FX Market Update: USD stays bid as Hormuz risk lingers; GBP wobbles, EUR holds.

USD – Trades with a softer tone as easing inflation pressures reduce expectations for aggressive Fed tightening, unwinding some recent strength.

EUR – Holds relatively steady, supported by improving sentiment and a softer dollar, though the broader backdrop remains fragile.

GBP – Remains volatile, with political uncertainty and external risk factors driving mixed price action despite short‑term gains.

USD:
The dollar has pulled back slightly, with the DXY slipping below recent highs as softer US PCE inflation data has led markets to reassess the outlook for further Fed tightening. While expectations remain skewed toward a restrictive policy stance, the immediate pressure from inflation has eased, reducing the urgency for additional rate hikes in the near term. This has taken some momentum out of the recent USD rally, although the broader environment of elevated yields and geopolitical uncertainty continues to provide underlying support.

EUR:
The euro is showing signs of stabilisation, holding above recent lows as the dollar eases and markets digest mixed commentary from ECB officials. While the repricing of ECB rate expectations has weighed on the single currency in recent sessions, the latest move suggests some consolidation rather than continued sharp downside. Nonetheless, the overall backdrop remains cautious, with limited conviction around stronger eurozone growth and policy direction, keeping the broader outlook contained.

GBP:
Sterling is trading with a mixed but slightly firmer tone, supported by a modest recovery toward the 1.32 level. However, the move lacks strong conviction, as underlying concerns around UK political uncertainty continue to weigh on sentiment. Recent developments in domestic leadership dynamics are creating a degree of instability, while external factors such as USD direction and geopolitical risks remain the dominant drivers. As a result, GBP continues to experience choppy price action rather than a clear directional trend.

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