20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
The pound struggled following the release of disappointing UK GDP data, which showed a 0.1% contraction in October, contrary to forecasts of a 0.1% expansion. UK industrial and manufacturing production also declined for the second consecutive month, further dampening the pound’s appeal. Meanwhile, the euro faced its own challenges after the European Central Bank (ECB) cut rates by 25 basis points and signalled further easing amidst weakening Eurozone growth.
Outlook:
The pound remains under pressure as investors anticipate key UK employment and inflation data next week, alongside the Bank of England’s policy decision. Markets expect the BoE to keep rates unchanged at 4.75%. For the euro, ECB commentary and economic performance will continue to weigh on its performance. GBP/EUR may trade in a narrow range with resistance at 1.2092 and support at 1.1976.
EUR/USD
Summary:
The euro has been in decline, trading near 1.0450, following the ECB’s dovish stance. President Christine Lagarde’s concerns about slower economic recovery in the Eurozone added to the euro’s weakness. In contrast, the US dollar strengthened, supported by better-than-expected Producer Price Index (PPI) data and rising bond yields.
Outlook:
EUR/USD faces continued downside risks as markets await next week’s Federal Reserve meeting. The Fed is widely expected to cut rates by 25 basis points, but a hawkish tone could further bolster the dollar. Key support lies at 1.0400, with resistance around 1.0520.
GBP/USD
Summary:
The pound fell sharply against the dollar, dropping below 1.2650, as weak UK economic data added to the bearish sentiment. The dollar continues its rally, buoyed by robust economic data and expectations that the Federal Reserve may slow its rate-cutting cycle in the new year.
Outlook:
GBP/USD is likely to remain under pressure as the dollar retains its strength. Next week’s UK employment and CPI data will be pivotal for the pound, while the Fed meeting could drive dollar moves. Support is seen at 1.2600, with resistance at 1.2720.
USD/CHF
Summary:
The dollar surged against the Swiss franc this week, with USD/CHF climbing to just under 0.8950. The Swiss National Bank (SNB) implemented a 50-basis-point rate cut, weakening the franc significantly.
Outlook:
Further downside for the franc is possible as the SNB’s dovish stance continues to weigh on the currency. Meanwhile, the dollar’s strength, underpinned by rising yields and solid economic data, could see USD/CHF testing resistance at 0.9000.
AUD/USD
Summary:
The Australian dollar struggled against the dollar, pressured by escalating US-China trade tensions and Trump’s proposed tariffs on Chinese goods. Robust US data, including stronger-than-expected PPI figures, further strengthened the dollar.
Outlook:
The AUD remains vulnerable to risk sentiment and any developments in US-China relations. Support is seen at 0.6300, with resistance around 0.6420. Next week’s Federal Reserve decision will likely be the key driver for the pair.
EUR/CHF
Summary:
EUR/CHF traded modestly higher this week, benefitting from the SNB’s rate cut. However, concerns over Eurozone growth limited the euro’s gains.
Outlook:
The pair may see further consolidation with a bullish bias, provided the euro avoids significant downside pressure. Key resistance is at 0.9440, while support is near 0.9320.
Final Summary
This week saw the US dollar solidify its strength across major pairs, supported by rising bond yields and strong economic data. The pound faced headwinds from weaker-than-expected domestic growth figures, while the euro struggled amid dovish signals from the ECB. As we approach next week, the Federal Reserve’s policy meeting and key economic data releases from the UK and US are likely to drive significant market volatility.