The US Dollar bounced back on Thursday after two days of losses, thanks to ongoing trade tensions and a strong US labor market report. The US Dollar Index stayed above 97.00, and US yields saw a slight increase. EUR/USD fell to two-week lows around 1.1660, driven down by a stronger US Dollar and rising hopes for a US-EU trade deal. Key data releases included Germany’s Wholesale Prices and a speech from the ECB’s Cipollone.

GBP/USD Downward Trend

GBP/USD continued its downward trend, sliding into the low 1.3500s as the Greenback strengthened. The UK is set to release important economic data, including GDP, Balance of Trade, and the NIESR Monthly GDP Tracker. USD/JPY fluctuated, testing the 146.50 level due to gains in the US Dollar. Japan’s upcoming reports will cover Machinery Orders and Industrial Production. Despite the US Dollar’s gains, AUD/USD rose for the third straight day, reaching around 0.6580. Australia will soon release the Westpac Consumer Confidence Index. WTI crude oil prices fell below $67.00 per barrel, while gold prices rose, testing the $3,330 level. Silver prices approached $37.00 per ounce. With the US Dollar recovering, we’re paying close attention to global economic cues. The Dollar’s performance now more clearly depends on interest rate expectations and recent data. Even small increases in yields led to renewed demand for the Dollar, showing how quickly investor sentiment can change with good jobs data. This should be considered when dealing with major economic updates while geopolitical tensions linger, affecting asset pricing inconsistently rather than just through interest rates. In the Eurozone, the drop in EUR/USD stemmed from more than just US strength. German wholesale prices were slightly weak, and Cipollone’s comments did not significantly alter the outlook. This highlights the cautious stance of the European Central Bank as political uncertainty rises and trade optimism with the US creates speculative noise. With EUR/USD breaking below short-term support, momentum seems to favor further declines unless upcoming data surprises positively. Traders should view any rise in EUR/USD as a tactical opportunity rather than a medium-term shift.

Concerns for Sterling

Sterling’s decline wasn’t surprising, but the extent of the drop into the lower 1.3500s raises new worries. With key economic data on the horizon—including GDP and trade balance—there may be intraday volatility that doesn’t indicate a broader narrative shift. Traders should factor GDP surprises against interest rate expectations, as the market is sensitive to signs of weak domestic output. If the numbers exceed modest predictions, Sterling could see a short-term lift; failure to deliver could lead to further declines, especially given the uncertainty surrounding the Bank of England’s forecasts. USD/JPY remained in a tight range, but the test of 146.50 reflects the expected movement when US rates rise. Japan’s forthcoming machinery and industrial production data will shed light on output. However, we don’t anticipate a break out of the current channel unless the figures are significantly above expectations. The pair currently reacts more to US funding conditions than data changes, and any move back towards 145.00 may attract strong dollar buying. Local fund flows might counteract this, particularly if input costs start to rise again. Some analysts are puzzled by AUD/USD’s resilience despite strong demand for the USD. Factors like commodity demand or unwinding of short positions might explain the Aussie’s three-day increase, suggesting a temporary decoupling rather than a new trend. The Westpac confidence numbers will be significant this week; if sentiment weakens, the rally may falter, even as general risk appetite remains unclear. Caution is advised for long positions at these levels since the pair could be vulnerable to a rebound in USD strength if risk assets struggle. Commodities are diverging again. Oil prices fell below $67.00 due to oversupply signals and a stronger Dollar affecting demand forecasts. If the selling intensifies, fresh signals from OPEC or unexpected supply issues will be needed to stabilize prices. Gold re-tested $3,330 with steady inflows, reinforcing its role as a volatility hedge. Currently, precious metal movements are more linked to real yields than nominal ones, and if inflation data strengthens in the coming weeks, gold may stall. Silver continued to rise, nearing $37.00; however, its hold on these levels could be fragile, and traders should brace for potential sharp reversals, especially in futures trading. Create your live VT Markets account and start trading now.

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