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)

GBP/USD revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold challenges its 200-day SMA near $4,530

Gold’s decline gathers fresh steam, hitting weekly lows while disputing its critical 200-day SMA near $4,530 per troy ounce. The yellow metal’s increasing weakness comes in response to the generalised upbeat tone in the US Dollar and the widespread rebound in US Treasury yields, as investors continue to reprice a Fed rate hike in September.

Crypto Today: Bitcoin, Ethereum, XRP rally loses steam despite steady ETF inflows

Bitcoin is back below $80,000 at the time of writing on Friday, after a second attempt at breaking resistance between $81,000 and $82,000. Meanwhile, Ethereum and Ripple mirror Bitcoin’s cooling trend, with ETH sliding to $2,500 and XRP falling toward $1.40 support.

Week ahead – RBNZ and BoC decide on rates ahead of all-important US NFP

Dollar rebounds ahead of ISM PMI and NFP data. RBNZ is expected to raise rates; focus to fall on forward guidance. BoC is set to remain on hold; will it raise rates in 2027?

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.