On Monday, there was crazy movement in the foreign exchange market. The euro and the British pound gained handsomely against the dollar. During the early European session, the EUR/USD pair attracted buyers around the 1.1370 level, reflecting a shift in market sentiment. This increase coincides with the euro nears a prominent upside hurdle around 1.1450.
The GBP/USD pair remained comparatively strong, managing to retain intraday gains in the vicinity of 1.3500 level. Analysts bullish on the British currency expect it to make further headway. It is looking to extend beyond the 1.3500 mark. There are a number of reasons why both currency pairs have recently moved in this direction, due to a combination of factors affecting the U.S. dollar.
Indeed, many market observers have begun to focus on new selling pressure surrounding the U.S. dollar. This inflationary pressure is the result of mounting speculation on future rate increases from the Federal Reserve. As investors recalibrate their monetary policy expectations, the dollar has encountered considerable headwinds. What’s more, increasing fiscal anxiety over the state of the U.S. economy has only served to exacerbate the dollar’s downfall.
U.S. trade policy took a huge step forward last Friday. In March of this year, President Donald Trump announced plans to double import tariffs on steel and aluminum. This unexpected decision sent shockwaves through the markets, stoking fears of escalating trade tensions that may further restrain global economic growth. These uncertainties have fueled a panic sell-off of the U.S. dollar. Consequently, other currencies are booming in a like friendlier political landscape.
These forces have converged to create a never-before-seen opportunity. The euro and pound are both set to strengthen against the American dollar. The EUR/USD, meanwhile, is still floating around 1.1370. Traders are understandably jittery, looking to pounce on the first signs of momentum that could propel the pair to its next resistance at 1.1450. Likewise, GBP/USD’s hold above 1.3500 opens the door to more upside if bullish momentum remains in control.