The markets have had an interesting week with major central banks holding rates steady but signalling potential easing cycles ahead. Economic data from the US and UK have spurred volatility (not as much as Michael Oliver's decision-making), while the Euro is trying to capitalise on a weakened Dollar. Good news for UK holidaymakers as the Pound has soared, so make sure to buy your bucket and spade abroad, it will be a little cheaper!

Key Updates:

• Fed cuts rates by 50 basis points last week, with more cuts expected this year, leading to a weaker USD.
• GBP/USD approaches its year-to-date high, now sitting around 1.34, bolstered by UK inflation staying high but below Bank of England forecasts.
• EUR/USD climbed to a three-week high of 1.12 but has pulled back as the dollar slightly recovered.
• The BoE held interest rates at 5%, with markets expecting cuts starting in November as inflation pressures ease.
• US economic slowdown looms, with signals of fatigue pushing USD down across major pairs.

GBP

The British pound has been flexing its muscles lately, climbing close to 1.33 against the USD. UK inflation is stuck at 2.2%, with core inflation at 3.6%, surprising some, but it was enough to keep the BoE from cutting rates this week. That being said, whispers of a November cut are growing louder. The pound is riding high, and with the US dollar struggling, we could see more of this trend continuing.

USD

The Dollar has been under the weather recently. The Fed’s 50 basis point cut has taken a toll, and with more reductions anticipated by year’s end, the outlook for the Greenback isn’t promising. Economic indicators reveal a slowdown in the US economy, further straining the Dollar. If this trend persists, we could be facing even greater weakness ahead.

EUR

The Euro’s had a nice run, hitting 1.12 against the dollar before pulling back slightly. What’s driving it? A stronger-than-expected current account surplus in the Eurozone. People are betting that as the dollar weakens, the Euro’s going to have its moment. But it’s not all smooth sailing—EUR/USD is now sitting around the 1.11 mark, waiting to see what the next big move will be.

Final Thoughts:

We’re heading into an easing cycle, with central banks cooling off on rate hikes. The Pound and Euro are sitting in a positive place right now, while the Dollar takes a backseat. But with so much uncertainty still on the table, anything could happen. Keep an eye out for inflation reports and policy moves—they’re going to be big drivers in the coming weeks.

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