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.
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.
