03/10/2024
Written by: Ian Morley
GBP/EUR
Summary
Despite slightly weaker-than-expected UK GDP growth figures, the Pound remains supported by expectations that the Bank of England (BoE) will slow the pace of interest rate cuts. Meanwhile, the Euro is softening as traders anticipate further rate cuts by the European Central Bank (ECB), fuelled by lower-than-expected inflation data in France and Spain. Germany’s inflation data, set to be released shortly, remains a key factor for the Euro’s near-term trajectory.
Outlook
The outlook for GBP/EUR hinges on upcoming economic data from both the UK and Eurozone. If the BoE maintains its cautious approach to rate cuts, the Pound may continue to find support. Meanwhile, the Euro could face further downside if German inflation prints below expectations, increasing the likelihood of another ECB rate cut.
EUR/USD
Summary
The EUR/USD pair has been trading near 1.1200, driven by strong German regional inflation data. However, the US Dollar remains subdued as traders await a speech from Federal Reserve Chair Jerome Powell. While the Euro has gained on the back of inflationary pressures in Germany, the mixed technical setup for EUR/USD suggests caution, with the pair struggling to break decisively above 1.1200.
Outlook
Looking ahead, the German Consumer Price Index (CPI) figures could provide the Euro with further momentum if they exceed expectations. However, failure to break above the 1.1200 mark could trigger a reversal towards 1.1125, especially if Powell’s speech hints at continued hawkishness from the Fed. Traders should watch for sustained movement beyond the 1.1200 region for confirmation of an upward trend, while a fall below 1.1120 could signal near-term weakness.
GBP/USD
Summary
GBP/USD continues to hover near 1.3400, benefiting from recent weakness in the US Dollar following softer US inflation data. The Pound remains well-supported by expectations that the BoE will maintain a cautious rate-cutting stance, while the Greenback struggles amid growing expectations for further Federal Reserve rate cuts. Investors are closely watching Powell’s upcoming speech for any clues on future rate decisions.
Outlook
The pair’s movement will depend heavily on Powell’s speech and upcoming US economic data, such as the ISM Manufacturing and Nonfarm Payrolls reports. A dovish tone from Powell could weaken the US Dollar further, pushing GBP/USD higher towards 1.3450. However, if Powell signals a cautious approach to rate cuts, the Greenback could regain strength, pulling the pair back towards the 1.3300 region.
AUD/USD
Summary
The Australian Dollar has extended its gains, trading near its highest level since February 2023, helped by a weak US Dollar and optimism surrounding China’s economic outlook. Despite weaker Chinese PMI data, expectations of further monetary easing by the US Federal Reserve have bolstered the AUD/USD pair.
Outlook
The outlook for AUD/USD remains positive as long as the Federal Reserve continues to signal an easing policy. However, China’s economic performance remains a key risk factor. Any negative developments in China’s growth could weigh on the Australian Dollar. Immediate resistance for the pair is seen at 0.6950, with support at 0.6850.
Final Summary
The major currency pairs are largely driven by expectations surrounding central bank actions and inflation data. The Pound continues to hold ground against both the Euro and the Dollar, while the Euro and US Dollar are poised for more volatility pending key economic releases and central bank speeches. Traders should keep a close eye on upcoming inflation reports and central bank commentary for directional cues.