20/01/2025
Written by: Ian Morley
GBPEUR
Summary:
GBP/EUR has seen limited movement, with the euro showing slight strength. The UK’s revised Q3 GDP growth figure of 0.9% (down from 1.0%) has weighed on the pound, while comments from ECB President Lagarde suggest the eurozone is nearing its inflation target, adding support to the euro.
Outlook:
With the ECB expected to continue cutting interest rates next year and the BoE maintaining a dovish stance, the euro may retain its advantage over the pound in the near term. Thin trading volumes this week due to holidays could limit volatility.
GBPUSD
Summary:
GBP/USD remains relatively stable after rebounding from multi-month lows late last week. Softer-than-expected US PCE inflation data has kept the dollar subdued, but the Fed’s hawkish outlook for 2025 supports the USD, capping significant gains for the pound.
Outlook:
The pair may continue to trade in a narrow range as the market digests contrasting central bank policies. With both the Fed and BoE leaning dovish, short-term moves are likely to be driven by broader risk sentiment. The upcoming US Consumer Confidence Index may provide some direction.
EURUSD
Summary:
EUR/USD is consolidating above the 1.0400 level after recovering from a multi-week low. Softer US inflation data and ECB President Lagarde’s optimism about nearing inflation targets have supported the euro, while the USD remains under pressure.
Outlook:
With holiday-thinned volumes, the pair is likely to remain range-bound in the short term. Longer-term trends will depend on market expectations for Fed rate cuts in 2025 and the ECB’s easing cycle.
AUDUSD
Summary:
The Australian dollar has appreciated slightly against the US dollar following softer US inflation data. However, expectations of RBA rate cuts in early 2025 have tempered the AUD’s gains.
Outlook:
Market participants are awaiting Tuesday’s release of the RBA Meeting Minutes, which could provide clarity on the central bank’s monetary policy trajectory. Short-term movements will also be influenced by US data and broader risk sentiment.
EURCHF
Summary:
EUR/CHF remains under pressure due to the Swiss franc’s continued strength. Concerns about the Swiss financial sector following the Credit Suisse inquiry have been offset by the SNB’s focus on regulatory stability.
Outlook:
The pair could face further downside if the CHF continues to attract safe-haven flows. However, the ECB’s cautious approach to rate cuts might limit significant losses for the euro against the franc.
Final Summary:
Currency markets have started the holiday-shortened week with subdued trading volumes, leading to limited volatility. Softer US inflation data and dovish central bank outlooks dominate sentiment across major pairs. With reduced market activity expected, any significant movements will likely stem from unexpected geopolitical or economic developments.