Since the US President’s reciprocal tariffs announcement in April, the euro has emerged as a strong performer among G10 currencies, following the Swiss franc. The euro’s stability is partially result of Germany’s debt brake relaxation in March, which had an optimistic impact on the currency.<\/p>\n
There are concerns that recent tariffs could lead to a US recession and rising inflation, prompting a shift away from US assets. Despite the S&P 500 reaching new highs since June, the US dollar remains weak due to anticipated aggressive Federal Reserve rate cuts.<\/p>\n
Current forecasts suggest four Federal Reserve rate cuts in 2026, following a cut in September. The euro could face short-covering pressure, potentially causing a EUR\/USD dip to 1.15 over future months. <\/p>\n
The US dollar maintains strength amid improved US-China relations. Meanwhile, the British pound and gold have been adversely affected, with the GBP\/USD falling to near 1.3420 and gold reaching $3,330 per troy ounce. In the cryptocurrency market, Bitcoin recently hit an intraday low of $114,723, though recovery efforts are underway.<\/p>\n
Based on the potential for a United States recession and aggressive rate cuts, we believe the euro will maintain its strength against the dollar. We see the relaxation of Germany’s debt brake as a fundamental support for the currency. Derivative traders could consider buying EUR\/USD call options or bull call spreads, targeting a move towards the 1.15 level over the coming months.<\/p>\n
The expectation of monetary easing from the central bank is a primary driver, with current market data from the CME FedWatch Tool showing over a 60% probability of a rate cut by September 2024. While inflation has cooled slightly to 3.3% in May, it remains a concern that validates fears of a policy shift away from supporting the greenback. We would respond by using any dollar strength as an opportunity to initiate short positions.<\/p>\n
We observe that the British pound has been negatively impacted, trading recently near 1.26, far below the level mentioned. This divergence suggests a strategy of buying the euro against the pound could be profitable. For gold, we see the forecast of $3,330 as a long-term bullish signal, justifying holding long futures contracts as a hedge against the anticipated inflation and dollar weakness.<\/p>\n
In the cryptocurrency space, the market has seen significant drawdowns, with Bitcoin trading closer to $60,000 rather than the intraday figure cited. We view this volatility as an opportunity to sell covered calls or engage in range-bound strategies. A recovery back towards previous highs near $73,000 seems more realistic before any attempt at new records could be staged.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Euro gains on US tariff fallout, Fed rate cut expectations; dollar weak, pound and gold decline.<\/p>\n","protected":false},"author":62,"featured_media":16963,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27362","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/27362","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=27362"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/27362\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16963"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=27362"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=27362"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=27362"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}