Market Update: GBP, EUR, and USD Trends

British Pound (GBP)

The Pound remains under pressure, particularly against the Euro, where it has slipped to six-week lows. Sentiment has been weighed down by a combination of weak UK data, a cooling services PMI, and persistently high public borrowing. While these factors matter, analysts note that markets are largely looking past day-to-day economic releases and focusing on the risks surrounding November’s autumn budget. Until then, the outlook for a sustained Pound recovery appears limited.

Euro (EUR)

The Euro has managed to hold its ground, supported by cautious market sentiment and a softer U.S. Dollar. Gains have been underpinned by improved German economic sentiment, although they remain capped ahead of upcoming data releases. France’s recent credit rating downgrade continues to cast a shadow, and investors are watching closely for September PMI and confidence figures. Any disappointment there could put the Euro back under pressure. Meanwhile, cautious signals from ECB officials keep movement restrained and highlight the ongoing uncertainty in the Eurozone.

U.S. Dollar (USD)

The Dollar has been trading in relatively narrow ranges as markets await fresh direction from the Federal Reserve. After a recent 25-basis point rate cut, a brief dip in the Dollar was quickly reversed when the Fed highlighted persistent inflation risks. Attention now turns to the upcoming PCE inflation data. A stronger reading could give the Dollar further support, though uncertainty over the Fed’s rate path continues to drive investor sentiment.

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British Pound (GBP)
The British Pound saw a lift this week as UK retail sales rose 0.6% in July, beating expectations of 0.3%. The stronger-than-expected data helped GBP recover ground against both the Euro and the US Dollar, offering short-term support after recent losses. However, subdued annual growth figures and concerns over the upcoming UK November Budget continue to weigh on sentiment, limiting the potential for a long-term rally.

Euro (EUR)
The Euro remained under pressure after Eurozone retail sales fell 0.5% in July, missing forecasts and signalling ongoing weakness in consumer demand. While EUR gained slightly against risk-sensitive currencies in a cautious market mood, it slipped against both GBP and USD. With few new economic drivers, traders are now focused on the upcoming Eurozone GDP data for clues on growth prospects.

US Dollar (USD)
The US Dollar weakened as softer labour market figures fuelled speculation of a potential Federal Reserve rate cut later this year. The Dollar Index fell 0.2% ahead of the highly anticipated US nonfarm payrolls report, which could provide further direction. Analysts at Bank of America note that while the Dollar is now closer to fair value after years of overvaluation, structural factors point toward a gradual USD weakening trend in the months ahead.

Key Takeaway
With GBP/USD testing support levels and EUR/USD struggling to find momentum, upcoming data releases – particularly US payrolls and Eurozone GDP – are likely to drive volatility. Businesses with international exposure may want to review their FX hedging strategies ahead of Q4.