The US CFTC data shows a change in GBP net positions, recording a net position of £-2K compared to a previous £-6.6K. The information is subject to risks and uncertainties, making it important for individuals to conduct their own research before making trading decisions.
EUR/USD climbed to daily highs, approaching the 1.1700 mark, driven by the weakening US Dollar. This movement followed the PCE data, influencing market expectations for potential Fed rate cuts.
Gbp Usd Performance
GBP/USD regained some value, reversing its recent losses, as market participants analysed the latest economic data. The fluctuations were influenced by the broader movements in the currency market and investor sentiment around the Greenback.
Gold prices strengthened, nearing the $3,800 per troy ounce, buoyed by the easing pressure on the Dollar. The positive trend is also linked to speculations about federal rate adjustments.
US core PCE inflation is anticipated to hold at 0.2% MoM in August. Jerome Powell’s recent address suggested a challenging environment for the Federal Reserve, maintaining a cautious approach amidst current economic conditions.
The US dollar is showing broad weakness, and this is the main theme we should be trading on. This weakness is driven by the recent PCE inflation numbers, which have solidified the market’s belief that the Federal Reserve will continue cutting interest rates. A dovish Fed is signaling a weaker dollar for the weeks ahead.
Impact On Pound Speculation
We are seeing a direct reaction in the British pound’s speculative positioning. The latest data shows non-commercial traders have reduced their net short positions on GBP from £6.6 billion to just £2 billion. This is a significant shift, indicating that major market players are no longer betting heavily against the pound.
This sentiment is backed by credible data, as the latest annual Core PCE inflation reading came in at 2.9%, continuing its steady decline from the peaks we saw back in 2024. As a result, the derivatives market is now pricing in an 85% probability of another 25-basis-point rate cut at the Fed’s November meeting. This would take the Fed Funds Rate to a target of 3.75-4.00%.
For the pound specifically, this shift is notable when we remember the extreme net short positions that exceeded £80 billion during the UK’s 2022 mini-budget crisis. The current reduction in shorts, coupled with GBP/USD flirting with 1.3400, suggests a sustained recovery is underway. This level represents a key technical area that we haven’t seen challenged for over a year.
In the coming weeks, buying call options on GBP/USD could be an effective way to capitalize on further upside while defining risk. We should also consider similar bullish strategies for gold, as the yellow metal is approaching $3,800 an ounce. Gold performs well in environments with a falling US dollar and declining real interest rates.
