Dollar bears were unleashed on Tuesday following the disappointing U.S ISM services data which dented hopes over the Federal Reserve raising US interest rates in September. The ISM non-manufacturing PMI for August came in at 51.4, making it the lowest since February 2010 consequently rekindling concerns over the health of the US economy. September has been a painful start for the Dollar bulls with the recent soft domestic economic releases challenging the bullish sentiment which initially elevated the Dollar. If US data continues to miss expectations then talks of September being a live meeting to raise rates could be thoroughly discounted with a move in December hanging on a thin line.

The Dollar Index plummeted on Tuesday with prices breaking below 95.00 as hopes over the Fed breaking the tradition of central bank caution faded into the distance. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. If the bearish momentum holds then the Dollar Index could trade lower towards 94.20.

Sterling bulls unchained

Sterling has enjoyed an extended period of gains with the GBPUSD charging to eight week highs at 1.344 as the combination of impressive UK economic data and Dollar weakness attracted bulls to install heavy rounds of buying. Sterling has had a good run with the string of positive PMI releases over the past week dispelling ongoing concerns that the EU referendum outcome may have an immediate negative impact on the UK economy. Although further gains in the pound may be accumulated in the short term as expectations diminish over the BoE unleashing further stimulus measures, it may be slightly early to come to a decisive conclusion with more time needed to weigh the impacts of Brexit to the UK economy.

Investors may direction their attention towards the UK manufacturing production data which could provide additional clarity on how the sector has fared post-Brexit. A release which follows the same positive pattern and exceeds expectations could reinforce further confidence into the UK economy consequently propelling the Sterling higher.

The BoE inflation report hearing may be the event which seizes centre stage today where Governor Carney will testify to the Treasury Select Committee. Mark Carney may likely reiterate his dovish mantra on the health of the UK economy while potentially suggesting of further stimulus measures in the coming months to retain economic stability. While questions may be asked if the BoE acted too swiftly to easing monetary policy post Brexit following the recent string of positive data, it still remains too early to gauge the effects of Brexit to the UK.

Commodity spotlight – Gold

Gold displayed an incredible appreciation on Tuesday with prices lurching towards $1352 following the soft US ISM services data which eroded optimism over the Fed raising US interest rates in September. The sharp uplift was complimented with Dollars vulnerability which provided a solid platform for bulls to install heavy rounds of buying. With hopes fading over the Fed stepping forward to raise rates in September, this yellow metal could be open to further gains moving forward. From a technical standpoint, prices have turned bullish on the daily timeframe and the breakout above $1345 could open a path towards $1355.