Daily Analysis: Trend Reversal As USD Posts Strong Gains

Our daily analysis of EUR, GBP and USD.

DAILY ANALYSIS

USD Gains Ahead of Much Anticipated Fed Chair Speech

The US Dollar Index (DXY), which measures the dollar against a basket of six major currencies, has been appreciating and is near a one-week high. Strength is primarily driven by recent US economic data, including strong Purchasing Managers' Index (PMI) data and rising jobless claims. These reports have eased expectations of an imminent interest rate cut by the Fed. With a Fed focused on inflation concerns, the probability of a Federal Reserve rate cut at the next meeting in September has fallen from 90% down to 70%. While a rate cut is still widely expected, the recent economic data and commentary from some Fed officials have lowered the certainty of the timing

This now puts a focus on Fed Chair Jerome Powell's speech at Jackson Hole later today with markets looking for clues on the Fed's long-term policy stance, particularly regarding its approach to inflation and employment targets.

EUR/USD: Below key 1.1600 level

GBP/USD: At 1.3400

GBP

UK Bank Holiday on Monday, so expecting the continued trend of little or no FX movements for the pound.

EUR/GBP: .8645

GBP/EUR: 1.1567

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