Perhaps the most interesting movement to watch was on the currency market, where speculators helped drive down the value of the British Pound and the price of gold. As we head into late July, GBP/USD looks very vulnerable to the south side of that 1.3460 level, still firmly entrenched on the defensive side of the marketplace. This drop follows a hotter than expected UK inflation surprise earlier this week. Consequently, it did not provide either member the boost needed for a breakout.
Those recent UK inflation figures have recalibrated expectations about any possible easing from the Bank of England (BoE). Most analysts cited the data as the reason many traders were scared off. This sudden change in sentiment resulted in very low demand for the British Pound. Supply, demand, and the broader market environment. All of a sudden, we’re seeing some renewed selling pressure on the US Dollar. This change comes on the eve of the next Federal Open Market Committee (FOMC) Minutes.
Gold is rocketing up with authority making new daily highs near $1,3350. This increase was driven by a long-term decline in the Greenback. The precious metal has gained speed, mirroring investor sentiment as it hit two-day highs. Gold bulls all across the market have rejoiced as gold prices have climbed 12% this year as US yields have plunged. This dynamic tends to pull investors into non-yielding assets, like gold.
Even though GBP/USD has had a tough go of it, EUR/USD hasn’t exactly sailed through unscathed either. The Euro has reversed most of those gains and moved back in the direction of the 1.1650 area. This drop represents a broader trend. The US Dollar is taking huge strides to claw back ground despite the collapse in US yields universally. Market watchers have been all ears on these developments as they look ahead to the posting of the FOMC Minutes.
At a time of increasing market turbulence, President Trump has not helped matters with yet another public denunciation of the Federal Reserve. His remarks were aimed at their fellow Governor Lisa Cook. They have raised further questions as to the course of monetary policy overall and its impact on currency values. Financial markets are preparing for a shock based on recently released FOMC Minutes. These details are likely to provide key clues as to what lies ahead regarding future interest-rate hikes.
This trifecta of UK inflation figures, US Dollar developments and President Trump’s verbal intervention have contributed to an unusual and liable-to-change week ahead backdrop for traders. As they walk this fine line between competing influences, GBP/USD continues to feel the weight of bearish pressure, while gold is resilient as investor risk appetite fluctuates.