Staying informed about the latest economic indicators and political developments is essential for forex trading, which operates in a dynamic environment. In this week’s analysis, we will focus on the British Pound (GBP), the Euro (EUR), and the US Dollar (USD), and their performance and potential influences. We will examine the significant events and their implications for traders in the upcoming days.
GBP: Mixed Signals and Economic Indicators
The UK’s average earnings saw a robust gain of 7.9%, while the annual Consumer Price Index (CPI) took a sharp dive from 6.7% to 4.6%. This divergence in economic indicators set the stage for an exciting week for the British Pound (GBP). The significant drop in inflation created a positive sentiment, which propelled GBP/USD higher, making it a favourable week for the pair. However, GBP/EUR remained unaffected by the inflation dynamics. On Wednesday, Chancellor Hunt’s Autumn Statement and MPC hearings will provide insight into the economic policies on the horizon. Thursday’s forward-looking Purchasing Managers Index data release adds another layer of anticipation. Traders will monitor if the upward momentum of GBP/USD is sustainable or if the price will be rejected at 1.25000 and head back to 1.2000.
EUR: Euro’s Resilience and Economic Forecasts
Last week, the Euro (EUR) had a good performance, possibly benefiting from the weakening of the US Dollar. ECB Villeroy’s recognition of lower Eurozone CPI was a justification for maintaining a constant monetary policy. However, some experts now predict a full 1% rate cut by the ECB next year.
This week is crucial for understanding Eurozone consumer sentiment, with data releases scheduled for Wednesday. On Thursday, the eagerly awaited Purchasing Managers Index will be released. The week concludes with the German Final GDP figures and a speech from ECB President Lagarde on Friday.
USD: Inflation Surprises and Dollar Weakness
In October, the Consumer Price Index (CPI) in the US unexpectedly dropped to 3.2% from September’s 3.7%, leading Bloomberg analysts to predict a possible US rate cut by the Federal Reserve in March 2024. Due to this change, the US Dollar weakened and last week, the US Dollar Index dropped by 1.5%. The market expected that the peak of US interest rates had been reached. This Tuesday, the Federal Open Market Committee (FOMC) meeting minutes will be released, which could reveal the Federal Reserve’s stance on the matter. As the US Thanksgiving holiday approaches on Thursday, there may be increased market volatility due to reduced liquidity.