20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
GBP/EUR held steady as markets processed Bank of England (BoE) Governor Andrew Bailey’s comments predicting four rate cuts in 2025. This dovish outlook initially pressured the Pound, though broader political uncertainty in Europe, particularly in France, continues to weigh on the Euro.
Outlook:
With no-confidence votes looming over the French government, the Euro remains vulnerable. Meanwhile, market participants will watch UK GDP and inflation reports due later this week for further clues. GBP/EUR could test higher levels if UK data surprises positively or if European political risks escalate.
EUR/USD
Summary:
EUR/USD traded cautiously near 1.0500, supported by stabilising US Dollar momentum and political uncertainty in France. The pair lacked recovery momentum, with markets eyeing speeches from ECB President Christine Lagarde and Fed Chairman Jerome Powell for directional cues.
Outlook:
Further downside risks for EUR/USD persist if Lagarde signals additional rate cuts amid a weakening Eurozone outlook. Conversely, Powell’s comments could lead to USD weakness if he emphasises rate cuts. Key US data, including ISM Services PMI and ADP employment figures, could provide immediate market direction.
GBP/USD
Summary:
GBP/USD edged closer to 1.2700 despite Bailey’s dovish comments. The Pound faced selling pressure initially but stabilised, as traders anticipate the Fed’s policy stance following Powell’s speech. US economic data, including Friday’s Nonfarm Payrolls, remains in focus for potential shifts in Dollar strength.
Outlook:
The bearish bias persists below the 100-day EMA. A breach of 1.2600 could expose further downside, while stronger UK data or dovish Fed commentary may support a move above 1.2750. Expect volatility around key economic releases.
AUD/USD
Summary:
AUD/USD hit a four-month low near 0.6400 after disappointing Q3 GDP data from Australia. Rising US-China trade tensions and weak Chinese economic indicators further pressured the Aussie, though the pair saw a mild recovery in the European session.
Outlook:
The Australian Dollar faces continued headwinds from domestic and global factors. Further downside is likely if trade tensions escalate or if Fed policy supports the USD. On the domestic front, the RBA’s interest rate outlook will remain a key driver.
Final Summary
Today’s foreign exchange market remains focused on central bank speeches and key economic data releases. Political uncertainty in France continues to impact the Euro, while the US Dollar’s performance depends on upcoming labour market and services sector data. The Pound and Australian Dollar remain under pressure from dovish domestic outlooks and global economic concerns.