Greenback Weakens; Euro and Pound Rise Amid Fed Expectations

The pound sterling held steady with an upward bias during Friday’s trading (Aug 21), while the euro remained near key resistance levels as the US dollar continued to weaken following US Treasury moves in the bond market. GBP/USD rose 0.32% to 1.3672, while EUR/USD strengthened 0.27% to the 1.1709 area.
Market sentiment remains driven by the US Treasury’s surprise decision on Wednesday to expand its long-term government bond buyback program. That policy pressured Treasury yields and weakened the dollar, fostering a more positive trading environment for risk assets and other major currencies.
The Dollar Index (DXY) remains under pressure, with support in the 98.65–98.70 range. ING analysts believe the dollar will struggle to break back above the 99.00 level as markets scale back expectations for Federal Reserve rate hikes. Softer US inflation and labor market data have also reinforced speculation that further monetary tightening is increasingly unlikely.
In the UK, a light economic calendar has allowed markets to maintain confidence in Prime Minister Andy Burnham’s government ahead of the November budget drafting. Meanwhile, investors are keeping a close watch on August S&P Global PMI data to gauge the sustainability of the UK’s economic expansion.
In the Eurozone, attention is focused on the release of August PMI figures, which are expected to show continued moderate growth. Investors are also awaiting the ECB’s consumer expectations survey, particularly given that three-year inflation expectations previously remained elevated at around 3%.
Newsmaker Analysis: Dollar weakness is the primary catalyst for GBP/USD and EUR/USD in the short term. As long as the DXY remains below 99.00, downward pressure on the greenback could persist. However, the future trajectory will hinge heavily on US economic data and signals from the Fed—specifically, whether the market is truly ruling out rate hikes or merely undergoing a temporary repricing. (arl)
Source: Newsmaker.id

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