03/10/2024
Written by: Ian Morley
GBPEUR
Summary: The GBP/EUR pair has seen some consolidation, trading near 1.1960. Recent dovish remarks from Bank of England (BoE) policymakers, especially Megan Greene, point towards a cautious, gradual rate-cutting cycle. On the Euro side, weak economic data from Germany and Eurozone as a whole, including dismal business confidence reports, have fuelled speculation that the European Central Bank (ECB) will continue cutting interest rates.
Outlook: The BoE’s cautious approach to rate cuts is expected to support the Pound against the Euro in the near term. The ECB is likely to remain under pressure to act more aggressively with rate cuts to stimulate the economy, which could weigh further on the Euro. The next few ECB meetings are crucial, especially with potential rate cuts expected through to April 2025.
EURUSD
Summary: EUR/USD strengthened to near 1.1150, supported by renewed selling pressure on the US Dollar and optimism about upcoming speeches by Fed Chair Jerome Powell and ECB President Christine Lagarde. The pair faced some volatility but remains firmly supported by a dovish outlook for US monetary policy, while the Euro struggles with recession fears in the Eurozone.
Outlook: As markets anticipate continued rate cuts from the Federal Reserve, the US Dollar could remain under pressure, offering further support to the Euro. However, uncertainty around Eurozone economic data and ongoing rate cuts by the ECB may limit the upside potential for EUR/USD. Key speeches and data releases in the coming days will be critical in shaping market sentiment.
GBPUSD
Summary: GBP/USD traded higher, hovering around the 1.3335 mark. The pair benefitted from a modest pullback in the US Dollar and the BoE’s relatively hawkish stance compared to the Federal Reserve. The Fed’s dovish approach to future rate cuts, despite some officials’ comments to the contrary, continues to undermine the Greenback.
Outlook: The Pound is likely to continue receiving support from the BoE’s steady approach to rate cuts, which is expected to be slower than in the US. Traders will be watching closely for further signals from the Fed, especially from Powell’s upcoming speech. With US economic data also playing a pivotal role, any significant USD weakness could propel GBP/USD higher in the near term.
GBPAUD
Summary: The Australian Dollar (AUD) gained ground against the Pound, driven by optimism around China’s fresh stimulus measures and the Reserve Bank of Australia’s (RBA) decision to hold rates steady. However, the GBP/AUD pair remains range-bound, as the Pound is supported by BoE policy expectations.
Outlook: While the Aussie Dollar could continue to benefit from China’s economic recovery measures, the Pound’s steady BoE outlook is likely to cap any significant gains for AUD against GBP. Traders are likely to monitor both Chinese economic developments and the RBA’s future moves closely.
GBPCAD
Summary: GBP/CAD remained fairly steady, with the Canadian Dollar under slight pressure from falling oil prices and BoE policymaker remarks supporting the Pound. The Loonie was weighed down by easing supply concerns in the oil markets and modest risk sentiment.
Outlook: The Canadian Dollar may continue to face challenges if oil prices remain weak. The Pound, on the other hand, could see some upside against the Loonie as the BoE’s gradual easing policy plays out. However, any significant move in oil prices could sway the GBP/CAD pair in either direction.
Final Summary:
This week’s currency movements have been influenced by key central bank speeches, economic data, and market sentiment. The BoE’s cautious approach to rate cuts has supported the Pound across most pairs, while the Euro continues to face downside risks due to weak economic data and expected further ECB rate cuts. In contrast, the Australian and Canadian Dollars face mixed signals from commodity markets and domestic policy, leaving room for further fluctuations in these pairs. All eyes remain on upcoming speeches by central bank leaders and economic indicators for further direction.