Market Insight 14-10-2024

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  • Market Insight 14-10-2024

GBP/EUR

Summary:
The GBP/EUR exchange rate has remained relatively steady over the past few sessions, as the UK’s economic outlook is countered by softness in the Euro. The Euro continues to face downward pressure due to the European Central Bank’s (ECB) dovish stance, with speculation growing around further rate cuts before the year ends. Meanwhile, the UK awaits employment and inflation data releases, which are expected to shape the Bank of England’s (BoE) monetary policy.

Outlook:
Expect GBP/EUR to remain range-bound in the short term. Any signs of a weaker UK labour market or inflation could drive the Pound lower, especially as markets anticipate a possible rate cut by the BoE in November. The Euro, pressured by weak inflation data in the Eurozone, might not see significant gains unless geopolitical risks ease or the ECB signals a change in policy direction.

EUR/USD

Summary:
EUR/USD has seen a prolonged decline, dipping below 1.0950 as geopolitical tensions (especially in the Middle East and Taiwan Strait) push investors toward the safe-haven US Dollar. The Euro struggles as the ECB maintains a dovish outlook, while the USD remains resilient, supported by expectations of only mild easing from the Federal Reserve.

Outlook:
EUR/USD is likely to stay under pressure as long as geopolitical risks remain elevated and the ECB’s policy remains accommodative. Any further escalation in global conflict could strengthen the USD further, while dovish rhetoric from the ECB will keep the Euro on the back foot. A break below the 1.0900 mark could signal a deeper move lower.

GBP/USD

Summary:
The GBP/USD pair softened to near 1.3050, impacted by a stronger US Dollar and the ongoing dovish tone from the Bank of England. The UK’s employment data and upcoming inflation figures will be key in determining the future path of monetary policy. Meanwhile, the US economy continues to show resilience, with labour market data beating expectations, keeping USD strength intact.

Outlook:
GBP/USD could face further downward pressure, especially if UK employment or inflation data disappoint this week. With a high probability of a BoE rate cut, the pair may struggle to hold above 1.3000. On the US side, any further indications that the Federal Reserve will slow rate cuts will continue to support the Dollar.

AUD/USD

Summary:
The Australian Dollar has lost ground against the US Dollar, falling back below key levels after weaker-than-expected inflation data from China, Australia’s largest trading partner. The disinflationary trend in China has heightened concerns about future demand, weighing on the risk-sensitive Aussie. At the same time, the market expects the Reserve Bank of Australia (RBA) to cut rates by the end of 2024, further adding to AUD weakness.

Outlook:
The AUD/USD pair is likely to remain under pressure as the Australian economy grapples with softer demand from China. Escalating geopolitical tensions may further enhance the US Dollar’s appeal, while expectations of easing from the RBA will keep the AUD subdued. The next significant level for AUD/USD could be near 0.6350 if risk sentiment continues to deteriorate.

Final Summary:

The overarching theme in the currency markets remains a preference for the US Dollar as geopolitical tensions and economic uncertainty persist. The dovish stances of central banks like the ECB, BoE, and RBA contribute to weaker EUR, GBP, and AUD. Key data releases, particularly from the UK and Eurozone, will be pivotal in shaping future trends across these pairs.