07/11/2024
GBP/EUR
Summary:
GBP continues its rally against the Euro, currently trading around 1.2030. UK Retail Sales figures, which unexpectedly grew by 0.3% month-over-month in September, have boosted GBP. Meanwhile, the Euro has suffered from a dovish European Central Bank (ECB) decision to cut interest rates by 25 basis points for the second consecutive meeting. The ECB lowered its deposit rate to 3.25%, citing a substantial decline in inflation and economic activity, contributing to Euro weakness.
Outlook:
UK Retail Sales data supports the idea that the Bank of England (BoE) may delay rate cuts, especially with inflation appearing more controlled. The EUR/GBP pair may continue to rise if Eurozone economic data remains weak and further rate cuts by the ECB are anticipated. Traders will be closely watching Eurozone inflation and GDP data for signs of further policy easing.
EUR/USD
Summary:
The Euro has rebounded slightly, trading near 1.0850, following a four-day losing streak. The pair remains volatile due to contrasting economic data. On one hand, the US Dollar has been bolstered by strong US Retail Sales data, which grew by 0.4% month-over-month, while Initial Jobless Claims fell sharply. On the other hand, the Euro faced selling pressure after the ECB’s rate cut and dovish signals, exacerbating concerns about slowing growth in the Eurozone.
Outlook:
As the market awaits key remarks from Federal Reserve policymakers (Fedspeak), EUR/USD could remain under pressure. The US Federal Reserve may cut rates by 25 basis points in November and December, but the USD’s strength is likely to persist in the short term, given robust US economic data. Meanwhile, the Euro could continue to struggle if the ECB maintains its dovish stance.
GBP/USD
Summary:
GBP is climbing against the US Dollar, with GBP/USD trading near 1.3050. The Pound has been supported by better-than-expected UK Retail Sales data, while the USD weakened slightly after reaching multi-month highs. However, solid US Retail Sales and labour market data are keeping the Dollar relatively strong.
Outlook:
In the near term, GBP/USD could trade within a tight range, as the UK’s stronger economic data boosts the Pound, while the Dollar remains supported by the expectation of nominal Fed rate cuts. Traders should watch upcoming inflation data from both economies to gauge the next moves from the BoE and Fed, with a possible continuation of GBP strength if UK data outperforms.
AUD/USD
Summary:
The Australian Dollar has strengthened against the US Dollar, currently trading above 0.6700. This rebound has been fuelled by strong domestic employment data in Australia, which diminished expectations of a near-term rate cut by the Reserve Bank of Australia (RBA). Additionally, optimism surrounding China’s economic performance has provided further support for the AUD, as China is Australia’s largest trading partner.
Outlook:
Looking ahead, the AUD could hold its ground if Australian economic data remains robust and Chinese growth continues to outperform expectations. However, the USD may limit AUD gains if the Fed remains hawkish. Investors will be monitoring Australia’s inflation and employment reports, as well as Chinese economic indicators, for further direction.
Final Summary
This week has seen a continuation of mixed fortunes for global currencies. The British Pound outperformed due to unexpectedly strong Retail Sales data, while the Euro struggled under the weight of another ECB rate cut and weak economic indicators. The US Dollar remains resilient on the back of solid economic data, although it may face some pressure if the Federal Reserve cuts rates as anticipated. Meanwhile, the Australian Dollar is benefiting from positive domestic data and Chinese economic stability, though its gains may be capped by USD strength.