06/12/2024
Written by: Ian Morley
GBP/EUR
Summary:
The GBP/EUR pair has traded higher this week, hovering near 1.2050. German inflation data showed a slight improvement in November compared to last year but fell short of expectations, while German retail sales contracted, reflecting economic stagnation. The Bank of England (BoE) held firm, reducing bets on further rate cuts after UK data revealed underlying inflationary pressures.
Outlook:
Eurozone inflation data due later today will shape market sentiment, with a hot reading likely bolstering the Euro. The ECB is expected to cut rates in December, but the size (25 or 50 basis points) depends on economic indicators. The Pound could remain steady if BoE policy continues to favour a cautious approach.
EUR/USD
Summary:
EUR/USD climbed to a weekly high near 1.0580 as the US Dollar weakened during the Thanksgiving holiday week. ECB member François Villeroy hinted at potential outsized rate cuts, keeping the market on edge. However, weak German retail sales and ongoing concerns about Eurozone growth capped gains.
Outlook:
Flash Eurozone HICP data for November is the focal point for traders today. A stronger-than-expected reading may provide temporary support for the Euro. Nonetheless, persistent speculation of aggressive ECB rate cuts could limit the pair’s upside potential.
GBP/USD
Summary:
GBP/USD rose to a two-week high, trading above 1.2700. This was driven by reduced expectations of a BoE rate cut and a weaker US Dollar following cautious Federal Reserve sentiment and a holiday-shortened trading week in the US.
Outlook:
The pair’s trajectory will depend on next week’s US employment and economic data releases. A dovish tone from the BoE could weigh on Sterling, while any further USD weakness would support additional gains.
AUD/USD
Summary:
The Australian Dollar held steady above 0.6500, buoyed by a weaker USD and strong Australian capital expenditure data. However, concerns about US-China trade relations and global economic growth limited upside momentum.
Outlook:
Geopolitical risks and the weekend release of China’s official PMIs will heavily influence AUD sentiment. Risk-sensitive assets, including the Aussie, may remain under pressure if uncertainty persists.
Final Summary
The currency markets remain finely balanced, with central bank policies and inflation data dominating sentiment. As we close out November, key events like Eurozone inflation and US macroeconomic indicators will set the tone for December’s trading dynamics. Stay alert for volatility and market shifts in the coming days!