20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
GBP/EUR saw limited movement yesterday, with the Euro making modest gains against the Pound. Marine Le Pen’s statement on France’s ability to deliver a budget has supported the Euro. Meanwhile, the lack of significant UK economic data kept the pair in a tight range.
Outlook:
Looking ahead, the Euro could face downside risks due to expectations of a 25bps rate cut by the ECB during its December meeting. Additionally, any signs of political uncertainty in France as President Macron appoints a new PM may weigh on the shared currency. The Pound, however, remains sensitive to speculation about the BoE’s next move, with no significant data releases to sway sentiment in the near term.
GBP/USD
Summary:
GBP/USD surged to a three-week high above 1.2770 this week, bolstered by weaker-than-expected US Initial Jobless Claims data and growing expectations of a December Fed rate cut. Persistent concerns about inflation in the UK, highlighted by BoE officials, also lent some support to the Pound.
Outlook:
The US Nonfarm Payrolls data later today will be pivotal. A strong rebound in job creation could boost the USD, though a weaker print may see the GBP/USD pair extend its rally. With the Fed likely to cut rates this month, further corrections in the USD could benefit the Pound in the short term.
EUR/USD
Summary:
EUR/USD approached 1.0600 earlier in the week as broad USD weakness prevailed. However, concerns about potential US tariffs on European goods and expectations of an ECB rate cut capped the Euro’s gains.
Outlook:
The pair remains at the mercy of US labour market data due today, which could either reinforce or diminish expectations of a Fed rate cut. While the Euro may see temporary support, the prospect of an ECB rate cut and geopolitical concerns could limit its upside potential.
USD/CAD
Summary:
USD/CAD reversed its recent gains, dropping below 1.4000 after weaker US labour data. Canadian labour market data, due later today, will also play a role in setting the tone for the pair.
Outlook:
With the US dollar under pressure, a strong Canadian jobs report could push USD/CAD lower. Conversely, weaker Canadian data might limit the downside for the pair, particularly if US job numbers exceed expectations.
AUD/USD
Summary:
The Aussie struggled this week, pressured by expectations of an early RBA rate cut following weak domestic GDP growth figures. The USD’s recent weakness provided limited relief, and the pair hovered near its multi-month low of 0.6425.
Outlook:
AUD remains vulnerable to downside risks due to global uncertainty, China’s economic concerns, and the possibility of RBA easing. Today’s US jobs data will be critical in determining whether AUD/USD finds temporary support or breaks lower.
Final Summary:
This week, the US Dollar corrected steadily as markets priced in a December rate cut, while European and UK currencies showed resilience. However, the focus now shifts to today’s US Nonfarm Payrolls report, which could drive significant volatility across major currency pairs. Those needing to buy USD may find current levels favourable as further downside pressure remains likely.