20/01/2025
Written by: Ian Morley
GBP/EUR
Summary: The pound remains under pressure, trading near 1.1940 against the euro as UK gilt yields hit their highest levels since 1998. Concerns about the UK’s fiscal outlook and the Bank of England’s cautious stance on rate cuts weigh heavily on sterling. Meanwhile, eurozone inflation data has tempered expectations of aggressive rate cuts by the European Central Bank (ECB), providing some support to the euro.
Outlook: The pound may face further downward pressure as gilt yields stay elevated, and fiscal concerns persist. ECB caution on rate cuts could provide ongoing support for the euro, keeping this pair under pressure.
GBP/USD
Summary: Sterling has weakened further, dropping below 1.2300, amid continued selling pressure driven by high UK borrowing costs. The market is awaiting the US Nonfarm Payrolls (NFP) report, which could influence the dollar’s direction.
Outlook: The pound is expected to remain fragile, with today’s US NFP report likely to set the tone for the dollar. If NFP data comes in strong, sterling could see further declines.
EUR/USD
Summary: The euro remains subdued, trading near 1.0300 as the Federal Reserve’s hawkish tone and delayed rate cuts bolster the US dollar. Modest eurozone retail sales growth has done little to inspire confidence.
Outlook: The dollar’s strength may persist in the near term, especially if the NFP report signals continued US labour market resilience. The euro’s outlook depends on how the ECB navigates its cautious approach to monetary easing.
AUD/USD
Summary: The Australian dollar remains under pressure, trading below 0.6200, near multi-year lows. Factors include the Fed’s hawkish stance, concerns over a potential Reserve Bank of Australia (RBA) rate cut, and US-China trade tensions.
Outlook: Any relief rally for the Australian dollar is likely to face resistance as bearish fundamentals dominate. Traders will monitor US NFP data and developments in US-China trade relations for further direction.
EUR/CHF
Summary: This pair is range-bound, with the Swiss franc benefiting from its safe-haven status. The possibility of a Swiss National Bank (SNB) rate cut in March could weaken the franc, but the euro remains subdued due to eurozone economic stagnation.
Outlook: The pair is expected to trade within a narrow range, with the SNB’s potential rate cut and eurozone stagnation likely keeping movements limited. Watch for breaks of key resistance or support levels for a directional signal.
Final Summary
The currency markets are treading cautiously ahead of the US Nonfarm Payrolls report, with the dollar maintaining its strength and pressuring its peers. The pound remains vulnerable due to fiscal concerns and rising borrowing costs, while the euro and Australian dollar struggle against broader macroeconomic challenges. Keep an eye on US employment data today, as it could drive volatility across major currency pairs.