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European currencies are holding near four-week highs at the start of the week. Following the volatile swings sparked by Jerome Powell’s remarks at the Jackson Hole symposium, the market has yet to form a clear scenario: the dollar corrected but then came under renewed pressure. As a result, EUR/USD and GBP/USD managed to test key resistance levels, though no breakout from their sideways ranges has yet occurred. The next move will largely depend on upcoming macroeconomic data releases from Europe, the UK, and the US, which could shift the short-term outlook.
Any labour market related weakness is likely to raise bets for Fed cuts, pressuring front-end yields and the dollar. We consider the bar to price out monetary easing, particularly for September (+/- 90% discounted), to be very high. European inflation numbers, seen at 0.1% m/m and 2.1% y/y, should come with little surprises after the national readings published over the last few days.
In metals, gold hit a fresh all-time high above $3’500 per ounce in Asia, surpassing its April peak. The rally reflects a softer dollar but also strong central-bank and institutional demand as investors rotate out of US Treasuries. The share of US Treasuries held by foreign central banks has been declining for over a decade, but that shift into gold accelerated this year amid US debt concerns, ratings downgrades, trade tensions and geopolitical risks. Central banks’ gold allocations even surpassed their US Treasury holdings this year. Meanwhile, Indian pension funds are seeking approval to invest in gold ETFs, hinting at strong demand despite record price. Silver also surged to its highest level since 2011. Both metals have further room to run. Yet, with the gold–silver ratio still above its long-term range of 60–80, silver may have greater upside potential.
European currencies are holding near four-week highs at the start of the week. Following the volatile swings sparked by Jerome Powell’s remarks at the Jackson Hole symposium, the market has yet to form a clear scenario: the dollar corrected but then came under renewed pressure. As a result, EUR/