20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
GBP/EUR has experienced slight volatility following mixed data from the UK and eurozone. UK employment figures showed steady unemployment at 4.3%, with average wage growth rising to 5.2%. Meanwhile, the eurozone remains under pressure as the European Central Bank (ECB) signals further interest rate cuts to combat weak demand and slowing inflation.
Outlook:
This week’s UK Consumer Price Index (CPI) data and Bank of England (BoE) policy decision on Thursday will be key. The BoE is expected to hold rates steady, but any dovish signals could leave the pound vulnerable. Political developments in Germany and ECB commentary will also shape the euro’s direction.
EUR/USD
Summary:
EUR/USD has struggled to hold above 1.0500 as the US dollar remains firm ahead of the Federal Reserve’s two-day policy meeting. Weak German sentiment surveys and political uncertainty after Chancellor Scholz’s government collapse add downward pressure on the euro. Meanwhile, US economic data, including retail sales and industrial production, showed signs of resilience.
Outlook:
The Federal Reserve is widely expected to cut rates by 25 basis points this week, but market focus will be on its updated economic projections. If the Fed maintains a hawkish stance for 2025, the US dollar could strengthen further, keeping EUR/USD under pressure.
GBP/USD
Summary:
GBP/USD recovered towards 1.2700 after the UK labour market report, which showed positive employment growth and rising wages. However, concerns about the BoE’s future stance and broader economic challenges weigh on the pound. The US dollar continues to trade cautiously ahead of the Fed decision.
Outlook:
UK inflation data on Wednesday will set the tone ahead of the BoE’s announcement. A softer inflation reading could reignite dovish expectations and weigh on the pound. In the US, a hawkish Fed stance could support the dollar and push GBP/USD lower.
EUR/CHF
Summary:
EUR/CHF remains under downward pressure as the euro struggles amid ECB rate-cut expectations and broader eurozone economic weakness. The Swiss franc continues to benefit from its safe-haven status in the face of geopolitical uncertainties.
Outlook:
The pair may face further downside risks if the ECB maintains its dovish tone and economic data from the eurozone remains weak. Conversely, safe haven flows into the Swiss franc could continue to support its resilience.
AUD/USD
Summary:
The Australian dollar has faced losses due to increased risk aversion and weaker domestic data. Consumer confidence fell in December, reflecting growing pessimism about the economic outlook. Broader concerns about Chinese growth and trade relations also weigh on the AUD.
Outlook:
With the Federal Reserve meeting in focus, the AUD will remain sensitive to the US dollar’s strength. Domestically, data-driven decisions from the Reserve Bank of Australia (RBA) will continue to influence sentiment, while developments in China’s economy and trade policy could add further volatility.
Final Summary
This week, central bank decisions from the Federal Reserve and Bank of England will dominate market movements, while economic data releases such as UK inflation and US retail sales will provide further direction. The euro remains under pressure amid weak sentiment and dovish ECB expectations, while the US dollar stands firm as markets prepare for the Fed’s updated guidance.