06/12/2024
Written by: Ian Morley
GBPEUR
Summary:
GBP hit 2024 highs against the Euro following weak Eurozone PMI data that increased expectations of a 0.50% ECB rate cut in December. However, GBP was weighed down by weaker-than-expected UK retail sales and PMI figures.
Outlook:
With little UK economic data scheduled this week, GBP movement will likely be driven by external factors, particularly any further developments in Eurozone data and ECB rate-cut expectations. Upcoming speeches from BoE officials, including MPC members Dhingra and Lombardelli, could provide additional clues on future policy direction.
EURUSD
Summary:
EURUSD experienced high volatility, falling to two-year lows on Friday due to weak Eurozone data and expectations of rate cuts by the ECB. However, the appointment of Scott Bessent as US Treasury Secretary led to a USD pullback, allowing EUR to regain some ground.
Outlook:
EUR recovery hinges on upcoming Eurozone consumer confidence and inflation data. Positive surprises in these metrics may help offset bearish sentiment. Meanwhile, US economic performance remains a critical driver, with the Fed’s November meeting minutes and core PCE data likely to influence USD direction.
GBPUSD
Summary:
The Pound rebounded against the USD on Monday after Bessent’s appointment triggered broad USD weakness. Market sentiment also improved on expectations that the BoE will not rush to ease monetary policy aggressively.
Outlook:
The Pound’s momentum could be supported by expectations of a shallow policy-easing path from the BoE. However, weak UK data from last week may cap gains unless market sentiment improves significantly. In the US, the holiday-shortened trading week could lead to reduced liquidity, amplifying volatility around key data releases.
AUDUSD
Summary:
The Australian Dollar initially benefited from a weaker USD and optimism in domestic equity markets. However, technical indicators suggest the broader downtrend for AUD remains intact, with a mixed domestic PMI performance adding to uncertainty.
Outlook:
The focus for AUD remains on Australia’s monthly CPI figures, which could shape expectations for RBA policy moves. Although USD weakness provides short-term relief, ongoing global uncertainty and weaker domestic PMI data could limit AUD gains.
Final Summary
Markets kicked off the week with significant movements driven by central bank expectations, geopolitical developments, and key appointments. While USD saw early weakness following the nomination of Scott Bessent, upcoming economic data and central bank communications across the UK, Eurozone, and US will likely steer market sentiment in the days ahead.