The US dollar exchange rate continued it’s weakening that has been going on since the end of last week. EUR/USD continued its consolidation in the 1.1000-1.1100 area.

Meanwhile, the GBP/USD pair reached a one-year high in the 1.2660s at the end of the European session on Monday (May 8). The next big move is likely to have to do with this week's major central bank meetings.

The U.S. Federal Reserve last week raised their interest rates by 25 basis points. However, it added a slightly more dovish tone in its announcement. 

As a result, market participants have become increasingly pessimistic about the Fed's interest rate prospects. The release of Non-farm Payrolls (NFP) data in America on Friday shows very resilient US labor market conditions. 

USD has Weakened against Other Currencies 

However, the data was only able to hoist the USD for a moment amid interest rate uncertainty. The turmoil of the American banking sector is also becoming a factor. 

The CME's FedWatch now shows a roughly 1:3 chance of the Fed's rate cut scenario starting in July. As a consequence, the United States dollar has weakened against a range of other currencies.

It is especially the currencies whose central banks are expected to have higher interest rates this year. That was including the pound sterling and the Australian dollar.

Pound sterling is the main focus this week in connection with the schedule of the regular meeting of the Bank of England (BoE) on Thursday. Consensus expects the BoE to raise interest rates from 4.25% to 4.50% in that event.

GBP/USD Opens the Drastic Bearish Risk

The situations above leaving the open door for further hikes. These hawkish expectations encourage GBP/USD to rise and open up drastic bearish risks if they fail to be met. 

It can be seen that the U.K. activity data has delivered better surprises in recent weeks. That is why; most economists now expect the central bank's benchmark interest rate peak at 5%.

It was said by Sharon Bell, a senior strategist in the European Portfolio Strategy team at Goldman Sachs. The euro also strengthened against USD. 

However, that currency performed slower than the pound sterling. On the one hand, EUR/USD is facing a strong technical resistance at 1.1100. On the other hand, Single Currency still lacks of fundamental drivers.

Spot Gold Price Edged up By 0.4%

The outcome of the European Central Bank's meeting last week signaled an intention to slow the pace of interest rate hikes. That was although Christine Lagarde later confirmed she would maintain tighter monetary policy.

Elsewhere, the Gold prices strengthened in the trading session on Monday (08/May) night. This was occured after being pressured by the release of NFP data late last week.

Based on that data, the spot gold prices edged up by 0.4% to $2024.95 per ounce. Besides that, the gold futures prices rose by 0.4% to $2032.40. 

The XAU/USD chart even shows an increase of almost half a percent to $2025.72. The weakening of the US Dollar became an opening for gold to stop the decline. 

Gold is Falling from It’s Highest Level

The effect of the United States NFP increase of 253k is maybe only temporary. The market really only discounted this precious metal’s price after last Friday's NFP report, which was very strong. 

Gold was hit falling from its high levels, but then this commodity managed to lift up again. In line with recession risks, markets are increasingly preparing for the Fed's rate cuts. 

In turn, this will encourage traders to use their capital in gold investments. In June, 88% of respondents to CME's FedWatch Tool expect the Federal Reserve to hold their interest rates. 

The estimated rate cut has even reached 33%. The outlook for policy easing was also supported by the Chicago Fed President who said that the mood for a credit squeeze is approaching.