Market Insight 21-10-2024

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  • Market Insight 21-10-2024

GBP/EUR

Summary:
The GBP/EUR pair remains steady around 1.1990 after Germany’s Producer Price Index (PPI) data showed a larger-than-expected decline of 1.4% year-on-year in September, marking a deeper drop than August’s 0.8% decrease. The Euro continues to face pressure from the dovish sentiment surrounding the European Central Bank (ECB), which recently cut interest rates by 25 basis points. Meanwhile, the Pound is held down by weak UK labour market data and growing speculation that the Bank of England (BoE) will implement rate cuts in November and December.

Outlook:
The Euro may continue to struggle if the ECB continues its easing cycle, while the Pound could face further downward pressure if the BoE follows through on market expectations for rate cuts. Further declines in Germany’s inflation metrics suggest limited upside for the EUR, while the GBP could soften further if UK data doesn’t improve.

EUR/USD

Summary:
EUR/USD dropped toward 1.0850, weighed down by renewed strength in the US Dollar. The Dollar’s rebound follows a shift in market risk sentiment, driven by investor optimism about US economic resilience and the potential for gradual interest rate cuts from the Federal Reserve. The Euro’s outlook remains uncertain, as expectations for additional ECB rate cuts persist. Weak Eurozone growth and inflation figures continue to fuel speculation that the ECB will further ease monetary policy.

Outlook:
The pair is expected to remain under pressure as investors anticipate further rate cuts from the ECB in December. The USD is likely to remain buoyed by expectations of gradual Fed easing and potential volatility tied to the upcoming US presidential elections. A break below 1.0800 could push the pair toward new lows, while any softening of the Fed’s policy stance may offer some relief for the Euro.

GBP/USD

Summary:
GBP/USD edged lower at the start of the week as the US Dollar found renewed support. The Pound remains under pressure, driven by rising expectations that the Bank of England will begin a cycle of rate cuts as early as November. From a technical perspective, the pair has struggled to hold gains above the 1.3000 mark, with key support levels around 1.2960 likely to come into play.

Outlook:
The Pound could weaken further if the BoE signals more aggressive easing in the coming months. If GBP/USD breaks below 1.2960, the pair may head toward the 1.2900 support level. Conversely, a recovery beyond 1.3135 could shift market sentiment more positively for the Pound.

AUD/USD

Summary:
The Australian Dollar has pared earlier gains against the US Dollar, despite hawkish sentiment from the Reserve Bank of Australia (RBA) and upbeat domestic employment data. However, the US Dollar has regained strength due to robust US economic performance, keeping the AUD/USD pair below 0.6700. Additionally, rate cuts by China’s central bank have failed to provide lasting support to the Aussie, as market focus shifts to the US Dollar’s outlook.

Outlook:
AUD/USD is likely to remain under pressure as the US Dollar continues to benefit from its safe-haven appeal and expectations of a steady Fed policy. Meanwhile, Australia’s strong labour market reduces the likelihood of immediate rate cuts by the RBA, offering some resilience to the Australian Dollar. Nonetheless, any signs of a slowdown in China could weigh on the AUD in the coming weeks.

Final Summary:


The currency market remains focused on diverging central bank policies. The ECB and BoE are expected to continue easing, putting pressure on the Euro and Pound, while the US Dollar remains supported by expectations of a gradual Fed easing cycle. Meanwhile, the Australian Dollar is feeling the effects of strong domestic data, though its outlook remains tied to the performance of China’s economy. As central banks adjust their policies, currency volatility is likely to persist in the coming months.