FX Market Update: Dollar Dominance Continues.

USD – Remains well supported as expectations for higher US interest rates and ongoing geopolitical tensions continue to underpin demand for the dollar.

EUR – Is struggling to gain traction, with Eurozone inflation coming in as expected and failing to provide fresh support for the single currency against a firmer USD backdrop.

GBP – Remains resilient despite slipping below 1.3550 against the dollar, with the broader bullish trend still intact while trading above key technical support levels.

USD:

The dollar remains firmly supported at the start of September as markets continue to price in a hawkish Federal Reserve outlook. Rising rate expectations and ongoing geopolitical tensions in the Middle East have boosted demand for the greenback, while also weighing on risk sentiment. The stronger dollar has pressured both major currencies and commodities, with gold falling to a two-week low as investors favour higher-yielding US assets. Market focus now turns to upcoming US data releases for confirmation that the Fed can maintain its restrictive stance.

EUR:

The euro remains on the defensive against the dollar, hovering around the 1.1600 level despite Eurozone inflation data meeting expectations. Flash HICP inflation rose 3.3% year-on-year in August, providing little surprise for markets and failing to generate fresh momentum for the single currency. EURUSD remains pressured by the stronger dollar narrative, while the euro has also weakened against several major peers, including the Canadian dollar. Unless Eurozone data begins to exceed expectations, EUR performance is likely to remain largely dictated by developments in the US.

GBP:

Sterling has edged lower against the dollar, with GBPUSD moving below 1.3550 during recent trading sessions. However, the broader outlook remains constructive, with the pair continuing to hold above its 100-day moving average and preserving a bullish longer-term bias. Elsewhere, the pound has performed well against the Japanese yen, benefiting from fiscal concerns in Japan and a widening rate differential between the UK and Japan. For now, sterling remains relatively resilient, although a strong dollar environment may continue to limit upside potential against the greenback.

Economic Calendar

Expected Previous
13:30 BST - EUR G20 Press Conference
15:00 BST - USD Manufacturing PMI 55.2 55.6

*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.