06/12/2024
Written by: Ian Morley
GBPEUR
Summary:
Last week, the Pound hit highs against the Euro, supported by speculation that the ECB may implement a 25bps or 50bps rate cut in December. Meanwhile, the Euro struggled amid weak Eurozone economic data and concerns over political instability in Germany and France.
Outlook:
This week, GBP sentiment hinges on any policy indications from Bank of England speakers, with markets expecting rates to remain steady at 4.75% in December. Euro movements will likely reflect the market’s reaction to any dovish ECB comments or further geopolitical concerns in Europe.
GBPUSD
Summary:
The Pound has faced challenges against the Dollar, particularly following President-elect Donald Trump’s proposed tariffs on imports from Mexico, Canada, and China. However, GBP has regained some ground due to optimism about Scott Bessent’s nomination as US Treasury Secretary, which has tempered risk sentiment.
Outlook:
Investors will closely monitor FOMC meeting minutes and US PCE inflation data this week for insights into the Fed’s policy direction. GBPUSD could experience further volatility as market focus shifts between UK monetary policy and US economic developments.
EURUSD
Summary:
EURUSD rebounded sharply after falling to two-year lows, gaining nearly 2% following Scott Bessent’s appointment. However, the Euro remains pressured by Eurozone’s weak economic outlook and market expectations for aggressive ECB rate cuts.
Outlook:
Key Eurozone data, including inflation figures, will shape the Euro’s trajectory this week. Any progress in US-China trade tensions or a ceasefire agreement between Israel and Lebanon could support the risk-sensitive Euro, though downside risks persist.
AUDUSD
Summary:
The Australian Dollar is under pressure, trading near multi-month lows. Risk sentiment has been weighed down by Trump’s tariff announcements and renewed concerns over global trade. Meanwhile, stronger US bond yields have bolstered the Dollar.
Outlook:
Focus will shift to Australia’s inflation data, due Wednesday, for clues on the Reserve Bank of Australia’s (RBA) future policy stance. Meanwhile, US data and FOMC minutes may also influence AUDUSD’s direction in the near term.
Final Summary
This week, global currencies are navigating heightened volatility driven by geopolitical developments, trade tensions, and evolving central bank policies. With major data releases and speeches ahead, markets are likely to see sharp moves as investors seek clarity on future economic directions.