The US dollar was seen closing last week with some solid gains. This came during the week, where the greenback already posted strong gains. Friday’s GDP report showed that the US economy grew 2.1% in the three months ending June 2019. This was slightly higher than the forecasts for a 2.0% increase. But the second-quarter data was still lower comparing to the first quarter’s 3.1% increase. The slightly better than expected data held the view that the Fed will cut rates by a quarter basis points only at this week’s meeting.
Euro Sinks on Strong USD and ECB Forward Guidance
The euro currency was seen trading weaker on Friday. The losses came a day after the ECB hinted at restarting its QE purchases and also cutting interest rates even lower. The stronger greenback following the GDP report also helped to keep the pressure upon the euro currency. Meanwhile, ECB forecasts said that they expect inflation to be around 1.7% in the longer term while forecasting a 1.3% average inflation rate for 2019.
Will EURUSD be Able to Rebound off the Lows?
EURUSD price action is currently near the previously established lows of 1.1140. The common currency is supported by the trend line and the horizontal support area as well. This could potentially trigger a short term rebound. However, price could remain caught within the range of 1.1250 resistance area. To the downside, a close below 1.1140 could signal further declines, as the EURUSD could test 1.1100.
Sterling Falls as Risk of a No-Deal Brexit Rises
Following the election of Boris Johnson as Prime Minister of the United Kingdom, the sterling is seen posting losses. This came amid reports of most of the cabinet members in Johnson’s administration being euro-skeptics. While the new administration wanted to negotiate a new Brexit deal, EU officials ruled out further talks. The British PM, however, said that the UK was committed to leaving the EU on October 31st.
GBPUSD at Risk of Falling to 1.20
The currency pair has been extending strong losses with Brexit now dominating the headlines once again. With price breaking below the initial support at 1.2426, the sterling remains dovish. However, the scope of the declines could be limited given the upcoming Fed meeting this week as well as the Bank of England’s monetary policy meeting.
Gold Pares Gains Ahead of Fed Meeting
The strong gains witnessed in gold is seeing a shift as price turns rather flat. The precious metal has been trading weaker. This comes as investors are now discounting just a quarter basis point rate cut. However, a lot will depend on how dovish the Fed will be at this week’s meeting.
XAUUSD Likely to Maintain a Flat Range
The precious metal has been consolidating near the resistance area of the 1431–1428 region. Price is likely to remain at these levels into Wednesday’s FOMC meeting. As a result, there is a downside risk that XAUUSD could slip to the 1404 level where support has been initially established. In the near term, we expect gold to hold flat ahead of further market developments.