On Tuesday, the EUR/USD currency pair shot up to daily highs around 1.1650. This increase occurred following the publication of mixed inflation data from the United States. This further movement is taking on a US Dollar bearish tone. This has forced traders to re-evaluate their positions with every new economic indicator that comes out.
Forthcoming US inflation data from the US Bureau of Labor Statistics (BLS) has been released. It means that the CPI, as measured by the headline Consumer Price Index, rose only 2.7% year-on-year in July. This figure was well below what economists had expected, adding confusion and doubt among market actors. The core CPI, which excludes the volatile food and energy categories, was up 3.1% from a year ago. Notably, this growth was higher than consensus expectations. This mixed bag of data has prompted a recalibration of the Federal Reserve’s monetary policy hawkishness.
With traders still catching up to these developments, the US Dollar was barely moved in a slightly bearish manner. This helped the EUR/USD pair’s strengthen, as it returned to test the 1.1650 area. Market observers noted that the strengthening of the euro was because of the overall weakness of the dollar. This increase provided a growing market for profit opportunities in currency trading.
This makes sense not only in lieu of the movements in the foreign exchange market, but given the large uptick in gold. After the hot US inflation data was released, gold prices began to climb. On Tuesday, they again tested the $3,350 per troy ounce zone. This move is a strong indication that investors are after safe-haven asset during times of economic pandemonium.
That proved an even bigger fillip to the GBP/USD currency pair, which surged to close above the key 1.3500 mark on Tuesday. Fresh selling pressure on the US Dollar provided the firepower for that rise. This change was an additional tailwind for the pound sterling. These positive shifts in each currency pair signal increasing overall market confidence, even as economic indicators continue to swing wildly back and forth.
U.S. traders are keenly awaiting any potential escalation in these geopolitics. They’re hoping to make some noise in advance of a high-profile upcoming meeting between former President Donald Trump and Russian President Vladimir Putin. Speculative positioning ahead of this meeting will likely continue to drive market sentiment and trading behavior over the next few days as well.
If we look at a fundamental driver, that would have to be the Federal Reserve’s path and the markets’ expectations of further easing. Speculators are reloading and repositioning their trades. They are looking ahead to possible changes in monetary policy based on recent economic developments.