07/11/2024
GBP/EUR
Summary:
The GBP/EUR pair traded cautiously with slight downward pressure on the Euro. This is largely due to anticipation of a 25 basis point rate cut from the ECB in today’s meeting, with expectations firmly in place for further rate cuts by year-end. At the same time, the Euro is weakened by concerns about slow economic growth within the Eurozone. Meanwhile, GBP faces its own challenges after UK inflation eased sharply in September, dropping to 1.7%—the lowest since April 2021. This has led to growing speculation of a potential interest rate cut from the Bank of England in November.
Outlook:
The ECB is widely expected to announce a 25-basis-point rate cut today, with additional dovish rhetoric likely from President Christine Lagarde. This could keep the Euro under pressure in the near term. The focus will shift to whether the Bank of England will align with market expectations for rate cuts, which would further drive movements in the pair.
EUR/USD
Summary:
EUR/USD remains weak, trading near 1.0850, a 10-week low. The pair faces multiple headwinds, primarily driven by a stronger US Dollar and expectations of dovish action from the European Central Bank (ECB). Investors are bracing for another 25 basis point rate cut today, which would be the second consecutive reduction. The Euro has been weighed down by sluggish economic activity in the Eurozone and softer inflation data, while the USD continues to strengthen amid robust US economic indicators, including better-than-expected Nonfarm Payrolls and Services PMI data.
Outlook:
As the ECB is expected to cut rates, EUR/USD is likely to remain under pressure. Traders will closely monitor the post-meeting remarks from ECB President Christine Lagarde for clues about December’s policy moves. A dovish outlook could open the door to further losses for the Euro. Meanwhile, US data, including retail sales, could provide more short-term support to the USD, especially if the figures exceed expectations.
GBP/USD
Summary:
GBP/USD saw a significant decline, dropping below the key psychological level of 1.3000, marking its lowest point since August 20. The sharp fall was triggered by UK inflation data, which showed a faster-than-expected decline in consumer prices, fuelling expectations of a potential rate cut from the Bank of England. In contrast, the US Dollar remains well-supported by strong economic data and diminishing hopes of aggressive rate cuts from the Federal Reserve. Geopolitical risks, especially in the Middle East, have also contributed to the safe-haven demand for the USD.
Outlook:
With GBP struggling below 1.3000, the next major support lies near 1.2955. The path for the Pound appears bearish in the near term, especially if UK economic data continues to underwhelm and BoE rate cut expectations grow. On the USD side, any positive US Retail Sales or Initial Jobless Claims data later today could further weigh on the GBP/USD pair. In the medium term, geopolitical risks may continue to support the USD.
AUD/USD
Summary:
The Australian Dollar showed some resilience today, staging a recovery after three consecutive days of losses. Strong employment data from Australia, including a 64.1K increase in jobs, provided a lift to the currency. However, the pair remains below 0.6700 as the US Dollar continues to find support from robust economic indicators and a stable US labour market. Market participants are also awaiting US Retail Sales data for further cues.
Outlook:
The Australian Dollar could see further short-term strength if employment figures continue to surprise on the upside. However, the broader trend will depend on how the US Retail Sales data affects USD strength. With solid US fundamentals, AUD/USD is expected to remain under pressure in the near term, especially if the Federal Reserve maintains its data-driven approach and delays further rate cuts.
Final Summary The FX market remains dominated by anticipation of central bank actions, with the ECB expected to cut rates further, pressuring the Euro. Meanwhile, the Pound is weighed down by easing inflation in the UK and rising expectations of a rate cut from the Bank of England. The US Dollar continues to show strength, supported by solid economic data and safe-haven demand amid geopolitical tensions. In contrast, the Australian Dollar received a brief respite from strong employment data but remains vulnerable to USD strength in the coming days.