In European trading on Friday, the GBP/USD currency pair is still near 1.3450, a sign that traders are still treading carefully. The duo/pair has recovered sharply from their recent lows. Still, it continues to come under pressure as the market continues to react to changes in the US Dollar. With the weekend, traders are taking USD position profits across the board. This change perhaps more than any other underscores a developing volatility in the currency markets.
At the same time, EUR/USD is having trouble finding a bid, hovering around 1.1650 during the European session. In economic terms, the euro is fighting against gravity. At the same time, the US Dollar has begun to bounce back, injecting further uncertainty into the outlook for the common currency. Strong US economic indicators are having a significant impact on market sentiment, keeping the euro under pressure, as it continues to trade in the red.
The gold market is experiencing record demand. Picture this, with gold very much on the offensive, pushing hard to break above the $3,400 threshold. Yet, it has a real hard time finding consistent positive acceptance at this level. As of writing, gold is still trading below a two-week high as traders consider their next move going into the weekend.
On the buy side, traders have been very skittish, with many traders choosing to cash in their profits. This behavior is evident across various asset classes as market participants adjust their strategies in response to recent economic data and policy signals.
“GBP/USD treads water around 1.3450 on US Dollar rebound.” – FXStreet
The Bank of England has just voted to reduce their own rates by 25 basis points further, down to 4%. As a result of this move, the currency landscape has now become even more complicated. For one, the central bank’s post-meeting statement shows that officials believe the easing cycle is nearly finished. Union leaders from the transportation sectors are concerned about inflation. Policymakers are understandably concerned here, particularly on the monetary side, where inflation is running well above 2%.
For traders, all of these changes are critical to pay attention to, as they determine currency valuations and sometimes massively impact commodity prices. With the US Dollar forming a potential bottom, more volatility is expected in GBP/USD as well as EUR/USD.
“Gold price makes a fresh attempt to build on momentum beyond $3,400 mark.” – FXStreet