EUR/USD and GBP/USD gains fueled by ongoing US dollar weakness

EUR/USD and GBP/USD Ongoing fueled rallies US dollar Weakness

EURO/USD and GBP/USD Latest

• The US dollar slips lower as US interest rates approach
• EUR/USD and GBP/USD after multi-month highs

The minutes of the last FOMC meeting are released later in today’s session and will show a more detailed picture of why the Fed decided to keep rates unchanged at 5.25%-5.5%. Since the July meeting, a series of data releases have pointed to growing weakness in the US economy, suggesting the Fed will begin cutting interest rates in September. Financial markets are currently pricing in a 67.5% chance of a 25 basis point decline and a 32.5% chance of a 50 basis point decline.

With today’s FOMC minutes already in the market, trader attention will turn to Powell’s appearance at the Jackson Hole Symposium on Friday. Chairman Powell is expected to acknowledge that the conditions and dates are now right for a series of interest rate cuts to begin in September. Markets will be keen to see if Powell agrees with current market prices of 100 basis points of cuts this year or rejects current assumptions. With only three FOMC meetings left this year, 100 basis points of cuts would require a 50bp move at one of those meetings.

The U.S. dollar index (DXY) has fallen sharply over the past two months as traders price in a more dovish Fed. The technical outlook for DXY remains negative, with two bearish flag formations on the daily chart keeping downward pressure on the dollar.

Daily Chart of the US Dollar Index (DXY).

The Euro and Sterling benefited from this weak dollar context, with EUR/USD and GBP/USD hitting new multi-month highs yesterday.

EUR/USD has bounced back strongly after posting a five-month low of 1.0600 in mid-April, and Monday’s bullish 50-day/200-day SMA crossover suggests the pair is likely to move higher in the coming weeks.

EUR/USD daily chart

The GBP/USD daily chart is also looking positive with an unbroken streak of higher lows and highs since late April. While the pound has strengthened on its own recently, further gains for the pair will be dictated by the outlook for the US dollar.

GBP/USD Daily Chart

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