20/01/2025
Written by: Ian Morley
GBP/EUR
Summary:
The Pound weakened on Thursday following the Bank of England’s decision to hold rates at 4.75%. The surprising vote by three MPC members in favour of a rate cut further pressured the currency. UK Retail Sales for November grew by 0.2%, falling short of the anticipated 0.5% increase, adding to Sterling’s challenges.
Outlook:
The dovish signals from the BoE suggest further headwinds for the Pound, with markets pricing in rate cuts in 2025. The Euro may face limited upside as the ECB maintains its easing bias, keeping this pair within its recent range for now.
GBP/USD
Summary:
The US Dollar surged to a two-year high, supported by the Fed’s hawkish tone and upbeat US economic data. The Pound hit a seven-month low against the USD at 1.2470 before recovering slightly to 1.2500.
Outlook:
Upcoming US PCE inflation data will be critical for further Fed guidance. If inflation shows resilience, the Dollar could continue its rally, keeping GBP/USD under pressure with potential dips below 1.2470.
EUR/USD
Summary:
EUR/USD remains subdued near a two-year low at 1.0360. Diverging central bank outlooks weighed on the Euro, as the ECB hinted at continued rate cuts, while the Fed emphasised slower rate reductions in 2025.
Outlook:
The path of least resistance for this pair remains downward, with any negative Euro moves potentially accelerating if today’s US PCE data reinforces the Dollar’s strength.
AUD/USD
Summary:
The Australian Dollar remains subdued near 0.6250. The Reserve Bank of Australia’s potential for early rate cuts and muted reaction to unchanged PBoC Loan Prime Rates have kept the Aussie under pressure.
Outlook:
The US Dollar’s strength remains a key driver for this pair, with further losses possible if US data outperforms. A break below 0.6220 could open the door to deeper declines.
Final Summary:
The US Dollar’s dominance persists, driven by a hawkish Fed and robust economic data. Diverging central bank policies and weaker data continue to weigh on the Pound, Euro, and Australian Dollar. Today’s US PCE inflation report will likely dictate short-term market moves as we head into the holiday season.