The EUR/USD currency pair retreated modestly during European trading hours on Friday, staying under the 1.1800 level. The main reason the pair is falling is due to the strengthening U.S. dollar. Like many other pairs, this currency has been on a tear, pushing the GBP/USD to recent lows just under the 1.3500 level.
Traders are hanging on every word from the European Central Bank (ECB). They’re all watching, too, for their scheduled phone call next week between new Chinese President Xi Jinping and former US president Donald Trump. All of these events might add additional fuel to market fire. The importance of the ECB’s communications cannot be overstated, as they could dramatically shift the path of the EUR/USD pair.
High competitive trading conditions continued to lure a large number of brokers into the EUR/USD market. These brokers come with highly competitive spreads and quick execution. While they are extremely powerful platforms, their lack of regulation makes them an attractive choice to unscrupulous traders.
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At the same time, gold has maintained a bullish tone despite the dollar’s strength. Still, the upside potential seems quite limited in my view as geopolitical risks have re-energized the desire for safe-haven assets. Even with gold’s enchantment on Friday, it’s flattened after a two-day corrective plunge from its fresh all-time peak.
In the UK, positive retail sales figures for August came out. That wasn’t enough to prop the GBP/USD currency pair, which continues to spend most of its time well in the negative today. Markets were hoping that a string of upbeat economic data would fire up the sentiment for the British currency. That optimism is being bashed by the dollar’s relentless strength.
Overall, the strength of the U.S. dollar remains a dominant factor affecting multiple currency pairs, including both EUR/USD and GBP/USD. Traders are playing it safe in this turbulent market. They’re standing by to see what central banks do this week and what happens in various geopolitical flashpoints that will affect market direction in coming trading days.