FX Market Update: The Dollar’s Next Test.

USD – Holding near 99.00 as geopolitical tensions support safe-haven demand, though weaker US data continues to weigh on the broader dollar outlook.

EUR – Remains constructive against the dollar, with UOB maintaining a target towards 1.1800, but continues to underperform against sterling despite stronger German GDP data.

GBP – Sterling remains well supported, particularly versus the euro, while GBPUSD consolidates ahead of key US data and Jackson Hole.

USD: The dollar is trading firmer around the 99.00 level, benefiting from increased safe-haven demand following escalating tensions involving Iran. However, the broader backdrop remains mixed. TD Securities continues to highlight weaker US economic data, fading Fed tightening expectations and Treasury buyback-related concerns as factors that could keep downside risks elevated. With US PCE inflation data due tomorrow and Fed Chair Kevin Warsh speaking at Jackson Hole later this week, markets are likely to remain highly sensitive to incoming US developments.

EUR: The euro remains supported against the dollar despite recent consolidation. UOB retains a positive outlook on EURUSD, noting scope for a move towards 1.1725 and potentially 1.1800 over the coming months while key support levels hold. Against sterling, however, the single currency continues to struggle. An upward revision to German Q2 GDP failed to provide meaningful support, with EURGBP remaining near weekly lows around 0.8550 as sterling demand persists.

GBP: Sterling continues to outperform the euro and remains resilient overall, although GBPUSD has stalled just below the mid-1.3600s as the dollar finds some support from geopolitical developments. Market participants remain reluctant to take strong positions ahead of this week’s key US events. Against the euro, sterling continues to benefit from favourable carry dynamics and investor demand, helping keep EURGBP under pressure despite encouraging German economic data.

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