During European trading hours on Tuesday, the GBP/USD currency pair dipped below the 1.3400 level. This is happening even as fears for the health of the US economy soar. Fears that the Federal Reserve could lose its independence will almost certainly complicate matters further for the US Dollar. That’s why traders will be intently focused on the next economic data. They’re especially watching weekly jobless claims and regional Fed surveys for clues as to where the market might be headed.
The GBP/USD pair’s recent price action reflects a wait-and-see attitude from investors. Even with this decline, analysts argue that the downside for the pair seems capped. The US Dollar is losing ground largely as concerns increase for a potential economic slowdown in the United States. Further, fears fueled by President Trump’s attacks on Fed Chair Jerome Powell are still keeping the currency under pressure. All these factors add to the uncertainty surrounding the US financial system’s stability. Consequently, they act to minimize the likelihood of a substantial corrective retracement in the currency pair.
Market participants are very focused on the trajectories of the weekly jobless claims data. This data has been surprisingly consistent, suggesting that uncertainty hasn’t caused the dam break of mass layoffs so far. This data point is ever more perceived as one of the most telling harbingers of our current economic dichotomy. Plus, the new US economic data is expected, which can impact trader outlook and market direction.
With the GBP/USD pair continuing to tread water, the US Dollar has managed to regain its footing after a recent stretch of weakness. On one hand, economic indicators and political developments are sending positive signals. That’s an indication that the dollar’s road ahead could be more complicated than we had imagined. Gold prices, meanwhile, have retrenched from their highs of $3,500. Another indication that buyers are retreating is the price action on the 5 minute integrated index, which has become overbought in these short-term charts.
In other currency moves, EUR/USD is struggling to hold its gains around 1.1500 through the European session. Investors are keeping a close watch on speeches from European Central Bank (ECB) officials and Fed representatives, which could provide further context regarding monetary policy directions.