FX Market Update: Dollar Strength Continues to Weigh on EUR and GBP.

USD – Remains broadly supported, although signs are emerging that recent Fed-driven momentum may be fading. Markets continue to favour the dollar against both the euro and sterling, but expectations for further gains are becoming more tempered.

EUR – Remains under pressure, with EUR/USD holding above 1.1450 but still trading below its 100-day moving average. The broader technical outlook remains bearish, with 1.1400 emerging as the next key support level.

GBP – Continues to struggle against the stronger dollar after breaking below 1.3400. Sterling is approaching oversold territory, but downside risks remain while the pair trades beneath former support levels.

USD: The US dollar begins the week on a firm footing, supported by the Federal Reserve’s relatively restrictive policy stance and continued demand for safe-haven assets. However, there are early signs that the Fed’s support for the greenback could be losing momentum, with analysts suggesting much of the hawkish outlook is already priced into markets. As a result, traders will be closely watching incoming US economic data for confirmation that the dollar’s recent strength can be sustained. Until then, the greenback is likely to remain supported but with a more balanced outlook than seen in recent weeks.

EUR: The euro remains on the defensive despite managing to hold above the 1.1450 level against the dollar. From a technical perspective, EUR/USD continues to trade below its 100-day moving average, suggesting the broader trend remains biased to the downside. UOB analysts note that the current downtrend could extend towards 1.1400 should dollar demand persist. While the single currency has shown some resilience, a lack of fresh Eurozone catalysts means direction is likely to remain largely driven by developments in the US and broader dollar sentiment.

GBP: Sterling remains under pressure after GBP/USD broke below the important 1.3400 level, removing a key area of technical support. The move lower has pushed the pair closer to oversold conditions, with UOB highlighting 1.3335 as the next significant downside target. Whilst this may encourage some short-term stabilisation, the overall bias remains cautious while trading below 1.3400. For now, the pound’s direction is likely to be determined by whether the dollar’s recent strength can continue and whether buyers emerge around current support levels.

Economic Calendar

Expected Previous
10:00 BST - EUR Eurozone Consumer Confidence Index -16 -15.5

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.