As Tuesday unfolded, the currency markets were in turmoil. The British Pound moved back and forth against the US Dollar, as did the Euro. The GBP/USD pair oscillated around profits and losses within the bottom 1.3300 area. At the same time, the USD was able to keep the EUR/USD down on its toes, clinging around 1.1550 after posting the US ISM data.
GBP/USD traded warily under the key 1.3300 threshold. Traders are clearly gauging overall market sentiment in advance of policy setting due from the Bank of England later this week. British Pound forecast Increased uncertainty weighing on GBP The British Pound has yet to find any sustainable positive momentum. Analysts say the risks now are tilted in favor of a possible rate cut later this year or early 2026.
In comparison, the Euro is under downward pressure as it has been trading in the red. The EUR/USD exchange rate is now trading near 1.1550. Its potential for further growth is limited by fierce upward pressure from the appreciating US Dollar. Against a backdrop of rising risks, the euro area economy has outperformed expectations spectacularly over the late summer months. This strength is bolstered by the recent EU-US deal and ambitious spending plans from Germany.
The market’s perception of the outlook for the euro area seems more positive than expected. Still, an increasing probability of a September Federal Reserve rate cut is helping put a limit on the Greenback’s gains. Analysts are cautioned that should wage indicators continue to weaken, the Fed could be looking toward a final ‘insurance cut.’ This decision is likely to have profound implications for currency valuations in the months ahead.
In terms of commodities, gold prices dipped close to $3,370 per troy ounce after a recent retreat. XAU/USD’s bullish momentum meets stiff resistance as US Dollar gains power. At the same time, we observe a limited recovery in US yields over virtually all maturities.
“Euro area – New ECB call: No further cuts in scope.” – FXStreet
Futures traders are closely watching rising and falling economic indicators as well as reports on central bank policy which could dramatically shift the direction of the market.
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