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When a currency or asset doesn’t fall in the face of ‘bad’ event risk, it’s bullish. Between rate expectations and risk trends, the dollar is a coiled spring of potential.
What these slight tweaks to the ECB’s policies equate to is that, at current time, there is no real imperative to speculate that the ECB could cut rates further. Going forward, the market will pay less attention to the ECB – that is unless economic data weakens to the point that further action may be necessary.
The USD/JPY may continue to consolidate in the week ahead as it retains the wedge/triangle formation from earlier this year, but the Bank of Japan (BoJ) interest rate decision may heighten the appeal of the Yen.
The British Pound finished the week almost exactly where it began, but key UK employment data releases on the calendar promise bigger moves in the week ahead.
Heading into next week, traders will be eyeing data out of the US with retail sales and the preliminary June University of Michigan confidence surveys looking to keep gold rising.
The Australian Dollar is vulnerable to renewed selling pressure as firming Fed policy bets undermine the currency’s yield advantage and feed risk aversion.