Euro Strength, Dollar Slips: Markets Bet on Fed Cuts Ahead!

The start of July brings an unexpected calm to global markets after weeks of high volatility. While major headlines remain limited, notable shifts in key assets suggest underlying momentum is building—especially for the euro and gold.

The U.S. dollar continues to weaken, breaking below recent consolidation levels. This downtrend is driving strength in currencies like the euro, pound, Australian dollar, and New Zealand dollar. With risk sentiment leaning positive and no major geopolitical disruptions, markets are favouring risk-on assets.

Economic data supports the moves. Germany’s CPI came in at 0.0%, reflecting controlled inflation, while UK GDP matched expectations at 0.7% quarter-over-quarter. The EU CPI, due later today, is forecast at 2.0%, slightly above the previous 1.9%. Even if results disappoint, the broader weakness in the U.S. dollar is expected to keep the euro supported.

Gold is also gaining, rising from $3,250 to $3,320. The move reflects ongoing caution around U.S. monetary policy and anticipation around the so-called “One Big Beautiful Bill Act”—a $3 trillion spending initiative from the Trump administration that could impact inflation and drive safe-haven demand.

With three Fed rate cuts (75 basis points total) now priced in for the remainder of 2025, further dollar weakness seems likely—fuelling bullish momentum in EUR/USD, GBP/USD, and precious metals.

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