06/12/2024
Written by: Ian Morley
GBP/EUR
Summary:
Pound Sterling weakened against the Euro, with the pair trading around 0.8330. UK retail sales for October declined by 0.7%, missing expectations and raising concerns about consumer spending. Eurozone PMI data highlighted further contraction in business activity, with the Composite PMI falling to 48.1. This indicates a deepening recession in manufacturing and emerging struggles in the services sector.
Outlook:
Further downside pressure on GBP is expected as investors digest weak retail sales and anticipate possible dovish actions from the Bank of England. Meanwhile, despite weak PMI data, the Euro could stabilise if expectations for aggressive ECB rate cuts intensify. Traders should monitor upcoming UK and Eurozone economic data, including inflation reports and central bank commentary.
GBP/USD
Summary:
The Pound slid to a six-month low near 1.2550 against the US Dollar. Weaker-than-expected UK retail sales and a strong USD, driven by safe-haven demand amid escalating Russia-Ukraine tensions, contributed to this movement. The US Dollar Index reached its highest level since October 2023, buoyed by lower jobless claims and reduced expectations for rapid Federal Reserve rate cuts.
Outlook:
The USD is likely to remain strong as geopolitical tensions persist, and PMI data from the US could further strengthen its appeal. GBP may face continued pressure unless upcoming UK PMI data surprises positively. Market participants should also watch for updates on the Russia-Ukraine conflict, as these developments heavily influence risk sentiment.
EUR/USD
Summary:
EUR/USD fell to its lowest level in nearly two years, trading below 1.0450. Weak Eurozone PMI data indicated deepening economic challenges, while the USD gained strength from safe-haven flows and robust US data.
Outlook:
The pair may see further downside as the market factors in weak Eurozone growth prospects and a stronger USD. However, potential signals of ECB rate cuts could cap Euro losses. US PMI data and developments in Ukraine will remain key drivers for the pair.
AUD/USD
Summary:
The Australian Dollar continued its decline, trading below 0.6500, after mixed PMI data showed further contraction in the services sector. A robust USD, supported by safe-haven demand and a strong US labour market, added to the AUD’s weakness.
Outlook:
AUD/USD may remain under pressure as traders expect subdued economic growth in Australia and favour the USD for its safe-haven appeal. The Reserve Bank of Australia’s cautious stance will also weigh on sentiment. Investors will focus on Chinese economic indicators, given Australia’s trade ties, for any signs of support for the AUD.
Final Summary
The overarching market theme remains one of caution, driven by geopolitical tensions and soft economic data. Safe-haven flows into the USD and JPY have dominated currency markets, while weak economic indicators weigh heavily on GBP, EUR, and AUD. Traders should monitor PMI results and geopolitical updates, which will shape market sentiment heading into the weekend.