06/12/2024
Written by: Ian Morley
GBP/EUR
Summary:
The Euro faced renewed selling pressure. The focus on upcoming Eurozone GDP data, coupled with cautious sentiment surrounding UK economic data, kept the pair subdued. Comments from ECB policymakers indicated inflation is trending towards the 2% target, with further interest rate cuts likely in the coming months. Meanwhile, UK unemployment rose to 4.3%, dampening the Pound.
Outlook:
Markets anticipate speeches from BoE Governor Bailey and ECB President Lagarde for further guidance. The ECB’s expected rate cuts may pressure the Euro further, while the BoE’s cautious stance on inflation and potential rate cuts could limit downside risks for the Pound. Economic data will play a crucial role in shaping short-term movements in this pair.
GBP/USD
Summary:
GBP/USD extended its decline to trade below 1.2700, weighed down by a robust US Dollar. October’s US CPI data met expectations, bolstering the Greenback, which gained further support from elevated Treasury yields and hawkish comments from Federal Reserve officials. The Pound struggled as UK unemployment data pointed to a weakening labour market, and BoE policymakers maintained a cautious outlook.
Outlook:
With traders eyeing Governor Bailey’s speech, any hint of dovishness from the BoE could exacerbate losses for the Pound. On the US side, Fed Chair Powell’s comments and PPI data will be pivotal in determining near-term Dollar strength. A sustained rally in the Greenback could see GBP/USD test lower support levels.
EUR/USD
Summary:
EUR/USD hit yearly lows near 1.0520 as the Euro faced intense selling pressure amid political and economic challenges in the Eurozone. The Republican victory in the US elections boosted the Dollar, with Trump’s proposed tariffs likely to weigh on European exports. ECB comments suggested inflation is under control, reinforcing expectations for further rate cuts.
Outlook:
The pair remains vulnerable as traders look to upcoming Eurozone GDP data and US economic reports. Should the ECB signal more aggressive monetary easing, the Euro could face additional downside. Conversely, any surprising dovishness from the Fed might offer a temporary reprieve for EUR/USD.
AUD/USD
Summary:
AUD/USD dropped to 0.6490, pressured by a strong US Dollar and concerns over Australia’s economic resilience. Steady unemployment figures failed to provide significant support, while RBA Governor Bullock’s remarks reaffirmed the restrictive stance on interest rates. Weak Chinese stimulus measures and lower Australian inflation expectations further weighed on the Aussie.
Outlook:
Downward pressure may persist for AUD/USD as global risk sentiment remains fragile. Traders will monitor upcoming US PPI data and Powell’s speech for cues on the Greenback’s direction. Any additional signs of economic weakness from Australia or China could exacerbate losses in the Australian Dollar.
Final Summary
The currency market remains highly influenced by the US Dollar’s ongoing strength, underpinned by solid economic data and political developments in the US. Central bank communications from the BoE, ECB, and Fed will be crucial in shaping market sentiment in the near term. While the Dollar appears well-supported, opportunities may arise for hedging against longer-term volatility in Dollar-denominated pairs.