Forex Today: Despite all, Dollar ends week stronger

Here is what you need to know for next week: 

After the Dollar's rally on Friday, Monday may not be the usual “quiet Monday”. Tuesday is the busiest day of the week for economic data, with Chinese activity, the Reserve Bank of Australia minutes, inflation in Canada and US Retail Sales. Later in the week, Australia will release labor market data and the Bank of Mexico will decide on interest rates.

The US Dollar finished the week stronger, trading at its weekly highs. Next week, the US calendar is light, with Retail Sales being the highlight on Tuesday. The debt ceiling impasse and banking concerns continue to be relevant developments. There will also be Federal Reserve remarks from Chair Powell and Williams.

The US Dollar Index rose above 102.50, posting its highest daily close in more than a month, surpassing relevant technical levels. The risks now appear to be tilted to the upside in the short term. A factor that boosted the US Dollar was the deterioration in market sentiment. Major stock indices across the globe finished the week with modest losses.

US yields finished the week modestly higher, despite evidence of slowing inflation and easing labor market conditions in the US. The US Treasury 10-year yield settled at 3.44% and the 2-year at 4%. Yields continue to move sideways in a wide range, trapped between volatile expectations for rates by year-end, the short end of the curve being sensitive to the debt ceiling drama, the Fed's expected pause and cautious market sentiment.

EUR/USD suffered its worst weekly decline since September 2022, after breaking a 2-week range on the back of a stronger US Dollar and despite hawkish European Central Bank (ECB) talk. After being unable to rise above 1.1100, the pair corrected to 1.0850, the lowest level in a month.

GBP/USD reversed from monthly highs near 1.2700 and tumbled to levels below 1.2450. In the UK, labor data is due on Tuesday. Many members of the Bank of England's Monetary Policy Committee are due to speak, which could be relevant after the recent 25 basis points rate hike.

USD/JPY surged on Friday, breaking important levels and climbing to 135.70, a one-week high, boosted by the rebound in Treasury yields.

USD/CAD erased last week's losses and rose from 1.3310 to 1.3560. It continues to move sideways in a wide range. Canada will report inflation on Tuesday and on Friday, the Bank of Canada will publish its Financial System Review.

AUD/USD traded above key moving averages in the daily and weekly charts but turned to the downside. It is still moving sideways but now risks are tilted to the downside. The pair could test 0.6600. It is a busy week ahead in Australia with the RBA minutes on Tuesday, of the May meeting that ended with a surprise rate hike; on Wednesday, the Wage Price Index is due and on Thursday April's employment report.

NZD/USD dropped 200 pips from the top, rejected from above the 20-week Simple Moving Average (SMA). The Kiwi was the worst performing currency among G10 currencies.

The worst performer across the board was the South African Rand. USD/ZAR jumped to a record high 19.50 after the US alleged that a Russian ship picked up weapons in South Africa last year.

Latin American currencies outperformed. USD/MXN posted its lowest weekly close since July 2017, near 17.50. The Bank of Mexico will have its monetary policy meeting, and there is potential for a pause after 15 consecutive interest rate hikes.

On Sunday, there will be general elections in Turkey. The Turkish lira accelerated its depreciation during the last days, hitting fresh record lows. 

The gloomy global outlook weighed on crude oil prices that posted another weekly loss, the fourth in a row. Metals had mixed luck: Gold finished the week flat, holding above $2,000 while Silver tumbled 6.6% during the week, ending around $24.00.

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