20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
Pound Sterling continues to trade firmly against the Euro, maintaining levels around 1.2090. Market sentiment leaned toward expectations that the Bank of England (BoE) will keep interest rates steady at 4.75% during its next meeting. In contrast, the Euro remains under pressure ahead of the European Central Bank (ECB) meeting, where a 25-basis-point rate cut is widely anticipated.
Outlook:
The focus remains on the ECB’s Thursday meeting and the subsequent press conference, which could provide critical insights into its easing path. Should the ECB signal a more dovish trajectory, the Euro may weaken further against the Pound. Meanwhile, UK GDP and production data later this week could add further support to Sterling if they surpass expectations.
GBP/USD
Summary:
The Pound has consolidated near 1.2740 against the US Dollar, with little movement ahead of key US Consumer Price Index (CPI) data. The Federal Reserve is expected to cut rates by 25 basis points during its December 18 meeting, supported by recent commentary from officials who remain optimistic about inflation control.
Outlook:
The release of US CPI data on Wednesday will be a key driver for the pair. Markets expect inflation to have ticked higher, which could bolster the Dollar in the short term. However, with the Fed leaning toward gradual rate reductions, the Pound may remain resilient if UK inflation concerns persist.
EUR/USD
Summary:
The Euro continues to struggle against the Dollar, trading around 1.0530, as expectations of an ECB rate cut weigh on the single currency. German inflation data confirmed a 2.2% year-on-year rise in November, highlighting subdued economic activity in the Eurozone.
Outlook:
The ECB meeting will dominate the outlook for EUR/USD. A dovish tone or significant rate cut could push the pair toward 1.0480. However, any surprises in US CPI data or signs of economic resilience in the Eurozone could temporarily lift the Euro.
AUD/USD
Summary:
The Australian Dollar slid below 0.6400 following the Reserve Bank of Australia’s (RBA) decision to keep rates steady at 4.35%. The RBA highlighted easing inflationary pressures but noted that risks remain, while China’s trade surplus expanded, offering some support to the Aussie.
Outlook:
The Aussie may face additional pressure as US CPI data could reinforce Dollar strength. Domestically, weaker-than-expected GDP growth and high unemployment could further weigh on the currency. However, ongoing Chinese stimulus measures might limit losses for the AUD in the medium term.
Final Summary
This week’s market action is set to be driven by high-impact events, including US CPI data on Wednesday and the ECB meeting on Thursday. The Pound remains supported against both the Euro and the Dollar amid stable BoE policy expectations, while the Euro and Aussie face challenges from dovish central bank tones. Clients should stay alert for any surprises in inflation data, as these will be key to shaping near-term currency movements.