EUR/USD extends last week’s gains near 1.1130 as rising bets for Fed large rate cuts weigh on the US Dollar. Soft US PPI and deepening concerns over labor market outlook prompt Fed jumbo rate cut bets. *The European Central Bank cut interest rates by 25 basis points at its meeting last Thursday, as expected. *According to reliable trading platforms, currency volatility remained low. *Obviously, the euro managed to stabilize slightly against the pound sterling and the US dollar. *With the start of trading this week, the EUR/USD pair remained stable around and above the resistance of 1.1100, coinciding with the decline of the US dollar against other major currencies ahead of the US interest rate cut decision later this week. For this, no firm guidance was provided for the future by the European Central Bank, but it is widely assumed that further cuts will come towards the end of the year as economic forecasts point to weak growth and low inflation. Financial markets were relatively stable last Thursday after a volatile session on Wednesday following the release of US inflation. This sent stock markets soaring, with the S&P 500 initially falling by more than -1.5% only to reverse sharply and close 1% higher. Meanwhile, the US dollar rose slightly as the odds of a 50bp Fed cut next week fell to just 11%.

At the beginning of this week, the GBP/USD pair was trading around $1.3158, up by about 0.2% from the previous Friday's levels. Clearly, this was driven by a weaker US dollar despite signs of stubborn producer prices in the United States. According to economic data, the latest US Producer Price Index data came in stronger than expected, rising 0.2% in August, up from a downwardly revised flat reading in the previous month. However, growing concerns that a weak US Labor market could push the Federal Reserve into an aggressive easing cycle in the near term have undermined the US dollar's upside potential. On the other hand, the latest initial US jobless claims report rose as expected to 230,000, revealing another increase in the number of unemployed US citizens claiming unemployment benefits. The figure held above averages seen at the start of the year, reinforcing concerns about a weak US labour market in the wake of a bleak US payrolls report in August. As a result, this offset any potential shifts in the current market consensus around multiple US interest rate cuts by the Federal Reserve this year, as the spectre of a US hiring slowdown weighed on the US dollar.

The Pound Sterling (GBP) is a moderate outperformer on the session, helped by the prospect of the BoE taking a pass at this week’s rate decision and holding off on easing rates again until later in the year, Scotiabank’s Chief FX Strategist Shaun Osborne notes. The Pound Sterling surges to near 1.3200 against the US Dollar amid upbeat market sentiment. Investors expect the BoE to leave interest rates unchanged at 5% on Thursday. Traders remain divided over the size of the Fed’s likely interest-rate cut. The Pound Sterling (GBP) jumps to near 1.3200 against the US Dollar in Monday’s North American session. The GBP/USD pair gains as investors expect that the BoE’s policy-easing cycle will be less aggressive than that of the Fed. The Fed is almost certain to begin cutting interest rates on Wednesday. However, traders remain split about whether the rate cut size will be of 25 or 50 basis points (bps). According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 bps to 4.75%-5.00% in September has increased sharply to 61% from 30% a week ago.

** KEY POINTS **** 1-Dollar hits new 2024 low against yen. 2-Bank of Japan seeks higher rates. 3-Federal Reserve seeks lower rates. Price action in the volatile dollar-yen pair rekindled enthusiasm for technical analysis with a looming battle at a long-term support zone. -USD/JPY extends its losing streak within a descending channel, suggesting a confirmed bearish bias. -The momentum indicator 14-day RSI suggests an oversold situation and a potential for an upward correction soon. -The pair tests the 14-month low at 140.25, followed by the lower boundary of the channel at the 138.50 level. The USDJPY pair continues to decline for the fifth Consecutive Day and also touched a fresh 2024 low and bounced right back up as traders reacted to something seen only on the chart. A double bottom pattern, where the price falls to a low that has previously acted as support, emerged on the daily time frame. The dollar-yen slipped on Monday to ¥140.20 — a level last used as support on December 28 — and broke slightly below it. What matters now is who will have the upper hand — the bears or the bulls? The Federal Reserve is getting ready to cut interest rates this week for the first time in about four years. Presently, the benchmark rate in the US is sitting at 5.5% but expectations point to a cut in the ballpark of 25 basis points to 50 basis points. Prepare your trades for sweeping volatility in the lead-up to Wednesday when the Fed will announce its rate cut.

The AUD/USD currency pair was flat on Monday morning as traders continued focusing on the upcoming Federal Reserve and Reserve Bank of Australia (RBA) decisions. The pair was trading at the psychologically-important resistance point at 0.6700, higher than last week’s low of 0.6620 also The Australian Dollar appreciates due to a slight increase in the odds of a 50 basis points Fed rate cut. The Aussie Dollar receives support from the RBA’s hawkish stance. The US Dollar faces challenges as the Treasury yields decline amid uncertainty over the scale of the Fed rate cut. The Australian Dollar (AUD) inches higher against the US Dollar (USD) on Monday. The AUD/USD pair may appreciate further due to growing speculation that the US Federal Reserve will opt for a jumbo 50 basis points rate cut at this week’s monetary policy meeting. Traders are anticipating a release of Australian jobs data later this week to assess the health of the labor market and its potential impact on domestic monetary policy.

GBP/USD was flying high when the Dollar was driving-lower. The big question for next week is whether USD weakness can extend and if it can Cable is in position to shine. Among all the major FX pairs that I track, GBP/USD seemed to have one of the brighter backdrops earlier in the summer. The first test above the 1.3000 handle happened around the same time that RSI on the daily chart moved into overbought territory. The last time that either of those instances had taken place was a year prior, in July of 2023 when GBP/USD burst-above 1.3000 while RSI moved into overbought. That led into a prolonged sell-off that ran into October of that year. The GBP/USD pair is edging higher toward 1.3150, supported by an improving risk mood reflected by rising US stock indexes. The GBP/USD exchange Rate went into this weekend near the 1.31218 ratio, on Friday the high for the currency pair challenged the 1.31570 vicinity before reversing slightly lower. Trading in the GBP/USD last week was full of volatile reversals and since the last week of August the currency pair has proven difficult for traders looking to latch onto a trend and ride momentum. The GBP/USD has produced many reversals and its price realm between 1.30000 and 1.32000 has proven a rather fast playing ground.