This week, currency markets went back to a blissful calm. The EUR/USD continued its range trading, holding under the 1.1400 level. Traders are continuing to play it safe ahead of high-impact U.S. economic data releases. These releases will feature labor market data, GDP, and PCE inflation reports.
During the European trading session, the large EUR/USD pair saw very slight fluctuations, as it stayed contained underneath the important 1.1400 mark. The market’s subdued activity follows the release of Germany’s GDP data, which indicated a contraction of 0.2% at an annual rate for the first quarter. This modest contraction was in line with market expectations and only added to the wary tone around the euro.
Traders are waiting with bated breath for the next slew of US economic indicators, which could have a major impact on currency valuations. This fear of these respective reports has created a wait-and-see trading mentality within the GBP/USD pair. Likewise, the GBP/USD, which had been holding above 1.3400, has fallen below that level, indicating the same type of investor trepidation.
Given the ongoing economic pressures, traders are understandably anxious. Above all, they are hoping to see brighter signals, especially in terms of the quality of new data coming out from the US.
“GBP/USD trades with caution below 1.3400 ahead of key US data” – FXStreet
Looking out over the euro, market analysts have observed that the unexpected news from Germany failed to meaningfully move the needle. Yet it has emboldened the embedded fearfulness of the commodity traders. Even the EUR/USD has stayed quiet, with little to no jitter seen following the German GDP release.
Currency markets have been unusually stable. Traders are keen to test the waters and see just how much impact the next slew of US economic reports will have on their wrong-footed positions. The excitement in the air is undeniable, particularly as analysts warn that these reports will increase volatility in currency trading.
In fact, the GBP/USD pair’s performance has mirrored that of the EUR/USD pretty closely. It’s having a tough time under the important 1.3400 mark in early European trading. This move is indicative of the overall pessimistic sentiment taking over the forex market. Market participants have been anticipating any fresh economic developments that might provide further direction to their trading strategy.