Market Insight 12-09-2024

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  • Market Insight 12-09-2024

Summary:

  • GBP/USD: GBP/USD has fallen to a three-week low, driven by a stronger US Dollar following August’s CPI release. With inflation data showing signs of stickiness, the market now favours a smaller 0.25% rate cut by the Federal Reserve next week, which has kept pressure on the Pound amid broader equity market sell-offs.
  • EUR/USD: EUR/USD remains slightly above the 1.1000 mark, as the pair consolidates ahead of the European Central Bank’s (ECB) widely expected 25 bps rate cut. Markets are focused on ECB President Christine Lagarde’s press conference for future rate guidance, which will be key to determining the Euro’s next move.
  • GBP/EUR: GBP/EUR is trading at a two-week low, with both currencies facing pressure. While the Euro is weighed down by expectations of a dovish ECB, the Pound is impacted by USD strength. Market participants expect little change unless the ECB signals a more aggressive easing stance for the months ahead.
  • GBP/AUD: The British Pound has struggled against the Australian Dollar, which saw some support amid a more risk-on sentiment. Australia’s softening inflation expectations, combined with former RBA Governor Bernie Fraser’s remarks on recession risks, have helped the AUD edge higher. The stronger USD has limited AUD gains, but the Pound’s weakness has driven the pair lower.

Outlook:

  • GBP/USD: The pair remains under downward pressure, with markets focused on the Federal Reserve’s anticipated 0.25% rate cut next week. The BoE is expected to leave rates unchanged, offering little support to the Pound. UK CPI data next week will be crucial for any significant movement in GBP/USD.
  • EUR/USD: The outcome of the ECB meeting today will be pivotal. A 25 bps cut is expected, but further dovish guidance from Lagarde could push the Euro lower. Without surprises, the pair is likely to hover around the 1.1000 level in the near term.
  • GBP/EUR: With little divergence in the outlook for the BoE and ECB, GBP/EUR may remain range-bound. The ECB’s communication on future cuts will determine any significant moves, but barring surprises, the pair is likely to see limited volatility.

GBP/AUD: GBP/AUD may continue to trend lower if risk sentiment remains favourable for the AUD. However, any significant USD strength, following US PPI data or jobless claims, could limit further AUD gains. UK data, including next week’s CPI release, will be key for the Pound’s recovery prospects in this pair.