Dollar Strength, GBP Stumbles on BoE Decision, EUR Faces Pressure Amidst Speculator Sentiment.

USD Update: The US Dollar Index (DXY) exhibits strength, surpassing the psychological threshold of 104.00 during early European trading hours on Monday. Fueled by optimistic US job data and expectations of prolonged higher interest rates from the Federal Reserve (Fed), the DXY marks a 0.11% increase, currently trading near 104.02. Despite Fed Chair Jerome Powell’s affirmation of three potential interest rate cuts this year, the likelihood of a March cut diminishes, impacting market sentiments. The latest US Nonfarm Payrolls data, showing a rise to 353K in January, further influences a shift in expectations. The heightened geopolitical tension in the Middle East also raises the appeal of the USD as a safe-haven currency.

GBP Recap: The British Pound (GBP) experienced volatility last week in anticipation of the Bank of England’s (BoE) interest rate decision. With limited economic data, the BoE’s decision to maintain the interest rates at 5.25% was largely expected, but the dissenting votes and Governor Andrew Bailey’s dovish stance contributed to Pound depreciation. The International Monetary Fund’s downgrade of the UK’s 2025 growth forecast and caution against additional tax cuts in the Spring Budget added to the negative sentiment surrounding the GBP.

EUR Insight: The Euro (EUR) sees marginal growth in net long positions among large currency speculators in the futures market, according to the latest Commitment of Traders (COT) data. Despite a slight increase, the Euro-Dollar exchange rate fell by 0.78% on Friday following robust US job numbers. As a result, expectations for a March rate cut wane, and the Euro faces further downside pressure. Market strategist Quek Ser Leang suggests a potential dip below 1.0755 in the very short term.