Forex Today: Commodity currencies comeback, focus shifts to US inflation

Here is what you need to know for next week: 

On the same day that the Federal Reserve (Fed) raised interest rates and signaled a potential pause, banking concerns dominated headlines. Next week, the central bank will release the Senior Loan Officer Opinion Survey on Bank Lending Practices, which will be used for the next FOMC meeting. The report addresses changes in the standards and terms of the banks' lending, as well as the state of business and household demand for loans; crucial figures in the current environment with the Fed tightening and concerns about the banking sector.

The key reports next week will be the US Consumer Price Index (CPI) on Wednesday and the Producer Price Index (PPI) on Thursday. These numbers will contribute to interest rate market expectations and will be crucial for the next direction of the US Dollar and for Treasury bond yields. 

The US 10-year yield briefly hit a three-week low before rebounding to 3.45%, while the US 2-year yield ended lower below 4.0%. Bond yields remain within their recent range. The overall trend remains bearish, but ongoing uncertainty surrounding the US debt ceiling could contribute to increasing market volatility. Meanwhile, the US Dollar Index closed the week at a one-year low but is still holding above the key support level of 101.00. 

USD/JPY had its worst week since March, despite a rebound in US yields and improvement in market sentiment. On Friday, the pair trimmed losses and rose toward 135.00 after the release of US jobs data. Volatility is expected to remain high in Yen crosses due to large fluctuations in Fed rate expectations and as Wall Street wavers. 
 
EUR/USD finished the week flat after the European Central Bank (ECB) meeting, where the ECB raised rates as expected. The pair approached 1.1100 but then pulled back. Although the correction was limited, it continues to trade sideways in the short term around 1.1000.

GBP/USD posted another weekly gain, closing at its highest level since April 2022. Despite some strength in the US Dollar, the pair broke above 1.2600 on Friday. The UK will have a holiday on Monday to celebrate the coronation of King Charles III. On Thursday, the Bank of England (BoE) is widely expected to raise interest rates by 25 basis points. The focus will be on whether the BoE signals a pause or keeps the door open to more hikes. On Friday, the UK will report its monthly GDP.

USD/CAD was trending downwards but collapsed on Friday due to the strong Canadian jobs report, causing the pair to fall below 1.3400 to the lowest in two weeks with the April bottom in sight.

AUD/USD rose for the fifth consecutive day on Friday, reaching 0.6750, the highest level in three weeks; the crucial resistance is still 0.6800. The Australian dollar was the best-performing currency among majors after the unexpected rate hike by the Reserve Bank of Australia (RBA). NZD/USD also rose sharply, ending the week at around 0.6300, the strongest level in months.

Gold had a volatile week with mixed signs after a sharp reversal from the record high of around $2,075 towards $2,000 following the Nonfarm Payroll report. Silver rose for most of the week but tumbled 1.70% on Friday, retreating below $26.00.

The Colombian Peso was the best-performing currency of the week, with USD/COP falling 2.80%, erasing all the gains of the previous week. The South African Rand was the worst, with USD/ZAR closing at 18.40. 

Bitcoin rose more than 2% on Friday and turned positive for the week, retaking $29,500. Crude oil prices ended the week with losses but far from the lows. WTI rose more than 4% on Friday, not sufficient to erase weekly losses but enough to improve the outlook.