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US dollar plummets to multi-month lows

The past couple of weeks have been market by a sharp pullback in the US dollar, amid renewed Federal Reserve interest rate cut speculation.

During this period, we’ve seen GBP/EUR trade between €1.16 and €1.17, while EUR/GBP has held at £0.85.

At the same time, GBP/USD jumped from $1.26 to a seven-month high of $1.28, while EUR/USD ticked up from $1.08, to $1.09.

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What’s been happening?

The US dollar has plunged over the past couple of weeks striking new multi-month lows against both the pound and euro. This comes as some underwhelming data and dovish comments from Fed Chair Jerome Powell stoked expectations that US interest rates will be cut in June.

At the same time, the European Central Bank (ECB) has infused some volatility into EUR exchange rates, with speculation for an April rate cut growing in response to dovish comments and a slashing of the bank’s inflation forecast.

The pound, meanwhile, has benefitted from an increasingly risk-positive mood, in addition to expectations the Bank of England (BoE) will hold off from cutting interest rates until later in the summer.

What do you need to look out for?

Looking ahead, the BoE and Fed are set to deliver their latest interest rate decisions next week. Neither bank is expected to make any changes to monetary policy this month, leaving the focus on their forward guidance.

A particular focus is likely to be placed on the Fed’s policy outlook. Will the US dollar plunge if the bank hints that a rate cut is on the cards for June?

Meanwhile EUR investors will be keeping a close eye on upcoming Eurozone data releases, as they attempt to gauge the likelihood of an April rate cu

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