Market Insight 06-11-2024

  • Home
  • Market Insight 06-11-2024

GBP/EUR

  • Summary: The Pound weakened against the Euro as markets responded to the US election with Trump’s projected victory boosting demand for the US Dollar. Additionally, strong German factory orders in September helped support the Euro, furthering the GBP/EUR decline.
  • Outlook: Attention now shifts to the upcoming Bank of England (BoE) rate decision, where a 25-basis point cut is anticipated. If Trump’s protectionist policies come into effect, they could negatively impact the UK’s economic growth, potentially leading to further depreciation of the Pound in the longer term.

EUR/USD

  • Summary: EUR/USD saw a steep decline, dropping to four-month lows, driven by Trump’s likely election win and his pro-tariff, protectionist policies. The Euro’s weakness was further compounded by growing concerns over economic growth in the Eurozone, despite stronger-than-expected German factory orders in September.
  • Outlook: With Trump’s victory expected to further lift the US Dollar, EUR/USD could face additional downward pressure. The Federal Reserve’s anticipated rate cut of 25 basis points may offer some temporary relief, but if the European Central Bank (ECB) opts for a larger rate cut due to deteriorating growth, the Euro may struggle to recover against the Dollar. Markets will also closely watch ECB President Lagarde’s upcoming speech for further guidance.

GBP/USD

  • Summary: The Pound experienced a sharp drop against the US Dollar, with Trump’s anticipated win in the US election spurring a “Trump rally” in the Dollar. Investors expect that Trump’s trade and tax policies will stimulate US economic growth, pushing demand for the Dollar higher.
  • Outlook: Should Trump officially win the election, his proposed tariffs and protectionist measures are likely to put pressure on the UK economy, reducing exports and potentially impacting growth. Meanwhile, both the BoE and the Fed are expected to cut rates this week. If the BoE proceeds with a cut, GBP/USD may face further downside pressure, though stabilisation could occur if the Fed takes a more dovish stance.

AUD/USD

  • Summary: The Australian Dollar fell to multi-month lows against the US Dollar as Trump’s projected victory increased concerns about potential new tariffs against China, Australia’s primary trading partner. The risk of a renewed US-China trade war has also contributed to pressure on the AUD.
  • Outlook: The Reserve Bank of Australia’s (RBA) relatively hawkish stance may lend the Australian Dollar some support. However, fears of a protracted US-China trade dispute could keep AUD/USD subdued in the near term. If Trump’s victory is confirmed and tensions escalate, the Aussie Dollar may face further challenges against a buoyant US Dollar.

Final Summary

Trump’s anticipated victory in the US election has driven a sharp rally in the US Dollar, applying pressure to major currency pairs such as EUR/USD, GBP/USD, and AUD/USD. Expectations of new tariffs and trade restrictions under Trump’s administration are driving concerns over economic growth for the Eurozone, UK, and Australia. This volatility is expected to continue, especially with upcoming rate decisions from the Fed, BoE, and ECB poised to influence the currency landscape further.