Let’s examine recent developments and influencers on three major currencies: the British Pound (GBP), the Euro (EUR), and the US Dollar (USD).
GBP: Inflation Challenges and Economic Stimulus
Bank of England Governor Bailey has recently highlighted the challenges of bringing inflation down to its target of 2% from its current rate of 4.6%. On the other hand, Chancellor Hunt has opted for tax cuts and measures to stimulate economic growth. The economic moves made by Chancellor Hunt may make Bailey’s task of curbing inflation more challenging. GBPUSD has experienced an uptrend, benefiting from reduced participation on Friday and thin liquidity during Thursday’s US Thanksgiving. It’s uncertain whether the British Pound can sustain its recent gains. Let me know if you need any further assistance. On Monday, MPC member Ramsden is scheduled to speak, followed by BoE Governor Bailey on Wednesday. It’s uncertain how these events will affect the currency’s direction.
EUR: Containing Euro Ranges Amid Economic Woes
The Euro remained stable within recent ranges but suffered a blow when the German economy contracted by 0.1% in Q3. If this trend continues into Q4, Germany may be in recessionary territory. ECB President Lagarde and Vice President De Guindos have warned that inflation has yet to be conquered. This raises the question of a possible Euro rate hike in the future. The release of Eurozone’s flash CPI on Thursday will provide further insights into the currency’s future.
USD: Holiday-Induced Weakness and Economic Indicators
The US dollar saw a decline during the shorter trading week. The market is anticipating the release of the preliminary GDP figures on Wednesday, which could create excitement following last month’s robust Advance GDP reading of 4.9%. The question remains whether the market will believe US interest rates have peaked, leading to another round of dollar selling. The US PCE data on Thursday could have a significant impact on the market’s mood.