Insights 
VT 
The US Dollar gained early in the week, with the Dollar Index rising 0.43%, reaching 99.28, following President Trump’s softened stance on China. Dovish remarks by the Philadelphia Fed President restricted further gains for the Dollar, as it moved near a two-month high of 99.56. Traders are focused on Fed Chair Jerome Powell’s speech.
The EUR/USD pair decreased by 0.46%, as France faced budget deficit reduction efforts. Germany’s inflation data and Mario Cipollone’s speech are upcoming events. GBP/USD experienced a 0.13% dip, stabilising between 1.3260-1.3370. The UK is set to release September’s employment figures.
Us Dollar Performance And Global Currency Updates
USD/JPY returned to 152.00, supported by improved risk appetite, affecting the Yen and Swiss Franc. AUD/USD rose 0.62% after the Reserve Bank of Australia’s rate decision. Traders await its meeting minutes, as the pair remains above 0.6500.
Gold prices are poised to exceed $4,100, with traders eyeing $4,150 unless Powell’s speech turns hawkish. Speculation persists on Bullion’s potential price landmarks. Economic updates include Powell’s upcoming speech, with possible implications for financial markets.
We are watching Fed Chair Powell’s speech closely today, as it will set the tone for the market in the coming weeks. The US Dollar Index is already strong near 99.30 following a de-escalation in US-China trade tensions. Given that last week’s data showed US core inflation remains elevated at an annual rate of 3.8%, any hawkish comments from Powell could fuel another leg up for the dollar.
Factors Influencing Global Currencies
The Euro looks particularly vulnerable against the dollar, weighed down by France’s persistent budget deficit problems. This makes shorting the EUR/USD pair an attractive strategy to express a view on continued dollar strength. We saw a similar dynamic play out in 2023, when internal European economic concerns caused the Euro to lag even as global risk sentiment improved.
Sterling is currently caught in a narrow range, balanced between a potentially hawkish Bank of England and broad dollar strength. The upcoming UK employment report will be critical, as the unemployment rate has held steady near a low of 4.1% for the past two quarters. Another strong jobs number would support the case for higher UK rates and could push GBP/USD toward the top of its recent 1.3370 range.
As the immediate threat of new tariffs fades, safe-haven currencies like the Japanese Yen are losing their appeal. We see the path of least resistance for USD/JPY as higher, especially now that it has broken back above the 152.00 level. This improving sentiment is reflected in the VIX, a measure of market fear, which has fallen by over 12% in the last two trading sessions.
Gold is telling a very different story, surging to a record high past $4,100 an ounce. This suggests that despite the positive trade news, traders are still hedging against major event risks, particularly a policy mistake from the Federal Reserve. Using call options to bet on gold moving toward $4,150 could be a prudent way to capture further upside while limiting downside risk if Powell surprises with a hawkish stance.
