The euro and the British pound were hardest hit on a relative basis against the US dollar. The EUR/USD pair traded under the 1.1650 line, showing a momentum loss and moving to the down side of the territory. In the meantime, GBP/USD continued to have a hard time staying above 1.3450, nosediving lower as Asia opened for business on Monday morning.
The US dollar rallied hard this week, after a dip last week. This bounce was driven by upbeat sentiment over the prospects of renewing the US-China trade truce. This agreement is about to expire on August 12. Investors are cautiously optimistic that the productive trajectory between the two economic superstars will long continue. Expectations that reconciliation in the trade talks are materializing have lifted an already bullish US dollar. This spike proves unsustainable as both EUR/USD and GBP/USD struggle to hold their pre-event advances.
As the dollar surged in strength, the EUR/USD cross saw heavy downward pressure. It dropped under 1.1650, part of an overall pattern where the euro began to run out of steam versus its U.S. rival. Market analysts think all the good news for the dollar isn’t over yet. They make this forecast on the grounds of today’s geopolitical tensions and expected economic developments.
GBP/USD fell under 1.3450, finding it difficult to gather up steam with a strong dollar hanging around as an unwanted presence. On Monday, the pair fell even further. Market participants were in a bearish mood as they waited for some key inflation data scheduled to be released on Tuesday. Expected economic releases in the coming week will help inform the state of the US and UK economies. All of this data combined might make for key currency-moving information over the immediate future.
Gold prices dropped significantly, down close to $3,350. They were down over 1% on the day. The precious metal has had a tough time establishing a base in a market rife with up and down risk appetite. Positive expectations for the outcome of US-Russia talks on Ukraine seem to be lending support to global risk sentiment. Accordingly, demand for safe-haven assets such as gold is deteriorating.
The interaction of these factors makes for a very interesting environment on the foreign exchange market. The US dollar has appreciated substantially in recent months against both the euro and the pound. These developments mimic national economic trends and positive investor sentiment influenced by Free Trade Agreements and ongoing international negotiations. Traders are understandably preparing for some major data drops later this week. They are already looking out for any signs of changes that would affect currency valuations.