Forex Market Forecast for August 2023

Nick Ranga

Forex Market Forecast for August 2023

While the first half of July began as predicted, with US dollar weakness, the second half saw the US dollar make substantial gains, and the recent comments from Federal Reserve Chair Powell may see those gains continue in the near term. Elsewhere, the GBPUSD hit a high of over 1.31 in July, while the EURUSD climbed above 1.12, both hitting levels not seen since the first quarter of 2022. While macroeconomic worries still remain, inflation is easing, and so too is the uncertainty. Whether that will stay in place as we continue in the second half of the year is another question. Here are some recent talking points:

  • After a move to pause rate hikes at the end of June, Federal Reserve policymakers increased rates by 25bps in July, with Chair Jerome Powell leaving the door open for another hike in September.
  • Despite concerns about economic conditions in the eurozone, the ECB raised rates again and kept its options open for September.
  • UK inflation remains high but is easing, coming in at 7.9% for June. However, similar to the eurozone, there are also economic concerns.
  • An economic slowdown in China has resulted in worries about the impact it will have on the Australian economy, while last month, New Zealand dipped into a technical recession.

US Dollar

As mentioned earlier, the US dollar gained at the back end of July, and with recent comments from Powell leaving the door open for a hike in September, it may continue in the first part of August. The Fed said it would look at “the totality” of incoming data before making its decision. Overall, we see the US dollar losing some ground overall in August, with currencies such as the GBP and EUR climbing against it.

Key Levels

  • EURUSD: Higher – 1.1250, Lower – 1.0700
  • GBPUSD: Higher -1.3140, Lower – 1.2670
  • USDJPY: Higher – 142.10, Lower – 138.00


There are growing concerns about the economy in the eurozone, with Germany a particular concern. Even so, the euro performed okay during July, although we are not sure how long that will last if economic activity continues to slow. The EURUSD hit a high of 1.1275 in July, and pulled back following recent ECB comments. We see another leg higher in the near term, but a further fall later in the month is certainly not off the table.

Key Levels

  • EURUSD: Higher – 1.1250, Lower – 1.0700
  • EURGBP: Higher – 0.8702, Lower – 0.8460

British Pound

The pound started July tremendously well, hitting a high of 1.3140. With inflation easing but still elevated, there is an expectation of further rate hikes, which should boost the pound in the near term, giving it another leg higher against the likes of the USD and EUR. It is vital to watch any essential economic data closely as a pick-up in macroeconomic uncertainty will see the GBP weaken against risk-off currencies such as the US dollar and euro (to a certain extent).

Key Levels

  • EURGBP: Higher – 0.8702, Lower – 0.8460
  • GBPUSD: Higher -1.3140, Lower – 1.2670

Japanese Yen

Apologies, it’s set to be another month of us mentioning the talk around a potential BoJ policy shift with inflation in the country sticky. The discussion continues, but the BoJ looks set to keep its ultra-low rates, at least for now, although, according to Bloomberg, traders are wary of yield curve control tweaks. Despite the talk, the Japanese yen made solid gains against the US dollar in July, hitting a low of 137.23 mid-month. That strength against the greenback looks set to continue as we head into August. We see continued strength, especially in the early part of the month, with the pair falling towards the key level of around 138.00.

Key Levels

  • USDJPY: Higher – 142.10, Lower – 138.00
  • EURJPY: Higher – 157.95, Lower – 154.15

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