Market Insight 29-01-2025

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  • Market Insight 29-01-2025

GBPEUR

Summary: The Pound gained against the Euro on Tuesday, supported by renewed confidence in the UK economy following optimistic comments from Prime Minister Keir Starmer. Meanwhile, the Euro faced pressure as expectations grew for a rate cut from the European Central Bank on Thursday.

Outlook: With rate cuts now largely priced in, attention turns to ECB President Christine Lagarde’s press conference, where traders will look for insights into future policy direction. Any indication of further easing could keep downward pressure on the Euro. Meanwhile, continued positive sentiment around the UK economy may provide additional support for the Pound in the short term.

GBPUSD

Summary: The Pound edged lower against the US Dollar ahead of today’s Federal Reserve interest rate decision. Traders remain cautious, with expectations that the Fed will hold rates steady at 4.50%. GBP/USD trades around 1.2430, with investors awaiting Fed Chair Jerome Powell’s comments for signals on future policy moves.

Outlook: The Fed’s stance will be crucial in determining the USD’s next move. Any hawkish signals from Powell could push the Dollar higher, while a more dovish outlook could allow Sterling to regain lost ground. The UK’s economic outlook and trade discussions with the US will also be key drivers in the medium term.

EURUSD

Summary: The Euro continued its downward trend against the US Dollar, trading near 1.0440. The USD gained traction due to risk aversion and uncertainty surrounding Trump’s proposed tariffs. Traders are also positioning ahead of the Fed’s decision, where any hawkish sentiment could further boost the Dollar.

Outlook: The Fed’s policy announcement will be the main driver of EUR/USD today. If Powell signals that rate cuts will be limited this year, the Dollar could strengthen further. On the other hand, dovish guidance might offer the Euro some relief. Additionally, the ECB’s rate decision on Thursday will be closely watched for further movement in the pair.

USDCAD

Summary: USD/CAD remains steady around 1.4400 as traders anticipate a 25bp rate cut from the Bank of Canada today. The Canadian Dollar has struggled amid expectations that the BoC will maintain a dovish stance, potentially leading to further rate cuts later in the year.

Outlook: The BoC’s forward guidance will be key in determining the CAD’s direction. If Governor Macklem signals more easing ahead, CAD could weaken further. Additionally, any mention of potential US tariffs on Canadian goods could add downside pressure to the Canadian Dollar.

AUDUSD

Summary: The Australian Dollar weakened following a lower-than-expected inflation reading. Australian CPI came in at 2.4%, below market expectations, reinforcing expectations that the Reserve Bank of Australia may cut rates this year. AUD/USD trades below 0.6250.

Outlook: The softer inflation data has increased the likelihood of RBA rate cuts, which could keep the AUD under pressure. Traders will also focus on today’s Fed meeting for further direction. A strong USD could push AUD/USD even lower in the near term.

Final Summary:

Markets are focused on today’s Federal Reserve decision, with expectations of a steady rate policy but cautious guidance from Powell. The Euro and Pound remain under pressure due to expected rate cuts from the ECB and BoE. The Canadian Dollar is in focus ahead of the BoC rate decision, while the Australian Dollar continues to struggle after weaker inflation data. The key drivers today will be central bank rhetoric and geopolitical developments, particularly around Trump’s tariff proposals.