labour Market Data Could Decide Whether the Loonie Stabilises
The Canadian dollar has been one of the weakest major currencies over the past week, losing ground against nearly every major counterpart.
Friday's employment report will be the key event to watch. The unemployment rate is expected to edge higher from 6.6% to 7.0%, while employment growth is forecast to slow sharply following last month's exceptionally strong increase.
If these forecasts materialise, the Canadian dollar could remain under pressure. However, a stronger-than-expected labour market report may help reverse some of the recent weakness, particularly if the Eco Surprise Index begins to improve.
EUR – German Data Could Offer a Fresh Direction
The euro has one of Europe's busiest calendars, with several German economic releases likely to shape market sentiment.
German factory orders are expected to rebound after last month's decline, while the trade surplus is forecast to widen. Traders will also monitor the ECB's Monetary Policy Meeting Accounts for further clues about the central bank's policy outlook before Germany's final inflation figures close the week.
Should Germany continue to show signs of improving industrial activity, the euro could build further momentum. However, weaker inflation or disappointing manufacturing data may reinforce concerns that the region's recovery remains uneven.
Conclusion
The currencies we have highlighted are those with the best chance of some action. However, you are always free to analyse other pairs in the vast forex market.
For a granular look at the most impactful events in the forex economic calendar, read our article here.
