The foreign exchange market is in a defensive posture for the Euro and the British Pound. At the same time, the US Dollar is initiating a potentially important bullish reversal. The EUR/USD pair is still all around in the low-1.1300s. That means the Euro isn’t finding much traction thus far in today’s currency trade. Alongside this, GBP/USD comes under pressure, falling back towards 1.3470 amid building bearish conviction around the British Pound.
To begin with, the EUR/USD has been struggling to stay strong, sitting at about 1.1303. Now, investors are taking a deficit-dog cautious outlook. As they look ahead to future events, including an important meeting from the European Central Bank (ECB), market analysts have pointed to uncertainty around US trade policy and rising, volatile US yields as other key drivers behind this move. Furthermore, the Greenback has bounced impressively. Traders are understandably on high alert, as they look to see how these dynamics play out over the next few days.
GBP/USD has faced notable downside pressure, with the pair most recently trading around 1.3480-1.3470. The British Pound selling momentum is gaining on the expressway to hell. This jump underscores just how deep the crisis the currency is undergoing right now. Analysts say growing pessimism across the market is to blame for this performance. Those feelings have been influenced by a constant drip of positive and negative economic releases from the US.
The US Dollar’s pullback comes amidst the trend of investors continuing to price in better-than-expected Personal Consumption Expenditures (PCE) numbers. Even with these readings indicating weak inflationary pressures, the Greenback has been surprisingly resilient, greatly affecting its performance against other major currencies.
Gold in the commodities market is still bearing the brunt of the downturn. For instance, today it maintains an offered bias near $3,300 per troy ounce. The yellow metal continues to be on the back foot after April US inflation data came in much worse than expected. According to analysts, trade uncertainties and lower US yields should bolster gold downside. Despite this support on the surface, gold finds it difficult to gather upward momentum.
Investors in the meantime positioned for potential changes in monetary policy and economic sentiment before the ECB meeting. They have great hopes on how these changes might affect the currency and commodity markets. Traders have little idea of what’s next, and so they are entering an extremely cautious mode. Like us, they are watching every bit of economic data with a magnifying glass.