The Pound Sterling rose against most other currencies, even with concerns about UK fiscal risks highlighted by the Office for National Statistics (ONS). The ONS showed that the UK government raised its second-largest funds since 1993 to tackle rising debt costs due to inflation, which may lead to higher taxes in the upcoming Autumn Statement. The GBP/USD stayed steady above 1.3500, helped by better risk sentiment. The US Dollar faced selling pressure amidst ongoing trade issues between the US and concerns regarding the relationship between President Trump and Federal Reserve Chairman Powell.

Euro Dollar Developments

The Euro regained some value against the US Dollar, aiming for the 1.1750 level as US-EU trade talks progressed. Meanwhile, the USD struggled as traders reacted to the recent US-Japan trade agreement. Gold prices fell below $3,400 per ounce due to reduced trade worries after the US-Japan agreement. Major cryptocurrencies like Bitcoin, Ethereum, and Ripple also declined, with the overall market cap dropping by 3.5%, likely due to profit-taking. During Trump’s presidency, major policy shifts faced resilient markets. Experts suggest that brokers offering competitive features are essential for effectively trading EUR/USD in the changing forex landscape. Currently, we see the Pound’s strength as fragile due to significant fiscal risks pointed out by the ONS. Recent data shows UK government borrowing in April 2024 reached £20.5 billion, the fourth-highest for an April since records began, stressing the burden on public finances. Derivative traders might consider buying put options on GBP/USD to guard against potential downturns ahead of the Autumn Statement.

Opportunities and Risks in Forex Markets

We see ongoing selling pressure on the US Dollar as a prime opportunity, given the changing monetary policy outlook. Although the quarrels between the former president and the Federal Reserve chairman are in the past, tensions between policy and politics remain. Markets are predicting at least one Fed rate cut by the end of 2024, leading us to consider shorting the dollar against currencies with more hawkish central banks. We’re closely watching the Euro’s potential rise against the dollar. Recent data shows Eurozone inflation steady at 2.6% in May, allowing the European Central Bank to adopt a cautious approach, unlike the Fed. We recommend traders look at call options on the EUR/USD pair, aiming for a move towards the 1.0950 level in the coming weeks. As for gold, its price is influenced less by trade deals and more by global interest rate expectations and central bank demand. With gold at around $2,330 an ounce, historical data shows its value tends to rise during times of declining real yields. Traders should use futures to capitalize on this range, as central bank purchases, which totaled a record 1,037 tonnes last year, provide a solid support for the market. In cryptocurrency, recent price drops reflect broader market stabilization rather than mere profit-taking. The approval of spot Ethereum ETFs follows over $15 billion in net inflows into spot Bitcoin ETFs since their launch, indicating a significant shift toward institutional adoption. We recommend using options to trade implied volatility, as regulatory updates and macroeconomic data are likely to cause sharp price fluctuations. Create your live VT Markets account and start trading now.

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