FX Market Update: USD supported by rate expectations; EUR and GBP struggle to gain traction.

USD – Continues to strengthen as markets price a more hawkish Federal Reserve, with elevated yields and policy expectations supporting demand for the dollar.

EUR – Remains weak, with downside pressure persisting as softer economic data and reduced ECB tightening expectations weigh on sentiment.

GBP – Struggles to gain traction, with limited domestic drivers and broader USD strength continuing to cap any upside.

USD:

The dollar is trading with a firm tone, supported by ongoing expectations that the Federal Reserve will maintain a restrictive policy stance for longer. US yields remain elevated, which continues to attract global capital into USD, reinforcing the move higher. Momentum has also played a role, with the break to recent highs drawing in additional buying interest. For now, the outlook remains constructive for the dollar, with upcoming US data and Fed commentary likely to guide the next move.

EUR:

The euro remains under pressure against the dollar, with EURUSD struggling to hold support levels as weaker Eurozone data weighs on sentiment. Recent indicators point to slowing economic momentum, which has led markets to scale back expectations for aggressive ECB tightening. This divergence in outlook versus the US is a key driver behind the continued softness in the euro. While there have been brief attempts to stabilise, the overall bias remains to the downside unless there is a meaningful shift in either data or rate expectations.

GBP:

Sterling continues to lack clear direction, trading with a softer tone as broader USD strength dominates. While there has been some limited support from UK data, the absence of strong domestic catalysts, combined with ongoing political uncertainty, is preventing GBP from building sustained upward momentum. As a result, the pound remains sensitive to external drivers, particularly movements in the dollar, and is likely to remain range‑bound unless sentiment shifts materially.

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