03/10/2024
Written by: Ian Morley
GBP/EUR
Summary:
GBP/EUR is trading relatively flat around 0.8330 as markets await Eurozone inflation data. The European Central Bank (ECB) has signalled a potential rate cut in October, contributing to a weaker Euro. Meanwhile, the Pound remains supported by the Bank of England’s (BoE) more cautious stance, with market participants anticipating a further rate cut later this year.
Outlook:
Eurozone inflation data is likely to dictate the next moves in this pair. Should inflation come in lower than expected, it could confirm ECB rate cuts, pressuring the Euro further. Conversely, any surprises to the upside in inflation could provide a short-term boost. The Pound is expected to hold its ground as the BoE remains less dovish than the ECB, though the overall movement could be limited.
EUR/USD
Summary:
EUR/USD has come under renewed selling pressure, falling toward 1.1100. The Euro continues to struggle as the ECB appears likely to cut rates further in October, while the US Dollar remains buoyed by Federal Reserve Chair Jerome Powell’s more hawkish remarks and upcoming US macroeconomic data.
Outlook:
Key data releases from both the Eurozone and the US will shape near-term moves. The path for EUR/USD appears downward unless Eurozone inflation data beats expectations significantly. The Dollar may continue to strengthen, especially if US manufacturing and labour market data show resilience, lending support to Fed hawkishness. Any volatility in geopolitical tensions could further boost the USD’s safe-haven appeal.
GBP/USD
Summary:
The Pound is consolidating near 1.3400 against the US Dollar, as both currencies await critical US economic data. Fed Chair Powell’s comments have subdued expectations for aggressive rate cuts, giving the Dollar room to recover. Meanwhile, comments from BoE policymakers highlight concerns over rising inflation risks in the UK.
Outlook:
The Pound is expected to stay range-bound in the near term as markets assess both US economic data and the BoE’s outlook on inflation. If US labour market data shows strength, it could push GBP/USD lower as Dollar strength prevails. BoE signals suggesting that inflation could flare up again in the UK may keep GBP supported for now, but any dovish surprise could lead to a pullback.
AUD/USD
Summary:
The Australian Dollar has found support, appreciating against the US Dollar despite mixed US data. Stronger-than-expected retail sales in Australia and a hawkish stance from the Reserve Bank of Australia (RBA) have underpinned the AUD. However, the US Dollar remains firm due to Fed Chair Powell’s cautious approach to future rate cuts.
Outlook:
The RBA’s restrictive monetary policy and strong domestic data could keep the AUD supported. However, the Dollar’s strength, driven by stable US economic data and potential geopolitical risks, could limit further upside for AUD/USD. Market participants will closely watch US employment data and manufacturing performance for more clues on USD direction.
Final Summary
Across the board, the strength of the US Dollar remains a key factor as the Federal Reserve maintains a cautious but hawkish stance. Both the Euro and Pound are seeing pressure from their respective central banks’ dovish tones, with the ECB likely to cut rates soon, and the BoE remaining cautiously optimistic about inflation. On the other hand, the Australian Dollar shows resilience due to domestic strength and hawkish sentiment from the RBA, though further gains could be capped by US Dollar strength.