Pound, Euro, and Gold Surge Amid Fed Rate Cut Expectations

The euro and the British pound surged against the US dollar, with gold prices hitting a new high before retreating on Wednesday. This shift comes from growing expectations of rate cuts by the Federal Reserve, which have weakened the dollar. 

Following weaker-than-expected US inflation data, the Federal Reserve is expected to implement its first rate cut since the pandemic began in 2020. Investors are also eyeing the European Central Bank's (ECB) rate decision, which is expected on Friday. 

Recently, the euro rose above 1.09 against the dollar, reaching its highest point since March 10, while the pound climbed above 1.30 for the first time since July 2023. At the same time, gold futures peaked at $2,488 per ounce before a slight pullback. The US dollar index, measuring the dollar against a basket of foreign currencies, fell below 104, its lowest since March 21.

Despite political uncertainties from the French election, the euro has gained over 2% against the dollar in the past four weeks. Market speculation suggests the ECB will maintain a hawkish stance, with a 0.4 percentage point reduction in rates expected by year-end and another potential cut in September. However, uncertainty surrounds the possibility of a third cut in December.

Gold's rise can be attributed to the Fed's anticipated rate cuts. Year-to-date, gold has seen a nearly 20% increase, outperforming the S&P 500. It is expected to remain a strong safe-haven asset amid the complex geopolitical and financial landscape.