FX Market Update: USD gains on Fed bets; euro and sterling struggle to build momentum.

USD – Remains supported by hawkish Fed expectations and higher yields, with additional backing from firmer oil prices and geopolitical uncertainty.

EUR – Trades on the back foot as softer economic data and falling rate expectations weigh on the single currency.

GBP – Holds relatively firm but faces ongoing downside risks, with political uncertainty continuing to limit upside.

USD:
The dollar is trading with a firmer tone, supported by ongoing expectations that the Federal Reserve will maintain a more restrictive policy stance. Higher US yields are continuing to attract demand for USD, while firmer oil prices and ongoing geopolitical uncertainty are reinforcing that support. While moves have been relatively measured, the overall bias remains to the upside for now, with markets continuing to look to US data and Fed communication for direction.

EUR:
The euro is under pressure, with EURUSD struggling to gain traction as weaker Eurozone data and declining expectations for further ECB tightening weigh on sentiment. Recent PMI readings point to slowing business activity, which has prompted investors to scale back rate hike bets, putting additional pressure on the currency. Although the euro has seen brief periods of stability, the broader tone remains soft, with downside risks still present.

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