Asset Summary – Tuesday, 26 August
GBPUSD is demonstrating upward momentum, supported by positive UK business activity data that suggests economic resilience. Although inflation figures were higher than expected, their composition, heavily influenced by airfares, suggests limited impact on the Bank of England’s monetary policy. This reinforces expectations that interest rate cuts are unlikely in the near term, with market probabilities indicating a potential reduction only in spring 2026. The pound’s strong performance year-to-date against the dollar, nearing 8%, underscores this bullish sentiment.
EURUSD is likely to experience upward pressure, driven by several factors. The European Central Bank’s indication of a policy pause, coupled with strong Eurozone labor market data and improving German business morale, reduces the likelihood of further rate cuts in the near term. This contrasts with signals from the US Federal Reserve hinting at a potential rate cut in September, creating a policy divergence favoring the Euro. Furthermore, the details of the EU-US trade deal, while imposing tariffs on some European goods, offer relief to key sectors like autos, pharmaceuticals, and chips, mitigating potential negative impacts on the Eurozone economy. The combination of these elements suggests a potentially bullish outlook for the EURUSD pair.
DOW JONES is likely to experience continued downward pressure in the short term, influenced by investor caution and profit-taking following a recent surge. The decline in US stock futures and the negative performance of the Dow Jones Industrial Average, alongside other major indices, suggests a prevailing risk-off sentiment. The market’s focus is shifting towards upcoming key events, such as Nvidia’s earnings and the Fed’s inflation data, which could further dictate trading activity. While a potential interest rate cut hinted at by the Federal Reserve Chair previously fueled market enthusiasm, the present weakness indicates that investors are reassessing their positions and awaiting more concrete economic signals.
FTSE 100 is demonstrating positive momentum, having reached 9321 points. This signifies a daily increase and substantial gains over the past month and year. The consistent upward trend suggests a generally favorable investment climate within the UK’s leading companies, as reflected by the contract for difference tracking its performance. Investors may view this as an indication of continued growth potential, although past performance does not guarantee future results.
GOLD is exhibiting upward price pressure as it recently hit a two-week high. This surge is likely fueled by political instability following the dismissal of a Federal Reserve Governor, raising questions about the central bank’s autonomy. Compounding this, the possibility of a rate cut in September, as suggested by the Fed Chair, adds further support. The market currently anticipates a high likelihood of this rate cut. Investors are keenly awaiting the upcoming release of the PCE price index, which will provide further insight into inflation trends and influence future monetary policy decisions, thereby impacting gold’s appeal as a safe-haven asset.