FX Market Update: Dollar Weakness Drives Broad Currency Gains.

• USD – Has come under broad pressure, with lower US yields and improved risk sentiment weighing on the dollar following the Treasury’s decision to increase longer-dated Treasury buybacks.

• EUR – Is gaining momentum, with EURUSD rising sharply as investors sell the dollar and focus remains firmly on developments in the US.
  

• GBP – Is benefiting from dollar weakness but remains relatively softer against other major currencies, with domestic UK data set to become more influential later this week.

USD:

The dollar came under significant pressure yesterday, with EURUSD surging around 0.9% following the US Treasury’s announcement that it would increase its long-end Treasury buyback operations by $2bn. The move pushed US yields lower and improved global risk sentiment, benefiting higher-beta currencies such as the Nordics and NZD, while the Swiss franc and Japanese yen also performed strongly. CHF gained almost 1.9% during the session. While the announcement itself was not a major policy shift, Treasury Secretary Bessent’s indication that he intends to keep longer-term borrowing costs low appeared to excite markets. Attention now turns to today’s weekly jobless claims, ahead of tomorrow’s PMI data.

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EUR: 

The euro gained considerable momentum yesterday, with EURUSD moving sharply higher as investors broadly sold the dollar. Despite ongoing concerns surrounding the Eurozone economy, including elevated energy prices and subdued growth prospects, markets are currently focused more heavily on developments in the US. The euro is therefore benefiting from the softer dollar and improved global risk sentiment. Elsewhere, the Swedish Riksbank kept interest rates unchanged at 1.75% as expected, while highlighting the unusually high level of uncertainty surrounding the economic outlook. For now, EURUSD momentum remains positive, although the sustainability of the move will depend heavily on incoming US data and broader dollar sentiment.

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GBP: 

Sterling benefited from broad-based dollar weakness yesterday, with GBPUSD pushing through key levels. However, the pound underperformed against several other major currencies, suggesting that the move was driven more by dollar weakness than renewed confidence in sterling. Broader market movements are likely to remain the key influence on GBP today, before attention shifts back towards the domestic UK calendar tomorrow. Investors will be watching consumer confidence, July retail sales and the August PMIs for further clues on the strength of the UK economy and the potential direction of Bank of England policy.

Economic Calendar