Deficits, Tariffs, and DOGE: Why the Dollar’s Strength Is Fading

Australian Dollar (AUD) is expected to trade in a 0.6325/0.6365 range vs US Dollar (USD). In the longer run, upward momentum has largely faded; AUD is likely to consolidate between 0.6280 and 0.6410 for now, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Upward momentum has largely faded

24-HOUR VIEW: "Yesterday, we detected 'a slight increase in downward momentum.' We expected AUD to 'edge lower,' but we indicated that 'any decline is unlikely to reach 0.6315.' Our view was correct, as AUD dipped to 0.6323, recovering to close largely unchanged at 0.6344 (-0.09%). The mild downward pressure has eased. Today, we expect AUD to trade in a 0.6325/0.6365 range."

1-3 WEEKS VIEW: "After holding a positive AUD view since early this month, we revised our view to neutral yesterday (25 Feb, spot at 0.6345). We pointed out that 'upward momentum has largely faded,' and we were of the view that AUD 'is likely to consolidate to between 0.6280 and 0.6410.' Our view remains unchanged."

Source: FXSTREET

Chance for Euro (EUR) to rise above 1.0530 vs US Dollar (USD); it is unclear whether it can maintain a foothold above this level. In the longer run, c, but only a breach of 1.0425 would indicate that EUR is not ready to rise above 1.0530, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

EUR has a chance to rise above 1.0530

24-HOUR VIEW: "EUR rose briefly to 1.0528 on Monday and then pulled back. Yesterday (Tuesday), we pointed out, “the price movements did not result in any increase in either downward or upward momentum.” We expected EUR to “trade in a sideways range of 1.0440/1.0495.” However, after dipping to a low of 1.0455, EUR soared and closed near a 2-1/2-month high (1.0513, +0.45%). Despite the relatively strong advance, upward momentum has not increased much. While there is a chance for EUR to rise above the major resistance at 1.0530 today, it is unclear whether it can maintain a foothold above this level. The next major at 1.0560 is unlikely to come into view. To sustain the increasing momentum, EUR must not break below 1.0480, with minor support level at 1.0495.

1-3 WEEKS VIEW: "Yesterday (25 Feb, spot at 1.0460), we noted that 'upward momentum has slowed somewhat.' We highlighted that 'only a breach of 1.0425 (‘strong support’ level) would indicate that EUR is not ready to rise above 1.0530.' While EUR subsequently rose and closed higher by 0.45% at 1.0513, there is no change in our view for now. Looking ahead, EUR has to break and remain above 1.0530 before a move to 1.0560 can be expected."

Source: FXSTREET

The Pound Sterling falls to near 1.2640 against the US Dollar as the Greenback rebounds on a decent recovery in US bond yields.

US Treasury yields bounce back as the US administration clears the $4.5 trillion tax cut plan.

BoE’s Dhingra sees more than four interest rate cuts this year.

The Pound Sterling (GBP) declines to near 1.2640 against the US Dollar (USD) in European trading hours on Wednesday. The GBP/USD pair faces selling pressure as the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has shown a strong recovery move after sliding to near the 11-week low of 106.10 earlier in the day.

The Greenback bounces back strongly as bond yields gain ground after a five-day losing streak. 10-year US Treasury yields recover to near 4.33% after posting a fresh more than two-month low near 4.28% during the Asian session.

US bond yields find buyers’ interest after Republicans-controlled House of Representatives advances $4.5 trillion tax cut plan, which would also fund the deportation of migrants living in the US illegally, tighten border security, energy deregulation, and military spending, Reuters report. The injection of significant liquidity would boost inflationary pressures and force the Federal Reserve (Fed) to keep interest rates at their current levels for a prolonged period.

Meanwhile, traders have raised Fed dovish bets after weak flash United States (US) S&P Global PMI data for February showed on Friday that service sector activity contracted for the first time in over two years. According to the CME FedWatch tool, the possibility of the Fed cutting interest rates in June has increased to 65% from 47% a week ago. In the March and May policy meetings, the Fed is almost certain to keep borrowing rates steady in the range of 4.25%-4.50%.

Going forward, investors will focus on the US Durable Goods Orders and the Personal Consumption Expenditures Price Index (PCE) data for January, which will be released on Thursday and Friday, respectively. Investors will pay close attention to the US PCE inflation data as it will influence market speculation about the Fed’s monetary policy outlook.

Daily digest market movers: Pound Sterling consolidates against its major peers

The overall performance of the Pound Sterling against its major peers is sideways on Wednesday as investors digest dovish guidance from Bank of England (BoE) Monetary Policy Committee (MPC) member Swati Dhingra in her speech at Birkbeck on Monday. Dhingra warned about “weakness in consumption” and didn’t see it going away sooner, which is why she favored the unwinding of “monetary policy restriction”.

Traders have fully priced in two interest rate cuts by the BoE for the year. On the contrary, the commentary from Dhingra indicated that she favors more than four. "I know 'gradual' has been interpreted in the media as 25 basis points (bps) per quarter, but cutting interest rates at this pace for the remainder of 2025 would still leave monetary policy in an undesirable restrictive position at the end of the year,” Dhingra said.

In the policy meeting earlier this month, the BoE reduced borrowing rates by 25 bps to 4.5% and guided a gradual policy easing. The BoE also halved its Gross Domestic Product (GDP) forecast for the year to 0.75% and warned that price pressures could temporarily increase in the third quarter due to higher energy prices.

The outlook for the UK economy is uncertain due to potential tariffs from US President Donald Trump. Until now, Trump has imposed 10% tariffs on China and 25% on all steel and aluminum imports. He has also threatened to introduce reciprocal tariffs and 25% levies on all imports from Canada and Mexico, and he has proposed the same level of import duties on foreign cars, semiconductors, pharmaceuticals, and lumber and forest products.

Technical Analysis: Pound Sterling continues to face pressure near 200-day EMA

The Pound Sterling slides to near 1.2640 against the US Dollar in Wednesday’s European session. The GBP/USD pair continues to face pressure near the 200-day Exponential Moving Average (EMA), which stands at around 1.2680. The Cable holds above the 38.2% Fibonacci retracement from the end-September high to the mid-January low downtrend around 1.2620.

The 14-day Relative Strength Index (RSI) oscillates above 60.00. The bullish momentum remains intact if the RSI (14) holds above that level.

Looking down, the February 11 low of 1.2333 will act as a key support zone for the pair. On the upside, the 50% and 61.8% Fibonacci retracement at 1.2767 and 1.2927, respectively, will act as key resistance zones.

Source: FXSTREET

GBP/USD is attempting a fresh increase from the 1.2600 zone. EUR/GBP is gaining pace and might extend its upward move above the 0.8300 zone.

Important Takeaways for GBP/USD and EUR/GBP Analysis Today

The British Pound is attempting a decent increase above the 1.2620 zone against the US Dollar.

There is a connecting bullish trend line forming with support at 1.2625 on the hourly chart of GBP/USD at FXOpen.

EUR/GBP started a fresh increase above the 0.8285 resistance zone.

There is a major bullish trend line forming with support at 0.8300 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair started a downside correction from the 1.2690 zone. The British Pound traded below the 1.2650 zone against the US Dollar.

A low was formed near 1.2605 and the pair is now attempting a recovery wave. There was a break above the 50% Fib retracement level of the downward move from the 1.2690 swing high to the 1.2605 low.

The pair even spiked above the 76.4% Fib retracement level of the downward move from the 1.2690 swing high to the 1.2605 low and settled above the 50-hour simple moving average.

On the upside, the GBP/USD chart indicates that the pair is facing resistance near 1.2675. The next major resistance is near the 1.2690 level. If the RSI moves above 60 and the pair climbs above 1.2690, there could be another rally. In the stated case, the pair could rise toward the 1.2750 level or even 1.2820.

On the downside, there is a major support forming near 1.2625. There is also a connecting bullish trend line forming with support at 1.2625. If there is a downside break below the 1.2625 support, the pair could accelerate lower.

The next major support is near the 1.2605 zone, below which the pair could test 1.2560. Any more losses could lead the pair toward the 1.2525 support.

EUR/GBP Technical Analysis

On the hourly chart of EUR/GBP at FXOpen, the pair started a fresh increase from the 0.8265 zone. The Euro traded above the 0.8285 level to move into a positive zone against the British Pound.

The EUR/GBP chart suggests that the pair settled above the 50-hour simple moving average and 0.8300. Immediate resistance is near 0.8305. The next major resistance for the bulls is near the 0.8320 zone.

A close above the 0.8320 level might accelerate gains. In the stated case, the bulls may perhaps aim for a test of 0.8365. Any more gains might send the pair toward the 0.8400 level in the coming days.

Immediate support sits near a major bullish trend line at 0.8300 and the 23.6% Fib retracement level of the upward move from the 0.8275 swing low to the 0.8305 high. The next major support is near the 0.8285 zone.

The 61.8% Fib retracement level of the upward move from the 0.8275 swing low to the 0.8305 high is also at 0.8285. A downside break below the 0.8285 support might call for more downsides.

In the stated case, the pair could drop toward the 0.8265 support level. Any more losses might send the pair toward the 0.8240 level in the near term.

Source: ACTIONFOREX

The US Dollar (USD) holds its ground against its rivals early Wednesday as markets adopt a cautious stance. The US economic calendar will feature New Home Sales data for January. Later in the American session, Atlanta Federal Reserve President Raphael Bostic and Richmond Federal Reserve President Thomas Barkin will be delivering speeches. 

US Dollar PRICE This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Falling US Treasury bond yields after US Treasury Secretary Scott Bessen said that the Trump administration will find a way to reduce spending and ease monetary policy at the same time weighed on the USD on Tuesday. As the benchmark 10-year US T-bond yield fell more than 2% on the day, the USD Index lost about 0.4%. Early Wednesday, the 10-year yield stays in positive territory above 4.3% and the USD Index clings to recovery gains at around 106.50.

Meanwhile, US President Donald Trump's trade adviser, Peter Navarro, said that tariff negotiations are ongoing with Canada and Mexico and noted that they will set a reciprocal tariff for digital services tax. Additionally, Trump signed an executive order late Tuesday to launch an official probe into copper markets, specifically an investigation into pricing of futures and delivery markets, citing national security concerns.

EUR/USD rose more than 0.4% on Tuesday but lost its bullish momentum early Wednesday. At the time of press, the pair was trading marginally lower on the day, a few pips below 1.0500. Earlier in the day, the data from Germany showed that the GfK Consumer Confidence Index for March dropped to -24.7 from -22.6.

Following Monday's decline, GBP/USD registered small gains on Tuesday. In the European morning on Wednesday, the pair fluctuates in a tight channel at around 1.2650.

AUD/USD failed to benefit from the selling pressure surrounding the USD and closed in negative territory for the third consecutive trading day on Tuesday. The pair stays on the back foot early Wednesday and trades below 0.6350. In the Asian session, the data from Australia showed that the annual Consumer Price Index (CPI) rose 2.5% in January, matching December's increase.

USD/JPY lost nearly 0.5% on Tuesday and registered its lowest daily close since early October. The pair stages a rebound in the European morning on Wednesday and trades near 149.50.

Gold came under heavy selling pressure on Tuesday and lost more than 1% on the day. After touching its lowest level in over a week at $2,888, however, XAU/USD managed to erase a portion of its daily losses to close above $2,900. As of writing, the pair was moving up and down in a tight channel slightly above $2,910.

Source: FXSTREET

Source: AP