British Pound dips below 1.3400, turns negative on the day as US Dollar picks up

GBP/USD retreats to 1,3390 from session highs near 1.3420.
Market concerns about the consequences of the escalating Middle East tensions are boosting the US Dollar's recovery.
The Greenback took a hit on Tuesday as US CPI cooled hopes of immediate Fed rate hikes.

Guillermo Alcala FXStreet

The British Pound (GBP) has retraced previous gains against the US Dollar (USD) on Wednesday, returning to the 1.3390 area from session highs of 1.3420 and turning negative on the daily chart. The safe-haven US Dollar has bounced up during the London session amid the risk-averse sentiment as US and Iran escalate their threats following the resumption of hostilities.

Risk aversion is weighing on the Pound on Wednesday with tensions in the Middle East simmering and Oil prices 17% above early July highs. Iranian authorities said that 30 people have been killed in the latest round of US strikes, and US President Trump has threatened to target civilian infrastructure, including power plants.

Iran’s Islamic Revolutionary Guard Corps (IRGC), in turn, threatened to block other energy routes and halt all Middle East energy exports, in response to the US blockade of Iranian ports.

Soft US inflation data cools Fed tightening expectations

These tensions have offset the US Dollar’s weakness seen in Tuesday's and Wednesday’s Asian sessions, as softer-than-expected US Consumer Price Index (CPI) figures dampened expectations that the US Federal Reserve might hike interest rates as soon as July.

Later on the day, the focus will shift to the US Producer Prices Index (PPI) figures, to confirm with markets looking for confirmation of the disinflationary trend pointed by Tuesday’s CPI data.

In the UK, Andrew Burnham has practically confirmed his nomination as the new leader of the Labour Party, with the backing of 349 MPs. He still needs the support from at least three organisations of the Labour Party, but this will not be an obstacle, as it is mathematically impossible for a rival to beat him.

After that, the former mayor of Manchester is expected to be nominated as Prime Minister on July 20. Markets remain calm about it, especially after his efforts to convey a responsible fiscal policy, which has contributed to the 2% GBP/USD appreciation since the former Prime Minister, Keir Starmer, stepped down in late June.

Economic Indicator

Producer Price Index (MoM)

The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

Economic Indicator

Producer Price Index (YoY)

AUD/USD holds firm near 0.7000 after Chinese inflation, trade data

AUD/USD stays firm near 0.7000 in Wednesday’s Asian session, picking up some bids after China's mixed inflation and upbeat trade data. CPI rose less than expected in September, while PPI inflation picked up. Meanwhile, the Chinese trade surplus unexpectedly widened in September. The pair remains underpinned by a broadly subdued US Dollar, despite the Middle East escalation, as focus remains on US CPI data.

USD/JPY consolidates near 158.50; looks to US CPI for fresh impetus

USD/JPY stays range-bound near 158.50 in the Asian session on Wednesday, with looming intervention risks supporting the Japanese Yen and capping upside amid a softer US Dollar. However, geopolitical uncertainties act as a tailwind for the safe-haven USD and the pair. Traders also seem hesitant ahead of the release of the latest US inflation figures.

Gold looks to $4100 and US CPI inflation amid geopolitical risks

Gold falls for the third straight day on Wednesday, as the recent recovery falters ahead of US inflation. US Dollar pauses correction amid rising Oil prices and stabilizing US Treasury bond yields. The daily bearish RSI remains a headwind for Gold buyers, with $4,100 seen at risk.

Bitcoin eyes $85,000; ETH holds support, XRP stabilizes

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) show signs of recovery on Wednesday as buyers try to regain control after their recent market weakness. BTC extends its rebound toward the $85,000 resistance, while ETH and XRP find support around key levels.

What happens after a US Treasury market crash

The global bond market is under severe pressure as US Treasury yields reach multi-decade highs, driven by persistent inflation risk, heavy government and corporate debt issuance, and expanding term premiums. Higher yields raise borrowing costs and tighten financial conditions, but a severe bond selloff can ultimately shift investor focus from inflation to growth and financial stability.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?