The British Pound rally continued, bringing it closer to the 1.3600 level against the US Dollar. At the same time, the US Dollar has been on the retreat overall in the currency markets. This latest GBP/USD rebound marks a huge break in prevailing market trends. Investors are clearly continuing to actively deleverage as they look ahead to the forthcoming policy statements from both the Federal Reserve and the Bank of England.
Looking at GBP/USD on Monday, the pair continued its comeback, supported by a new round of USD-related bearishness. Consequently, the market sentiment swung widely toward the bulls, as seen in the performance of equity markets. Buyers have found it easy to ignore escalating tensions in the Middle East. They are looking to huge changes in monetary (i.e., Federal Reserve) policy.
With GBP/USD improving, the Euro started to flood in a similar fashion against the Dollar. EUR/USD managed to grind higher above 1.1550. We commented on the Euro’s performance as the common currency continued to find new buyer support even amid escalating geopolitical fears during European trading hours.
“GBP/USD advances toward 1.3600 as US Dollar loses ground” – [https://www.fxstreet.com/currencies/gbpusd – source]
The safe-haven bullion, which had been surging for three-straight days, looked to have officially broken its winning streak. According to an Associated Press report, gold prices have recently jumped to their highest point since April. Those were quickly reversed, as prices fell consistently all day long. For all this volatility, the markets appear to be holding onto those gains and consolidating a string of very stronger performance in gold.
The gold price has not fallen to the $2,400 vicinity as was the talk of some pundits. Rather, some of these debates mistakenly cited it as $3,400. This misinformation does underscore just how fragile the markets can be and how quickly we all must respond to any erratic market price activity.
As these changes play out, investors are jostling to position themselves accordingly. They are bracing for smart moves in monetary policy from the Fed and BoE. The Fed is expected to address interest rates and monetary policy in light of recent economic indicators, while the BoE’s decisions will likely reflect ongoing inflation concerns and economic recovery strategies.
To market analysts, these changes are absolutely critical. Traders are preparing for big moves that could come from central banks’ disclosure statements. The relationship between currency values and interest rate policies is still a key point of focus for investors.
“EUR/USD grinds higher above 1.1550 despite Middle East conflict” – [https://www.fxstreet.com/currencies/eurusd – source]