If we see a continuation or escalation of hostilities, expect gold, oil, and the USD to push even higher

EM currencies are all already seeing a lift, with the South African Rand hitting 20-month highs against the USD.

We can now expect a relatively rapid reduction in interest rates for all major currencies and a period of increased volatility.

Any significant volatility will come from the ECB’s forward guidance, with big question marks over further cuts in October and December.

The odds of a 50-bps rate cut on September 18th have risen. Uncertainty is the market’s worst nightmare; whatever the decision is, we will see serious volatility.

Recent developments have forced the USD lower as a September rate cut looks certain, but will the cut be 25bps or 50? And will Powell’s speech shed any light?

Today’s surprise data put paid to the dollar’s fall, with retail sales up 1% vs 0.3% expected – the biggest increase since January 2023.

As we head into the end of the week, Monday's panic seems like a bad dream. However, markets are very nervous and expect more data-driven volatility over the coming months.

Given the high probability of a US rate cut in September and the uncertainty in the EU, the price of the EUR/USD will likely remain dependant on EU data, rather than events in the US.

With interest rates now likely to come down at least twice and possibly three times this year - and Biden’s bid for a second term looking weaker than ever - gold prices are likely to remain elevated.

The USD nosedived, and the chances of the Federal Reserve cutting interest rates in September received a major boost today as US CPI figures showed a further fall in inflation.

The GBP looks set for further gains over the coming weeks, especially considering any further weakness in the US economy. However, this may not translate into long-term gains for the EUR/USD.

Whatever happens, the USD/JPY pair is set for further volatility. The BoJ’s previous interventions have seen moves of over 500 pips, so prudent risk management is especially important.

Any moves above the 1.0860 level could see the 1.0900 psychological level come into focus, and beyond that, traders will be eyeing the 1.0950 level.