06/12/2024
Written by: Ian Morley
GBPEUR
Summary:
The Pound weakened against the Euro, even as UK inflation data surprised to the upside. The October Consumer Price Index (CPI) showed core inflation rising to 3.3%, up from 3.1%, while services inflation increased to 5%. Despite this, speculation about Bank of England (BoE) rate cuts in December diminished. Comments from BoE Deputy Governor Dave Ramsden indicated a cautious stance, suggesting a readiness to accelerate rate cuts if disinflationary trends strengthen.
Outlook:
Focus will shift to the UK’s retail sales data and PMI figures for November. These releases could influence the BoE’s next policy moves. Meanwhile, the Euro faces its own pressures, with expectations of a 25-bps rate cut from the European Central Bank (ECB) in December. Continued geopolitical risks in Europe may also weigh on sentiment for both currencies.
GBPUSD
Summary:
The GBP/USD pair dipped slightly as the US Dollar gained on cautious Federal Reserve commentary. While Boston Fed President Susan Collins advocated a gradual approach to easing, Fed Governor Michelle Bowman highlighted lingering inflation concerns. UK inflation data briefly supported the Pound, but safe-haven flows driven by escalating Russia-Ukraine tensions capped gains.
Outlook:
Investors will monitor US jobless claims and Fed policymaker speeches for further clues on rate adjustments. The GBP/USD pair may see limited upside given ongoing geopolitical concerns and the Fed’s cautious tone. Any improvement in UK data could offer temporary support to the Pound.
EURUSD
Summary:
The Euro held steady around 1.0550 after previous losses, supported by ECB Governing Council member Yannis Stournaras’ comments that the Eurozone is close to sustainably achieving its 2% inflation target. However, geopolitical risks in Ukraine and a resilient US Dollar weighed on the pair.
Outlook:
Market participants expect a 25-bps rate cut from the ECB in December, with the possibility of further adjustments in 2025. US economic releases and Fed commentary will continue to drive USD performance. Any escalation in geopolitical tensions could lead to increased demand for the safe-haven Dollar, limiting Euro gains.
AUDUSD
Summary:
The Australian Dollar held above 0.6520, supported by a softer US Dollar and a positive risk sentiment. The Reserve Bank of Australia (RBA) maintained a hawkish stance, emphasising inflation risks. However, expectations of slower US rate cuts provided some resistance to further AUD/USD upside.
Outlook:
The pair is likely to remain range bound as markets await US data and Fed commentary. RBA policy dynamics may provide additional support, but any escalation in geopolitical risks or USD strength could cap gains for the Aussie.
Final Summary
The Pound remains under pressure despite strong inflation data, with market attention focused on the BoE’s next moves. The US Dollar is showing resilience amid cautious Fed remarks and geopolitical tensions, while the Euro and Australian Dollar navigate their respective domestic policy challenges. Upcoming economic data releases and geopolitical developments will shape currency pair trajectories in the near term.