06/12/2024
Written by: Ian Morley
GBPEUR
Summary
GBP has extended gains against the EUR, reaching its highest levels since April 2022. This movement is supported by EUR weakness stemming from concerns over the potential impact of Trump’s proposed tariffs on the Eurozone economy and political instability in Germany.
Outlook
The UK labour market data, particularly wage growth, suggests the BoE may take a cautious approach to rate cuts, reducing the likelihood of a December cut. For the EUR, attention will focus on the ZEW sentiment survey and German political developments. The pair could remain elevated if the Eurozone shows continued signs of economic weakness.
EURUSD
Summary
EURUSD has declined to its lowest levels since April as fears of US protectionist policies weigh heavily on the Eurozone. The ECB is expected to cut rates by 50 bps in December, adding further pressure to the single currency.
Outlook
The market will closely watch US inflation data tomorrow. A higher-than-expected CPI could bolster USD strength, potentially pushing EURUSD below this year’s lows. The ECB’s dovish stance and German political uncertainty will likely keep EUR under pressure in the near term.
GBPUSD
Summary
GBP fell to nearly 1.2800 against the USD following a rise in the UK unemployment rate to 4.3%. Despite better-than-expected wage growth, signs of a loosening labour market have dampened GBP sentiment. The USD remains strong, buoyed by optimism over Trump’s policies and fading expectations of aggressive Fed rate cuts.
Outlook
While wage growth offers some support for GBP, the rise in unemployment points to a cooling labour market. This week’s US inflation report will be critical. A hotter-than-expected reading could strengthen USD further, possibly driving GBPUSD below the 1.2800 mark.
AUDUSD
Summary
AUD continues to weaken, falling below 0.6550 amid concerns about Trump’s trade policies affecting China and falling commodity prices. The USD’s strength exacerbates the Aussie’s struggles.
Outlook
Downside risks remain for the AUD, with weak consumer confidence in Australia and economic concerns in China. The US CPI release and any updates on Trump’s trade policies will likely dictate near-term movements. The pair may challenge the 0.6500 psychological support level.
Final Summary
The currency markets remain volatile, driven by political developments and diverging monetary policy expectations across major economies. This week, key data releases, including US inflation and European sentiment surveys, will provide crucial insights into the next directional moves. Stay prepared for potential sharp shifts in sentiment.