The US CFTC data shows a shift in GBP net positions, now at £-2K, up from £-6.6K previously. This data comes with risks and uncertainties, so it’s wise for individuals to do their own research before trading. EUR/USD rose to daily highs, nearing the 1.1700 mark, due to the weakening US Dollar. This change followed the PCE data, which affected market expectations for possible Fed rate cuts.

GBP/USD Performance

GBP/USD has regained some value, bouncing back from recent losses as traders looked at the latest economic data. The changes were influenced by overall currency market trends and investor feelings about the US Dollar. Gold prices also increased, approaching $3,800 per troy ounce, supported by the softening of the Dollar. This positive trend is linked to speculation about federal rate changes. US core PCE inflation is expected to stay at 0.2% MoM in August. Jerome Powell’s recent speech highlighted a tough environment for the Federal Reserve, prompting a cautious approach given the current economic climate. The US Dollar is showing general weakness, which should be a key focus for trading. This weakness comes from recent PCE inflation data, reinforcing the belief that the Federal Reserve will keep cutting interest rates. A dovish Federal Reserve signals a weaker Dollar in the coming weeks.

Impact on Pound Speculation

We are witnessing a direct response in the British pound’s speculative positioning. The latest data shows non-commercial traders have cut their net short positions on GBP from £6.6 billion to only £2 billion. This significant shift indicates that major players are no longer betting heavily against the pound. This sentiment is supported by solid data, as the annual Core PCE inflation reading is now at 2.9%, continuing its steady decline from the peaks seen in 2024. Consequently, the derivatives market is pricing in an 85% chance of another 25-basis-point rate cut at the Fed’s November meeting, which would bring the Fed Funds Rate to a target of 3.75-4.00%. For the pound, this shift stands out, especially when we recall that net short positions were over £80 billion during the UK’s mini-budget crisis in 2022. The current decrease in short positions, along with GBP/USD nearing 1.3400, suggests a sustained recovery is underway. This level is a key technical area that hasn’t been tested in over a year. In the upcoming weeks, buying call options on GBP/USD could be a smart way to benefit from potential gains while managing risk. It’s also worth exploring similar optimistic strategies for gold, as the yellow metal is getting close to $3,800 an ounce. Gold thrives in environments with a falling US Dollar and decreasing real interest rates. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now