07/11/2024
GBPEUR
Summary:
Pound Sterling showed a mild recovery against the Euro after the release of better-than-expected UK factory data and GDP growth figures for August. The UK’s economy grew by 0.2% month-on-month, matching forecasts, with manufacturing production rising by 1.1%. However, the pair remains above 0.8350, as German inflation data for September held steady at 1.8% year-on-year. This support for the Euro, alongside the European Central Bank’s cautious stance on economic growth, has kept the pair stable.
Outlook:
While the UK’s upbeat economic data has boosted sentiment around the Pound, its upside may remain limited, as focus now shifts to the upcoming UK employment and inflation data. On the Euro side, any further movement will be driven by the ECB’s decision next week, with a rate cut likely. Market expectations suggest that any monetary easing will be gradual and data-dependent, which could keep the Euro relatively strong in the near term.
GBPUSD
Summary:
Pound Sterling is trading within a narrow range against the US Dollar, hovering around 1.3050, following the release of the UK’s GDP and industrial growth figures. While UK data showed some positive signs, including robust factory output, it wasn’t enough to significantly lift the Pound. Meanwhile, the US Dollar is firm ahead of the Producer Price Index (PPI) data release, consolidating its weekly gains. US inflation figures have come in hotter than expected, reinforcing expectations of a gradual pace of Fed rate cuts.
Outlook:
The next major market movers for GBP/USD will be the US PPI and UK employment data next week. In the US, a soft PPI result could weigh on the Dollar, providing some upside potential for the Pound. However, traders remain cautious ahead of further signals from the Federal Reserve, with most expecting a 25-basis point rate cut in November. The BoE is also expected to follow a gradual policy easing, but a firmer US Dollar may cap any significant gains for GBP/USD.
EURUSD
Summary:
EUR/USD remains under pressure, trading slightly below 1.0950 after US inflation data came in above expectations. The stronger-than-expected US CPI report has increased the likelihood of gradual rate cuts from the Federal Reserve, while the Euro is being supported by stable German inflation data and cautious signals from the ECB about further policy easing.
Outlook:
The ECB is expected to cut its deposit rate to 3.5% next week, with more cuts anticipated by December. However, the gradual nature of the policy shifts may limit the Euro’s downside against the US Dollar. For the Dollar, attention will focus on the upcoming US PPI release, which could provide further clues about the Federal Reserve’s next move. A weaker-than-expected result could undermine the Dollar’s strength, offering some recovery for EUR/USD.
AUDUSD
Summary:
The Australian Dollar has strengthened slightly, marking its second consecutive day of gains as markets prepare for the release of US PPI data. Reduced expectations for aggressive Fed rate cuts following the hotter US inflation report are supporting the US Dollar, limiting the AUD/USD pair’s upside. However, the Australian economy continues to show resilience, with the Reserve Bank of Australia maintaining flexibility in its rate policy.
Outlook:
Investors are closely watching US PPI data and Michigan Consumer Sentiment Index results for further direction. Should these figures come in weaker than anticipated, it may provide a tailwind for AUD/USD, allowing the Aussie to extend its recovery. However, in the near term, a stronger US Dollar will likely continue to cap significant gains.
Final Summary
This week has seen mixed results across the board, with Pound Sterling gaining some ground due to positive UK factory and GDP data but remaining subdued overall as traders look ahead to key employment and inflation reports. The US Dollar remains firm, underpinned by stronger-than-expected inflation data, while the Euro holds steady with support from German inflation figures. All eyes will be on upcoming central bank decisions, particularly the Federal Reserve and ECB, as markets prepare for potential rate cuts.