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    Euro and the British pound directionless as China rate cuts and US election uncertainty creeps in 

    July 23, 2024

    Key points

    • EURUSD and GBPUSD trading directionless within a range. 
    • Traders await US Q2 GDP data and PCE data, which will influence the Fed’s decisions in rate cuts. 

    The US dollar edged higher on a relatively mixed day as the foreign exchange market digested rate cuts in China and a plot twist in US politics. President Joe Biden’s decision not to run for re-election added uncertainty to the market, with EURUSD and GBPUSD remaining directionless. 

    The chart shows the EUR/USD currency pair over an hourly interval with a -0.12% trend. The pair opened at 1.08906 and closed at 1.08776, with a high of 1.08967 and a low of 1.08738. The chart includes moving averages (5, 10, 20, 30) indicating a recent bearish trend. The MACD (12, 26, 9) shows negative momentum, suggesting further downward pressure. Trading volume fluctuates, highlighting varying market activity. The overall trend reflects a decline.
    The chart displays the GBP/USD currency pair over a 30-minute interval with a -0.11% trend. The pair opened at 1.29307 and closed at 1.29167, with a high of 1.29349 and a low of 1.29115. The chart shows moving averages (5, 10, 20, 30) indicating fluctuating trends. The MACD (12, 26, 9) suggests decreasing momentum, hinting at potential downward pressure. Trading volume varies, reflecting different market activity levels. The overall trend shows a recent decline.

    SEE: Both EURUSD and GPBUSD reaches one-year high over stable UK inflation, as observed on the VT Markets app.  

    No clear signal in the market 

    The foreign exchange market was in a state of flux, primarily driven by China’s rate cuts and significant developments in U.S. politics. President Joe Biden’s decision not to seek re-election introduced an element of unpredictability.  

    This uncertainty could lead to increased volatility in the forex market, especially regarding pairs like EURUSD and GBPUSD, which became directionless. 

    Rate cuts from China hits 

    China’s decision to cut rates had a direct impact on the dollar, highlighting the sensitivity of these currencies to economic policies in China, their major trading partner. The rate cuts indicate China’s attempt to stimulate its economy, but they also raise concerns about the underlying health of the Chinese economy. 

    US Treasury yields saw modest increases across maturities, with the 2s-10s curve steepening slightly. This movement reflects market expectations of economic conditions and potential Fed actions. The upcoming Q2 GDP data and PCE data will be crucial in shaping these expectations further.  

    What traders can look out for 

    The EURUSD and GBPUSD pairs offer potential for range-bound trading, creating opportunities for traders to do scalping, although risk management remains important. The mixed data and geopolitical developments suggest staying alert to sudden market shifts. Monitoring the US Q2 GDP data and PCE data releases will be crucial for anticipating market moves. 

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