06/12/2024
Written by: Ian Morley
GBP/EUR
Summary
Pound Sterling held its ground against the Euro, supported by hawkish expectations for the Bank of England’s (BoE) policy meeting in December. Meanwhile, the Euro struggled as market participants anticipate a potential 25-basis-point rate cut by the European Central Bank (ECB). Concerns over US trade tariffs further weighed on the Eurozone’s economic prospects.
Outlook
The ECB’s expected dovish stance may keep the Euro under pressure, while the BoE’s cautious approach to easing could support the Pound. Key events to watch include Eurozone inflation data later this week, which could influence the pair further.
GBP/USD
Summary
The Pound consolidated below 1.2600 against the US Dollar as markets await a slew of US economic data, including the Personal Consumption Expenditure (PCE) Price Index. The Federal Reserve’s dovish rhetoric and expectations of rate cuts have tempered USD strength, although high US bond yields and solid economic performance continue to lend support.
Outlook
With US inflation data and revised GDP figures due, the Dollar may see further volatility. The Pound, on the other hand, could remain range-bound unless the BoE provides clearer direction on interest rates in its December meeting.
EUR/USD
Summary
The Euro remained subdued, trading below 1.0500 against the US Dollar. Concerns about US tariffs on European carmakers and lacklustre Eurozone data have kept the Euro under pressure. Meanwhile, the Dollar maintained its bullish tone, supported by solid economic performance and expectations of sticky inflation.
Outlook
While EUR/USD looks technically oversold, potential month-end rebalancing flows could offer limited upside for the Euro. The PCE inflation data may provide further direction for the pair as markets evaluate its implications for Federal Reserve policy.
AUD/USD
Summary
The Australian Dollar rebounded modestly, supported by stable domestic inflation data and a hawkish Reserve Bank of Australia (RBA). However, concerns about US-China trade tensions following President-elect Trump’s tariff announcements capped gains for the Aussie.
Outlook
Further developments in US-China trade policies and Australian economic data will play a critical role in shaping the pair’s direction. Any deterioration in global risk sentiment may limit AUD’s upside potential.
Final Summary
This week’s focus remains on the release of key US economic data, particularly PCE inflation and GDP figures, which are likely to set the tone for major currency pairs. While the Dollar remains bullish on strong fundamentals, other currencies like the Euro and Pound are driven by regional challenges and central bank policies. Stay vigilant for month-end rebalancing flows, which could trigger short-term volatility across markets.