03/10/2024
Written by: Ian Morley
GBP/EUR
Summary:
The GBP/EUR pair remained under pressure, trading near 0.8435 as the ECB’s recent 25 bps rate cut did little to boost the Euro. The cut, alongside downward revisions to the 2024 growth forecast from 0.9% to 0.8%, placed a cap on the Euro’s strength. Meanwhile, the Pound held steady ahead of this week’s UK inflation data and BoE rate decision, with the market expecting no changes to the current 5.0% interest rate.
Outlook:
The outlook for GBP/EUR will be heavily influenced by upcoming inflation data from both the Eurozone and the UK, as well as the Bank of England’s decision later in the week. While the BoE is expected to hold rates, a weaker-than-expected inflation reading could increase expectations for a future rate cut, possibly pushing the Pound lower. The Euro, on the other hand, may remain under pressure if economic indicators continue to suggest slow growth.
EUR/USD
Summary:
EUR/USD climbed above the 1.1100 level, buoyed by broad-based USD weakness. Expectations of an aggressive rate cut from the Federal Reserve, potentially 50 basis points, have pressured the US Dollar, leading to gains for the Euro. The pair’s technicals suggest bullish momentum, with the price holding above key moving averages and a positive RSI.
Outlook:
The direction of EUR/USD will likely depend on the outcome of this week’s Fed meeting. A larger-than-expected cut could drive the USD lower, pushing EUR/USD higher towards 1.1150 or beyond. However, if the Fed opts for a smaller cut or signals a cautious approach moving forward, the Dollar could regain some strength, capping further gains for the Euro.
GBP/USD
Summary:
GBP/USD strengthened to trade above 1.3150, benefitting from the weakening US Dollar. With markets anticipating that the Federal Reserve will ease more aggressively than the BoE in the near term, the Pound outperformed. The pair has seen consistent buying support due to expectations that the BoE’s rate-cutting cycle will be less aggressive than the Fed’s.
Outlook:
The upcoming Fed and BoE meetings will be crucial for GBP/USD. Should the Fed cut rates by 50 bps as expected, the pair could push higher towards 1.3200. However, if the BoE signals more dovishness than anticipated, the Pound may struggle to maintain gains. Investors will also be watching UK inflation data for any signs that could sway future BoE policy.
AUD/USD
Summary:
AUD/USD saw a slight increase, supported by speculation that the Fed will implement a 50 bps rate cut. The Australian Dollar also received some support from the Reserve Bank of Australia’s hawkish stance, with officials indicating it’s too early to cut rates despite domestic inflation concerns.
Outlook:
A significant Fed rate cut could provide further upside for AUD/USD, potentially driving the pair above 0.6750. However, Australia’s employment data, due later this week, could play a pivotal role. A weaker labour market could temper expectations for the RBA’s hawkish stance and limit gains for the Aussie Dollar.
Final Summary:
This week is critical for the major currency pairs as key central bank meetings and inflation data are expected to influence market sentiment. The US Dollar remains under pressure ahead of the Fed’s expected rate cut, providing opportunities for gains in pairs like EUR/USD and GBP/USD. However, outcomes from the Fed and BoE decisions will dictate whether these trends persist or reverse. For now, the market remains cautiously optimistic about a dovish Fed and a steady BoE.