Market Insight 07-10-2024

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  • Market Insight 07-10-2024

GBP/EUR

Summary:
Concerns over the Bank of England’s (BoE) stance on interest rates, coupled with geopolitical risks in the Middle East, have weighed on Sterling. Market sentiment is leaning towards a more gradual policy easing approach by the BoE, with divided expectations on rate cuts for November and December. Meanwhile, the Euro has remained relatively stable, despite downside pressures from the stronger US Dollar and weak European economic data.

Outlook:
The Pound is likely to remain subdued in the near term as the market awaits key economic indicators, including the UK’s GDP and industrial production data. Any positive surprises could lend support to the currency, but uncertainty over future BoE actions will likely cap significant gains. On the Euro side, upcoming Eurozone retail sales data and ongoing Fedspeak in the US could influence direction.

EUR/USD

Summary:
EUR/USD remains under pressure, hovering near the 1.0950 mark, as the US Dollar continues to benefit from strong non-farm payroll (NFP) data. Despite a risk-on market sentiment, the Euro struggles to make headway as traders focus on upcoming US Federal Reserve speeches and Eurozone economic reports. US job numbers for September came in well above expectations, prompting a re-evaluation of Fed rate cut expectations for November, now largely favouring a 25 basis point cut rather than the previously speculated 50.

Outlook:
The path of least resistance for EUR/USD appears to be to the downside. Support levels are set at 1.0881 and 1.0800, while resistance lies at the 1.1000 psychological mark. The Euro could see further losses if the US economy continues to outperform expectations and pushes the Federal Reserve toward a more cautious easing approach. Key Eurozone data on retail sales and economic sentiment will provide additional guidance for the pair’s direction.

GBP/USD

Summary:
The GBP/USD pair has drifted higher, hovering around 1.3130 after snapping a three-day losing streak. However, the upside remains limited as strong US NFP data has reduced the likelihood of aggressive Fed rate cuts. The Pound remains vulnerable as the BoE hints at a more measured approach to lowering interest rates, while geopolitical risks and rising oil prices continue to exert downward pressure on risk-sensitive assets like Sterling.

Outlook:
The GBP/USD pair may struggle to break above 1.3200 unless there are significant shifts in the UK economic outlook or dovish surprises from the Federal Reserve. The Pound’s weakness could persist if UK GDP data disappoints, while the US Dollar is likely to consolidate its recent gains unless inflation data for September shows unexpected weakness. Expect range-bound trading between 1.3050 and 1.3200 in the coming days.

Final Summary:

Overall, the currency market remains highly sensitive to economic data and geopolitical developments. The US Dollar continues to dominate its peers, buoyed by robust employment numbers, while the Euro and British Pound struggle under the weight of weaker economic fundamentals and policy uncertainty. As markets await key data from both the UK and the Eurozone, expect continued volatility, particularly for GBP/USD and EUR/USD.