20/01/2025
Written by: Ian Morley
GBPEUR
Summary
EUR has faced selling pressure following political instability in France, where the government is bracing for three no-confidence motions. Comments from far-right leaders threaten to further destabilise sentiment. Inflation data showed a slight increase, but expectations of a 25 bps ECB rate cut in December weigh on the currency. Meanwhile, the GBP gained a slight boost from stronger-than-expected UK house price data, which rose 3.7% YoY in November.
Outlook
EUR remains under pressure as political and economic uncertainties in France persist. This week, market participants will watch developments closely to assess if the EUR tests recent lows. For GBP, ongoing concerns over a potential BoE rate cut in December could limit gains, keeping the pair in a cautious range.
GBPUSD
Summary
GBP fell below the 1.2700 mark against the USD after President-elect Donald Trump threatened 100% tariffs on BRICS nations for considering a new reserve currency. Despite the bearish tone, GBP saw brief recovery due to stronger-than-expected UK house price data. USD gained support from its safe-haven appeal and expectations of a rebound in US jobs data later this week.
Outlook
This week, the focus will shift to key US jobs data, including JOLTS and Friday’s employment report. If US data comes in strong, the USD could strengthen further. For GBPUSD, the immediate support level is 1.2600, with resistance near 1.2834. The pair is likely to remain sensitive to geopolitical developments and economic data releases.
EURUSD
Summary
EURUSD slipped below 1.0550 amid a firmer USD and ECB rate-cut expectations. The Eurozone’s inflation rose to 2.3% YoY in November, aligning with forecasts, but this failed to lift the EUR. Meanwhile, the USD benefited from Trump’s comments and a cautious Fed stance, which signalled no rush to cut rates.
Outlook
The pair faces further downside risk, with support around 1.0500. Investors will closely monitor ECB President Lagarde’s upcoming speech and US ISM Manufacturing PMI data. A hawkish ECB tone could provide some relief to the EUR, while strong US data may cement USD gains.
AUDUSD
Summary
AUD showed resilience, holding slightly above 0.6500, despite geopolitical tensions and a stronger USD. Australian retail sales rose 0.6% MoM in October, surpassing expectations, but the broader market mood remains cautious.
Outlook
The AUDUSD pair is likely to stay range-bound this week, with key US economic data setting the tone. Sustained USD strength could push the pair lower, with support near 0.6450. However, strong domestic data might limit further losses.
Final Summary
This week, geopolitical developments and key economic data will dominate currency market movements. The USD stands to benefit from safe-haven demand and strong US employment data, while the GBP and EUR face downside risks from political uncertainty and potential rate cuts. Traders should remain vigilant as volatility could heighten ahead of the Fed’s meeting later this month.