20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
Pound Sterling trades steadily against the Euro, hovering around 1.2130, as markets anticipate significant central bank decisions this week. The European Central Bank (ECB) is expected to announce a 25-basis-point rate cut on Thursday, which has kept the Euro under pressure. Meanwhile, the Pound remains supported by expectations that the Bank of England (BoE) will keep interest rates steady at 4.75% in its upcoming meeting.
Outlook:
The ECB’s decision on Thursday will be pivotal for the EUR/GBP pair. If the ECB signals further easing measures, the Euro could weaken further against the Pound. Additionally, UK GDP and industrial production data later this week could provide further support for Sterling, especially if the data surpasses market expectations. Traders will also monitor the BoE’s tone in the lead-up to its policy meeting next week for guidance on future rate movements.
EUR/USD
Summary:
The Euro continues to face downward pressure against the US Dollar, trading near 1.0530. The Dollar remains buoyant as US Treasury yields climb and markets await US Consumer Price Index (CPI) data. Expectations of a 25-basis-point rate cut by the Federal Reserve next week have not significantly dented Dollar strength, while the Euro has struggled amid weak economic data and expectations of ECB easing.
Outlook:
The US CPI report due later today could influence the pair’s short-term direction. If inflation data comes in higher than expected, the Dollar could gain further strength. Conversely, a dovish tone from the ECB on Thursday might push the pair lower. Key support lies near 1.0480, with resistance around 1.0600.
GBP/USD
Summary:
The Pound trades in a narrow range near 1.2750 against the US Dollar. The lack of major economic releases from the UK has kept Sterling in a consolidative phase, while the Dollar’s resilience is supported by rising US Treasury yields and cautious market sentiment ahead of the US CPI release.
Outlook:
The Pound’s trajectory will depend on both the US CPI data and the UK GDP and production figures due later this week. A strong UK GDP print could bolster the Pound, while higher-than-expected US inflation might strengthen the Dollar, potentially pushing GBP/USD lower. Markets will also look ahead to the BoE meeting next week for indications of future rate policy.
USD/CAD
Summary:
The US Dollar continues to strengthen against the Canadian Dollar, with USD/CAD trading near 1.4150. Market attention is focused on the Bank of Canada (BoC), which is expected to announce a 50-basis-point rate cut later today. The strong US Dollar has also been supported by rising Treasury yields and anticipation of the US CPI release.
Outlook:
If the BoC delivers the expected rate cut and signals a dovish stance, the Canadian Dollar may weaken further. However, any significant deviation in US CPI data could also influence USD/CAD. Resistance for the pair is seen around 1.4200, with potential support near 1.4050.
AUD/USD
Summary:
The Australian Dollar remains subdued against the US Dollar, trading below 0.6400. The Reserve Bank of Australia’s (RBA) decision to hold rates steady at 4.35% has weighed on the Aussie, while a strong Dollar and weak Chinese economic data add to the downward pressure.
Outlook:
The US CPI data will likely be the key driver for AUD/USD in the near term. A stronger Dollar following the inflation release could push the pair lower. However, improved sentiment around Chinese economic stimulus could lend some support to the Aussie in the medium term. Traders will also keep an eye on Australian employment data for additional cues.
Final Summary
The week’s major events—US CPI data and the ECB’s policy decision—are set to drive market volatility across major currency pairs. The US Dollar remains supported by resilient Treasury yields and inflation expectations, while the Euro and Australian Dollar face challenges from dovish central bank expectations. Meanwhile, the Pound stays steady ahead of key UK data releases and the BoE meeting. Market participants should prepare for potentially sharp moves as these high-impact events unfold.