FX Market Update: The Dollar Finally Blinks.

USD – The dollar is on the back foot this morning, extending recent losses as US Treasury yields continue to drift lower. While the broader outlook remains supportive, investors are beginning to question how much further the greenback can rally without fresh economic catalysts.

EUR – Remains range-bound against the dollar, with traders continuing to buy dips and sell rallies. The single currency has found some support from softer USD sentiment but remains stuck within a well-defined trading range.

GBP – Continues to outperform, with GBP/USD holding near monthly highs around 1.3410 as sterling benefits from a weaker dollar backdrop and improving sentiment towards the UK outlook.

USD: The big story this morning is the softer dollar. After dominating markets for much of the past few weeks, the greenback is continuing to retreat as US bond yields move lower. The decline in yields has reduced some of the dollar’s appeal, particularly against currencies that have been heavily sold in recent months.

That doesn’t necessarily mean the broader trend has changed. The US economy remains relatively resilient and markets are not aggressively pricing Fed rate cuts. However, after such a strong run, the dollar appears to be entering a period of consolidation. Unless fresh data significantly surprises to the upside, investors may be less inclined to chase the greenback higher in the near term.

EUR: The euro remains trapped in consolidation mode.

UOB notes that EUR/USD continues to trade within a defined range, with neither bulls nor bears showing enough conviction to force a breakout. The softer dollar has provided some relief, but the euro still lacks a strong domestic catalyst to drive a more meaningful recovery.

Against sterling, EUR/GBP is attempting to climb back towards 0.8400 after recently slipping into oversold territory. While that may support short-term rebounds, broader sentiment towards the euro remains cautious, particularly while economic growth across the Eurozone remains subdued.

GBP: Sterling continues to be the standout performer among the major currencies.

GBP/USD is holding close to monthly highs around 1.3410, supported by the weaker dollar environment and the market’s growing confidence that UK interest rates may remain elevated for longer than previously expected.

What’s particularly impressive is that the pound is finding support without a major domestic catalyst this morning. That suggests recent positioning and sentiment have become increasingly constructive towards sterling. While the pair may face resistance at higher levels, the fact that it continues to hold near its recent highs points to underlying demand for the currency.

Economic Calendar

Expected Previous
13:30 BST - USD Employment - Unemployment Claims WoW 200K 199K
14:00 BST - GBP BoE Governor Bailey Speech
15:00 BST - EUR Eurozone CCI data -17 -16.5

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.