03/10/2024
Written by: Ian Morley
GBP/EUR
Summary: The Euro has depreciated against the Pound, trading near 0.8350. The Euro remains under pressure due to increased expectations of an ECB rate cut in October, following weaker French and Spanish inflation data. Meanwhile, the Pound is supported by market expectations that the Bank of England (BoE) will proceed with more gradual rate reductions compared to the ECB.
Outlook: The Euro may face further challenges as ECB officials indicate that more dovish policies could be implemented. If the ECB confirms its next rate cut, this is likely to push EUR/GBP lower. Whilst the BoE’s slower approach to easing could offer additional support to the Pound.
EUR/USD
Summary: EUR/USD is continuing to lose ground, currently hovering near 1.1100. Softer inflation data from key Eurozone countries and increased speculation around ECB rate cuts in October have weighed on the Euro. Despite a softer US Dollar, pressure on the Euro persists.
Outlook: With ECB rate cuts anticipated and the potential for weaker Eurozone growth, EUR/USD is likely to remain under pressure. However, the upcoming release of US PCE inflation data could add some volatility, particularly if it alters expectations for the Fed’s policy direction. Any signs of a US inflation slowdown could limit USD strength, possibly cushioning the Euro’s decline.
GBP/USD
Summary: GBP/USD has stalled near 1.3400 as markets await the release of the US PCE inflation data. While the BoE is expected to continue with gradual rate reductions, the Fed’s rate-cutting cycle remains a critical factor influencing this pair.
Outlook: The Pound may find further support if the BoE holds off on aggressive easing, while the Fed’s actions will likely hinge on the upcoming inflation report. A softer-than-expected PCE result could boost the Pound by dampening demand for the Dollar. However, a robust PCE figure could see the pair struggle to break higher.
AUD/USD
Summary: The Australian Dollar has lost ground against the US Dollar despite improving sentiment following China’s stimulus measures. US Treasury yields have contributed to the AUD’s recent dip, although China’s economic support could offer some reprieve.
Outlook: The AUD may regain some ground if Chinese stimulus measures continue to positively influence global market sentiment. However, stronger US inflation data could support the US Dollar, further pressuring AUD/USD. Traders will keep an eye on developments in US inflation and how they shape the Fed’s rate trajectory.
Final Summary
In summary, the Euro continues to struggle against both the Pound and the Dollar due to dovish ECB expectations, while the Pound holds steady against the Euro and USD, supported by a more measured BoE policy outlook. US PCE inflation data is a key upcoming event, with the potential to sway market sentiment and impact several major currency pairs. Markets remain sensitive to central bank policy adjustments, especially as rate cuts become the focus in Europe and the US.