06/12/2024
Written by: Ian Morley
GBP/EUR
Summary:
GBP/EUR saw limited movement as weak UK economic data offset broader Euro weakness. UK GDP for Q3 grew by only 0.1% versus the forecasted 0.2%, while September GDP contracted by 0.1%. Industrial and manufacturing production also declined. Meanwhile, the Euro held steady despite increased speculation about ECB rate cuts, as officials cited ongoing inflationary pressures and strong wage growth.
Outlook:
The pair remains range-bound, with a focus on ECB commentary and upcoming Eurozone inflation data. In the UK, sluggish economic indicators and cautious Bank of England (BoE) rhetoric could weigh on the Pound. Continued hints of Eurozone monetary easing might cap any significant EUR gains.
GBP/USD
Summary:
GBP/USD briefly bounced above 1.2650 during the European session but remains pressured amid a robust US Dollar. UK GDP figures fell short of expectations, compounding a weak outlook for the Pound. Meanwhile, USD strength persisted as Federal Reserve Chair Jerome Powell emphasised the US economy’s resilience, signalling fewer and slower rate cuts.
Outlook:
The Pound faces headwinds, with market participants closely watching US retail sales figures and Powell’s continued commentary for signs of a shift in Fed policy. Any further softening in UK data could see GBP/USD test new lows, while stronger-than-expected US retail numbers might bolster the Dollar further.
EUR/USD
Summary:
EUR/USD rebounded slightly to trade above 1.0500 after falling to yearly lows earlier in the week. The Euro’s recovery was supported by a temporary correction in the US Dollar, though ongoing speculation about ECB rate cuts capped gains. In contrast, robust US PPI figures and hawkish Fed commentary highlighted the Dollar’s continued dominance.
Outlook:
While the Euro is showing signs of stabilisation, the potential for further weakness remains if the ECB signals a more aggressive easing cycle. Attention now turns to US retail sales data and comments from ECB officials, with the pair likely to remain under pressure in the near term.
AUD/USD
Summary:
AUD/USD regained ground above 0.6450 as the US Dollar corrected lower, but the Aussie remains under pressure due to weak domestic data and concerns over Chinese economic growth. Australia’s unemployment rate stayed at 4.1%, though job creation fell short of expectations. Meanwhile, Reserve Bank of Australia Governor Bullock reaffirmed the central bank’s restrictive stance on rates.
Outlook:
The Aussie’s recovery may be short-lived as traders await US economic data for direction. Weak Chinese data and tepid domestic economic momentum could further limit gains for AUD/USD. Any signs of continued USD strength or heightened risk aversion would likely weigh heavily on the pair.
Final Summary
The currency market continues to be driven by US Dollar strength, supported by resilient economic data and hawkish Fed commentary. While corrective moves in major currency pairs offered some relief, underlying themes such as sluggish UK growth, Eurozone policy easing, and weak Chinese data suggest that the Dollar’s dominance could persist in the near term. Clients should consider taking advantage of any temporary Dollar weakness to hedge future exposures.