FX Majors Ride on Weak U.S Dollar Ahead of Fed Decision
Forex majors, which are currencies of leading economies, gained strength as the U.S. dollar weakened in anticipation of possible interest rate cuts by the Federal Reserve in the upcoming week.
In the recently concluded week, the US dollar fell against its major trading pairs in the foreign exchange markets in reaction to weak economic data.
The U.S. stirs the global trade structure with new tariffs on key partners and other nations with back-and-forth discussions. While tariff deals have been closed, the markets have seen significant adjustment to dollar holdings.
Sell pressure in the dollar position has kept the greenback on edge. Trading data showed that the dollar lost 0.17% to trade at 147.22 yen. The greenback loses 0.22% to 1.3834 Canadian dollars. The euro gains 0.34% to $1.1734.
Also, Sterling gained 0.32% to $1.3572 ahead of the Bank of England rates decision. The US dollar slipped in volatile trading this week as markets priced in Federal Reserve rate cuts after jobless claims surged to a near four-year high.
The labour-market shock has overshadowed stubborn US inflation at 2.9% and kept EUR/USD near seven-week highs around 1.17. GBP/USD surged to 1.3560 after the UK economy flatlined in July, with traders braced for the next data release for UK jobs and inflation data to set the tone for Sterling.
Weak job data and an accelerated consumer price index in the US kept the US dollar in the hook last week ahead of the Federal Open Market Committee (FOMC) meeting.
The market anticipates the Federal Reserve to cut rate even when inflation data worsens. The markets anticipate Fed rate cuts will encourage risk-taking, though inflation risks from uncertainty around tariffs remain.
Amidst rising possibilities of a Fed cut soon – boosted by the labour market weakness – and continued concerns around the Fed’s independence, gold investors’ bullish bets rose further across the board. All eyes on the Fed’s rate decision on 18 September.
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