06/12/2024
Written by: Ian Morley
GBP/EUR
Summary:
The pound continued its downward trajectory against the euro after weaker-than-expected UK GDP figures dampened investor confidence. The pair currently trades near 1.2000 as concerns about the UK’s economic resilience overshadowed recent euro weakness, which stemmed from dovish expectations for the European Central Bank (ECB).
Outlook:
UK CPI data on Wednesday could bolster the pound if inflation rises to the expected 2.1% due to increased household energy bills. However, any further signs of UK economic fragility, such as disappointing retail sales on Friday, may drive the pair lower. In the Eurozone, final CPI numbers and wage data will provide further clarity on the ECB’s likely rate cut size in December.
GBP/USD
Summary:
GBP/USD declined over 2% last week, marking its seventh consecutive weekly loss, and it remains under pressure near 1.2630. Better-than-expected US retail sales and hawkish Federal Reserve comments have supported the dollar, while UK economic concerns weigh on the pound.
Outlook:
The UK’s CPI and retail sales data will be pivotal this week, potentially providing GBP with relief if results exceed expectations. However, in a relatively quiet week for US data, the dollar’s strength may consolidate further. Any signs of dollar weakness could provide a short-term buying opportunity for those looking to hedge.
EUR/USD
Summary:
The euro struggled against the dollar, closing last week at its lowest level since October 2023. Lingering fears of a US-Eurozone trade conflict and the prospect of a December ECB rate cut weighed heavily on the pair. EUR/USD currently hovers around 1.0550.
Outlook:
Christine Lagarde’s speech today and November PMI numbers on Friday could influence the euro’s trajectory. Any dovish comments from the ECB or soft PMI results might drive the pair lower. Conversely, the dollar could retrace recent gains if risk sentiment improves, or US data disappoints later in the week.
AUD/USD
Summary:
The Australian dollar remains subdued against the greenback, trading near 0.6470. Weak domestic employment data and steady US dollar strength have exerted downward pressure, despite Reserve Bank of Australia (RBA) Governor Michele Bullock’s hawkish stance.
Outlook:
Tomorrow’s RBA meeting minutes will be critical in shaping market sentiment for the AUD. A hawkish tone could lend support to the pair, but any signs of global risk aversion or stronger US data might maintain downward pressure. Key levels to watch are 0.6400 for support and 0.6500 for resistance.
Final Summary
The currency markets are poised for a significant week with critical data releases, including UK CPI, Eurozone wage data, and November PMI figures from multiple regions. The dollar retains a bullish edge, but opportunities for corrections could arise, particularly in pairs like GBP/USD and EUR/USD.