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Dollar loses ground against rivals

Daily Currency Update

The British pound finished off last week on a positive note, as it was up almost 0.5% for the day on Friday. The major reasons for this, are due to a softer dollar environment at the moment due to a hesitancy from the Federal Reserve over September's tightening plans. The bounce back in GBP/USD has been bigger than anticipated, with the pair currently sat around the 1.2640 mark. However, with this softer dollar environment that we have experienced over the last week, analysts believe that the pair could break through into the 1.27s again in the coming days.

Key Movers

The dollar finished in the red last week on Friday, for the second week in a row. It posted losses against all other G10 currencies and has dropped by around 3% from the highs that it experienced at the start of the month. For a long time now, global risk sentiment has remained the primary driver for FX markets and volatility. However, it seems that the speculation within the markets over whether the Fed will pause its tightening cycle through September, is creating a softer dollar environment currently. 10bp have been shaved from the Fed's rate expectation for later this year. The Fed funds rate for 21 September was initially priced at 2.35% but is now being priced at 2.15% causing the slight uncertainty in the market and making the dollar slightly weaker. Though there is a public holiday in the US today, the biggest data point this week comes from Friday's release of the US non-farm payrolls report, which could have further impact on the Fed's decision on tightening.

EUR/USD has also been taking advantage of this softer dollar environment as it made its way towards the 1.0750 handle last week. It was also helped by some eurozone data last week, which has prompted the markets into pricing in some ECB tightening later this year. Chief Economist Andy Haldane affirmed these expectations by stating that the ECB could begin raising rates by 25bp increments through July and September.

Expected Ranges

  • GBP/USD: 1.2590 - 1.2680 ▲
  • GBP/EUR: 1.1720 - 1.1795 ▲
  • EUR/USD: 1.0705 - 1.0780 ▲
  • GBP/AUD: 1.7575 - 17680 ▼