The Pound Sterling is steady against the US Dollar, even though it has faced some recent declines. Market predictions for Bank of England rate cuts have eased. A 25 basis point cut is expected by August 7, with a smaller reduction by the end of the year now down by 5 basis points. Recent data from the CFTC indicates a change in sentiment towards the GBP. Traders have shifted from a net long position of $2.4 billion to a neutral stance. This makes the GBP seem vulnerable since it has recently fallen below key support levels from mid-July. If it can move up to 1.34, that would stabilize its outlook, while new lows around 1.33 would suggest a bearish trend. In other markets, EUR/USD is below 1.1550, recovering after dropping to 1.1500 due to US data. GBP/USD is testing the 1.3300 support as strong demand for USD continues in anticipation of the FOMC and NFP events. Gold is struggling for gains, hovering around $3,330 per ounce, as caution prevails before the Fed’s rate decision. Meanwhile, Ethereum has reached a year-to-date high near $4,000, fueled by strong institutional interest with ETFs gaining 1.6 million ETH recently. The Federal Reserve is facing criticism for delaying rate cuts amidst uncertainties about tariffs and the economy’s strength. However, this delay could reveal weaknesses in the job market. The British Pound’s apparent stability may be deceiving, and it seems increasingly vulnerable ahead of the Bank of England’s meeting on August 7. With the market pricing in a 25-basis-point cut, the outlook for the currency appears to be downward. The latest Commitment of Traders report highlights this shift, showing non-commercial positions falling by over 30,000 contracts, marking this as the largest weekly decline of the year. Given this situation, traders should consider any rallies towards the 1.3400 level as chances to take bearish positions. A clear break below the 1.3300 support level, which has been tested several times this month, would likely lead to more selling. Using put options that expire in late August could be a smart way to prepare for a potential drop while managing risk. The main story remains the strength of the US Dollar, driven by expectations for this week’s Federal Open Market Committee meeting and Non-Farm Payrolls data. Currently, Fed funds futures show less than a 10% chance of a rate cut before November, reflecting the economic strength noted by policymakers. Historically, the dollar index has increased by an average of 1.2% in the two weeks leading up to meetings perceived as hawkish. This creates a significant challenge for gold, which is struggling with resistance at $3,330 per ounce. The main pressure comes from rising U.S. 10-year real yields, which have climbed above 2.0% this week, increasing the cost of holding non-yielding assets like gold. We recommend avoiding large positions in gold until the central bank provides clearer direction. In contrast, Ethereum continues to show impressive strength, reaching new year-to-date highs. The 1.6 million ETH accumulated by spot ETFs in recent weeks equates to over $6 billion in net inflows, confirming that institutional capital is driving this rally. The options market indicates this optimism, with a persistent bias towards call options over puts, as shown by the 25-delta risk reversal skew.

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