Market Insight 07-11-2024

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  • Market Insight 07-11-2024

GBP/EUR

  • Summary: GBPEUR rebounded to near 1.2048 after posting a fresh low, reflecting market caution ahead of the BoE’s rate decision. The Euro remains under pressure from weak economic data and political instability in Germany, where Chancellor Scholz’s call for a confidence vote and potential snap elections have added uncertainty.
  • Outlook: With the BoE likely cutting rates to 4.75%, attention will shift to Governor Bailey’s remarks regarding fiscal policies and Trump’s potential tariffs. The Euro could face further headwinds if the European Central Bank (ECB) signals a more aggressive easing path. Expect GBP to remain supported in the near term, though volatility is likely around BoE announcements.

EUR/USD

  • Summary: The pair saw a sharp recovery to 1.0770 after dipping below 1.0700. The Euro struggled due to fears over Trump’s tariff policies and weak German industrial production data, while the USD surged following his election victory. However, some profit-taking in the USD provided relief to the Euro.
  • Outlook: Markets anticipate a Fed rate cut, but any hawkish hints could rekindle USD strength. Trump’s protectionist policies and the potential for global trade tensions remain downside risks for the Euro. The pair is likely to remain vulnerable in the coming weeks.

GBP/USD

  • Summary: The pair recovered to 1.2935 after hitting a near 11-week low. The Greenback’s rally, fuelled by expectations of fiscal expansion under Trump, pushed GBP/USD lower initially, but market correction allowed Sterling to regain ground.
  • Outlook: Both the Fed and BoE’s decisions will set the tone for GBP/USD. A cautious tone from the BoE could limit GBP’s gains, while any hints of a slower Fed easing cycle could strengthen the USD. Expect continued two-way movements as markets digest rate decisions and geopolitical developments.

AUD/USD

  • Summary: The Australian Dollar recovered after initial weakness driven by disappointing trade surplus figures and Trump’s election. A stronger-than-expected trade surplus in China, Australia’s largest trading partner, offered some support to the AUD.
  • Outlook: The Fed’s decision will likely drive short-term USD movements, impacting AUD/USD. Additionally, a cautious Reserve Bank of Australia (RBA) stance and mixed economic data may cap AUD gains. Look for resistance near 0.6700 and support around 0.6550.

Final Summary

This week, the currency markets have been driven by a combination of central bank decisions, political uncertainty, and Trump’s re-election. While rate cuts are broadly anticipated, market attention will remain on the accompanying commentary to gauge future monetary policy paths. Expect heightened volatility as investors reassess currency valuations amid evolving geopolitical and economic landscapes.