USD pulls back as risk-on mood boosts GBP – OCBC

FXStreet Insights Team FXStreet

The safe haven US Dollar (USD) lost ground after an early firm start, tracking the broader risk-on mood, while Pound Sterling (GBP) outperformed G10 peers overnight, OCBC's FX analysts Sim Moh Siong and Christopher Wong note.

Fed cuts and AI growth shape market outlook

"Despite stronger risk assets, gold surged as markets digested US intervention in Venezuela and a softer ISM manufacturing PMI, which reinforced expectations for a Fed rate cut. Higher global oil prices suggest that markets appear to be focused – for now – on a near-term disruption in Venezuelan oil production due to the ongoing naval blockade and sanctions rather than prospects of a recovery in oil output amid potential increase in US-led investments."

"Beyond geopolitics, we expect markets to remain fixated on AI-driven growth and the Fed’s next steps. The year begins with a divided Fed after three consecutive 25bps cuts since Sep 2025. The median dot signals one cut in 2026, but markets price two cuts and a 40% chance of a third, leaning dovish—partly on expectations of a leadership shift after Fed Chair Powell exits in May."

"US growth prospects may improve on AI-led investment, fading tariff drag, and tax cuts, tempering expectations for further easing beyond the final 25bp Fed cut we see in 1Q26. This could support USD later in the year. The labour market remains key, with this Friday’s December US jobs report in focus."

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD clings to daily gains near 1.3550

GBP/USD adds to Friday’s advance, briefly hitting three-month tops near 1.3570 before edging lower on Monday. Fading expectations of a Fed rate hike in September weigh on the Greenback, helping Cable to keep its bullish momentum ahead of the release of the UK jobs report on Tuesday.

EUR/USD trims gains, back to 1.1580

EUR/USD gives away part of the earlier advance north of 1.1600 the figure on Monday, receding toward the 1.1580-1.1570 band as the NA session enters its last part. The pair’s move higher comes on the back of persistent US Dollar weakness as investors scale back expectations of Fed rate hikes following a string of disappointing US data releases.

Gold loses some traction, still above $4,400

Gold faces some loss of momentum and slips back toward the vicinity of the $4,400 mark per troy ounce on Monday. The yellow metal adds to Friday’s uptick and its positive performance follows the steady offered stance in the US Dollar amid dwindling bets for further tightening by the Fed in the next few months.

Bitcoin range trade hints at looming volatility burst, analysts say

Bitcoin (BTC) trades slightly higher around $63,500 on Monday, following a slight correction the previous week, supported by improving risk sentiment and despite mild outflows from institutional demand.

Economists agree: Fed to leave interest rates unchanged this year – Reuters poll

A large majority of economists expect the Federal Reserve (Fed) to keep interest rates unchanged in September and for the rest of this year, according to a Reuters poll conducted between August 12 and 17.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.