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Currencies GBP/USD

GBP/USD Gains as US CPI Data Sustains September Gilt Cut Expectations

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  • August 12, 2025
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GBP/USD rose on Tuesday, trading at 1.3485, as weaker US Dollar sentiment and positive UK labor market data underpinned the pair. The recent US CPI report revealed headline inflation remained at 2.7% YoY in July, and core CPI accelerated to 3.1%, leading markets to increase the likelihood of a Federal Reserve rate cut in September to 94% as per the CME FedWatch Tool. In the UK, high wage growth and an unexpected decline in jobless claims canceled out hints of labor market weakness, further supporting the Pound. Different monetary policy directions between the Bank of England’s dovish easing strategy and increasing Fed dovishness are one of the prime drivers behind the currency pair’s resilience before UK GDP and US jobless claims releases later this week. KEY LOOKOUTS • July CPI remained unchanged at 2.7% YoY, although core CPI increased to 3.1%, lifting September Fed rate cut probabilities to 94%. • Robust wage growth and declining jobless claims supported GBP even with increased unemployment rates. • BoE’s conservative easing stance is the reverse of increasing Fed dovishness, supporting GBP/USD rallies. • UK GDP and US weekly jobless claims will be important for the pair’s near-term direction. GBP/USD accelerated higher on Tuesday, hitting close to 1.3485, as a weaker US Dollar and good UK labor market data supported the pair. The US CPI report in July revealed headline inflation unchanged at 2.7% YoY, with core CPI rising to 3.1%, sending market hopes of a September rate cut by the Federal Reserve to 94%. In Britain, wage growth remained strong and unemployment claims decreased unexpectedly, which balanced fears of high levels of unemployment. The monetary policy divergence—BoE’s cautious loosening compared to the increasing dovishness at the Fed—is still being supported by the Pound, with the public now looking to future UK GDP and US jobless claims for new market directions. GBP/USD reached close to 1.3485 on Tuesday as solid UK wages growth and less bullish US Dollar sentiment supported the pair. US CPI statistics bolstered September Fed rate reduction forecasts, while UK labor market stability underpinned Pound vigor in advance of significant GDP and jobless claims data. • GBP/USD was close to 1.3485, 0.37% higher on Tuesday. • US July CPI remained unchanged at 2.7% YoY; core CPI hit 3.1% from 2.9%. • Market probability of a September Fed rate cut rose to 94% from 84%. • UK pay growth remained firm at 5.0% YoY, as expected. • UK unemployment claims dropped by 6,200 in July, contrary to expectations. •   BoE reduced rates to 4.00% in August but signaled a pace of gradual easing. •  Traders now look to UK GDP and US unemployment claims for new direction. The British Pound rallied against the US Dollar on Tuesday following the issuance of critical economic statistics from both the UK and the US. In the UK, robust wage growth and a surprise fall in jobless claims tempered fears of soaring unemployment. The most recent data revealed that companies created more jobs than initially anticipated, and this has reflected the resistance of the labor market to the subtle signs of losing momentum. Conversely, the US Dollar was pressured by inflation data that reaffirmed hopes for a Federal Reserve interest rate cut in September, and increasing investor confidence in the Pound. GBP/USD DAILY PRICE CHART SOURCE: TradingView The policy divergence between the Federal Reserve and the Bank of England continues to be a key theme for markets. While the BoE recently reduced rates but communicated a measured, gradual path to further easing, the Fed is growing increasingly likely to restart policy easing in the near future. This divergence has served to underpin sentiment for the Pound over recent sessions. Market focus then shifts to tomorrow’s UK GDP report and US jobless claims figures, which may offer additional insight into economic direction and shape investor positioning in the near term. TECHNICAL ANALYSIS GBP/USD is maintaining above the crucial psychological level of 1.3450, and near-term resistance is found around 1.3500, a move above which can pave the way towards the 1.3550 region. The opposite way, first support is at 1.3430, followed by a solid base around 1.3400. Momentum indicators continue to be positive, with RSI still lingering in bullish territory and price action continuing to trade above the 50-period moving average on the 4-hourly, indicating that short-term buying interest is still firm. FORECAST If bulls hold firm, GBP/USD may push through the 1.3500 psychological level, opening the door for a push towards the 1.3550–1.3570 resistance region. Persistent buying interest, underpinned by robust UK GDP data or dovish Fed rhetoric, may even take the pair higher towards 1.3600 in the short term. Favorable risk appetite and continuous policy divergence between the BoE and Fed would also add further fuel to the pair’s appreciation. On the other hand, a fall below 1.3450 might unleash a corrective pullback to 1.3430, with further losses targeting the 1.3400 support. A higher-than-expected US jobless claims figure or comments from Fed officials that are more hawkish might rekindle Dollar demand and cap Pound gains. A fall through 1.3400 would switch short-term direction to a more bearish bias.

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Currencies

USD/CHF Surges to 0.8090 as US-Swiss Trade Tensions Increase and Fed Rate Cut Expectations Rise

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  • August 5, 2025
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USD/CHF currency pair surges to approximately 0.8090 in early trading in Europe on Tuesday as US-Swiss trade tensions rise and investors expect a rate cut by the Federal Reserve in September. The Swiss Franc dipped after the US imposed a significant 39% import duty on Swiss products, pressuring Switzerland’s significant exports. Though this shock of trade helps support the US Dollar, dovish statements by Fed officials and a lower-than-expected US Nonfarm Payrolls report indicate a possible cut in rates in the future, which would cap further upside in the pair. All attention now waits for the next US ISM Services PMI data for new direction. KEY LOOKOUTS • The 39% US import tariff on Swiss imports, scheduled to be imposed from August 7, could continue to put pressure on the Swiss Franc and shape USD/CHF dynamics. • Markets are factoring in an 84% chance of a 25 bps rate cut by the Fed in September, after poor US labor data and dovish Fed rhetoric. • Investors look to the release of July’s ISM Services PMI later today for new insights on the health of the US economy and the direction of policy. • The willingness of Switzerland to offer a “more attractive offer” in trade negotiations will influence CHF sentiment if a deal is agreed before the tariff deadline. The USD/CHF exchange trades firmer at 0.8090 in early European trading on Tuesday with tensions ramping up between Switzerland and the US. The news of a 39% US tariff on Swiss imports has pinned the Swiss Franc, providing upward strength to the pair. Meanwhile, speculation over a possible Federal Reserve rate cut in September—driven by lackluster US Nonfarm Payrolls data and dovish Fed comments—is limiting upside for aggressive gains on the US Dollar. With both trade news and monetary policy expectations in the limelight, market players now look toward the release of the US ISM Services PMI for additional cues. USD/CHF rises to 0.8090 due to increasing US-Swiss trade tensions and a downgraded Swiss Franc. US Fed rate cut anticipations and future US ISM Services PMI releases can affect the pair’s future direction. • USD/CHF peaks at 0.8090 during initial European trading, fueled by US trade measures. • US slaps 39% tariff on Swiss imports, putting pressure on the Swiss Franc. • Swiss government indicates willingness to renegotiate a more favorable trade agreement with the US. • Soft US NFP numbers fuel speculation of rate cut by the Fed in September. • 84% chance priced in for a 25 bps Fed rate cut, according to CME FedWatch Tool. • Fed’s Daly suggests approaching rate cuts as signs of slowing job market emerge. • US ISM Services PMI data awaited by markets for additional signals on economic well-being. The USD/CHF pair picked up momentum as the US initiated a draconian 39% import tariff on Swiss goods, decisively affecting Switzerland’s export industry. This surprise action has diluted the Swiss Franc and lent strength to the US Dollar in early European trading. In response, the Swiss government signaled openness to offering a more compelling offer to the US in a bid to ease trade tensions. The uncertainty of whether both countries will come to an agreement prior to the August 7 deadline has introduced volatility into the market, however. USD/CHF DAILY PRICE CHART SOURCE: TradingView Meanwhile, attention is centered on the changing dynamics for US monetary policy. The most recent US Nonfarm Payrolls numbers missed forecasts, implying slowing labor market conditions. This has raised mounting speculation that the Federal Reserve could start reducing interest rates as soon as September. Such views have been echoed by Fed policymakers, with San Francisco’s Mary C. Daly among them, who stressed the requirement for policy changes in response to easing economic conditions. Investors are now looking forward to the publication of the US ISM Services PMI for additional information regarding the health of the economy. TECHNICAL ANALYSIS USD/CHF is in positive ground around the 0.8090 level, showing short-term bullish inclination. The pair is aided by the recent breakout from the important resistance levels, as momentum indicators such as RSI remain above the 50 level, indicating ongoing buying interest. Nonetheless, traders need to be on the lookout for possible resistance at the psychological 0.8100 level, while any downward correction will probably find support in the 0.8050 area. Broader action over 0.8100 might provide the way forward for additional near-term gains. FORECAST If US-Swiss trade tensions continue unresolved and the Swiss government does not get a better deal, the Swiss Franc could continue to be under pressure, possibly sending USD/CHF beyond the 0.8100 threshold. A higher-than-anticipated US ISM Services PMI reading may also power the US Dollar further, adding to the bullish momentum for the pair. In such a scenario, the next major resistance levels may be tested, with speculators looking at the 0.8130 and 0.8160 regions as possible short-term targets. Conversely, if Switzerland is able to sign a trade deal with the US or if US economic data in the days ahead falls short of expectations, USD/CHF may come under selling pressure. Another risk aversion wave or heightened Fed rate cut bets could also bear on the US Dollar, sending the pair lower. Here, a dip below the 0.8050 support may unlock the way for 0.8000 and possibly lower to 0.7975 in the near term.

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Currencies USD/JPY

Japanese Yen Depressed as BoJ Rate Hike Bets Fades Over Global Trade Disputes

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  • July 14, 2025
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Japanese Yen continues to face pressure as diminished hopes of a Bank of Japan (BoJ) rate hike, together with local political volatility, discourage bullish tendencies. Although rising global trade tensions, especially new U.S. tariffs threats against Mexico and the EU, create some safe-haven encouragement to the Yen, the currency finds it hard to find strong direction. Meanwhile, a persistent U.S. Dollar—supported by receding prospects of a near-future Federal Reserve rate cut—keeps USD/JPY close to three-week high. Investors now look ahead to crucial U.S. inflation data and Fed speak for further guidance, with the general bias in favor of an upside in USD/JPY. KEY LOOKOUTS • Lower expectations of a Bank of Japan rate hike in 2025 remain to dampen the strength of Yen. • Safe-haven demand is rising with threats of increasing tariffs from the U.S., especially against Mexico, the EU, and Japan. • Fear of Japan’s ruling coalition holding a majority in the July 20 upper house election puts pressure on JPY sentiment. • This week’s release of the U.S. CPI and PPI, along with commentary from the Fed, will be important in determining USD direction and the path for USD/JPY. The Japanese Yen remains to trade in the absence of clear direction as opposing market pressures bear down on investor moods. While, on the one hand, escalating global trade tensions—driven by the U.S. administration’s warning that it will impose fresh tariffs on leading partners such as Mexico and the EU—have boosted safe-haven demand. Nevertheless, this Yen support is more than counteracted by decreased prospects for a Bank of Japan rate increase, dampening domestic inflation, and continuing political tensions prior to Japan’s upper house elections. At the same time, the U.S. Dollar continues to be supported by market reassessment of near-term Fed rate cut probabilities, keeping the USD/JPY pair at recent highs and pointing to a positive near-term undertone. Japanese Yen is soft in the face of lower BoJ rate hike hopes and domestic political instability. Meanwhile, the U.S. Dollar continues to remain firm on diminishing Fed rate cut hopes, maintaining USD/JPY at multi-week highs. Investors look to U.S. inflation figures for further guidance on the currency pair. • Softening inflation and falling real wages lower the chances of a BoJ rate hike in 2025. • In spite of safe-haven demand, the Japanese Yen fails to make gains on account of conflicting market signals. • Fears related to the performance of the ruling coalition in Japan’s next election are an added burden. • Sliding prospects for a Fed rate cut help the U.S. Dollar, pushing USD/JPY upwards. • New U.S. threat of tariffs on Mexico and the EU increase global risk aversion, partially supporting the Yen. • A breakout above the 100-day SMA and bullish momentum indicate further upside in USD/JPY. • Markets are waiting for U.S. CPI and PPI releases to inform expectations of future Fed policy and USD/JPY direction. The Japanese Yen continues to be battered by several fundamental factors, constraining its capacity to gain strong buying interest despite increased global trade tensions. One of the main drags on the Yen is the diminishing prospect of a Bank of Japan rate increase, as recent indicators are pointing towards easing inflation and falling real wages in Japan. These indicatives are an indication that the BoJ would likely continue its dovish stance in the coming times. Adding to this stress is growing domestic political instability, as uncertainty mounts on whether the majority in the next upper house election will be held by the ruling coalition, introducing an element of restraint among Yen traders. USD/JPY DAILY PRICE CHART SOURCE: TradingView Meanwhile, the U.S. Dollar is strongly supported as markets dial back their hope for an imminent interest rate cut from the Federal Reserve. This change in sentiment is a result of fears that higher tariffs would exacerbate inflation, combined with ongoing resilience in the U.S. labor market. Meanwhile, investors overseas remain wary as the U.S. administration escalates tariff threats against key trading partners, such as Mexico, the European Union, and Japan. This intricate blend of safe-haven demand, policy divergence, and political risk is confining the Japanese Yen in a tight range, while traders anticipate coming U.S. inflation data and Fed commentary for further direction. TECHNICAL ANALYSIS USD/JPY has a positive bias following the breakout above the 100-day Simple Moving Average (SMA) for the first time since February 2025, indicating robust upward momentum. Oscillators on the daily chart also remain in positive momentum without yet overselling, suggesting room for further upmove. A breakout sustain over the 147.50–147.55 resistance area can validate a continuation of the uptrend, which may push the pair up towards the 148.00 level and June’s swing peak at 148.65, with potential to challenge the 149.00 psychological level. To the downside, any reversal is likely to find some initial support at 146.60–146.55, followed by 146.25 and the 100-day SMA level of 145.80, below which the bullish scenario may be eroded. FORECAST As long as bullish momentum prevails, the USD/JPY pair has potential to push its rally beyond the 147.50–147.55 resistance zone. A clear breach through this level is likely to reaffirm the favorable outlook and unlock the way towards 148.00, with potential to challenge the June swing high at 148.65. In case overall U.S. Dollar strength remains intact and U.S. inflation reports favor a hawkish Fed policy, the pair has potential to target the 149.00 psychological figure in the near term as well. Conversely, if USD weakens on softer-than-forecasted U.S. inflation reports or dovish words from the Fed, USD/JPY could witness selling. A corrective pullback might find some initial support in the 146.60–146.55 zone. Further declines could target the 146.25 intermediate level, then the major 100-day SMA level at 145.80. A persistent fall below this region may turn the bias in favor of sellers, with the pair dipping to the 145.50–145.00 support area.

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Currencies NZD/USD

NZD/USD Retreats Below 0.6000 Amid Mixed NZ Data and Pre-FOMC Caution

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  • May 7, 2025
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NZD/USD pair slipped back below the key 0.6000 level after briefly touching a two-week high during the Asian session, pressured by mixed New Zealand labor market data and a modest rebound in the US Dollar. Though US-China trade talk news and stable unemployment levels initially buoyed the Kiwi, weak wage growth and minimal job increases rekindled expectations of additional rate cuts by the RBNZ. In addition, risk-off sentiment in front of the Federal Reserve’s coming policy decision and Chair Powell’s comments has speculators holding off on new directional wagers, leaving the pair on the back foot. KEY LOOKOUTS • Market players wait for the result of the Fed’s two-day conclave, with attention on the policy statement and the signals on future rate cuts by Chair Jerome Powell. • Weaker wage growth and muted employment increases continue to underpin bets that the RBNZ may cut rates to 2.75% by the end of the year, bearing down on NZD sentiment. • Hopes of resumed US-China trade negotiations in Switzerland could provide some support to risk-sensitive currencies such as the NZD, subject to developments. • A slight US Dollar recovery puts further pressure on the pair to the downside, and any sustained US Dollar strength would limit NZD/USD gains in the near term. NZD/USD pair continues to be exposed to further weakness as investors wait for important macroeconomic events and policy announcements. The Federal Reserve’s next interest rate decision and Chair Jerome Powell’s words will be carefully monitored for rate path guidance, which will have a substantial bearing on USD demand. Meanwhile, ongoing bets on rate cuts by the Reserve Bank of New Zealand—despite soft wage growth and lackluster employment numbers—are set to cap any meaningful upside for the Kiwi. In addition, some short-term relief may be provided by developments in US-China trade talks, but overall sentiment is still cautious and keeps the NZD/USD pair under selling pressure. NZD/USD pair is under downward pressure as markets look to the Fed’s policy decision and direction from Chair Powell. Combined New Zealand jobs data and expectations for a rate cut by the RBNZ continue to keep the Kiwi weighed down, with US-China trade talks providing minimal support. • NZD/USD retreated below 0.6000 after momentarily reaching a two-week high at around 0.6025 in the Asian session. •  Confusing New Zealand jobs data provided early support but couldn’t hold pace because of slow wage growth and limited employment gains. •  RBNZ rate cut bets are still intact, with markets pricing in a potential fall to 2.75% by the end of the year. •   US Dollar strength puts pressure on the pair with a modest bounce before pivotal Fed events. •   FOMC rate decision and Powell testimony are in high focus for new guidance on US monetary policy and rate expectations. •  Optimism on US-China trade talks provided a fleeting lift to market mood but not enough to sustain a rally. •  Market players are hesitant, staying out of large positions until after the Fed announcement and the related policy guidance. NZD/USD currency pair is currently driven by a combination of economic data and overall market mood. New Zealand’s recent labor market data displayed stability in unemployment rates, yet weak wage growth and minimal employment generation have contributed to concerns about the economic pace of the nation. These pressures have supported expectations that the Reserve Bank of New Zealand would potentially weigh further interest rate reductions in the months ahead to ensure domestic growth. The RBNZ’s Financial Stability Report also noted dangers related to global trade uncertainty, which remains a drag on the economic forecast. NZD/USD DAILY PRICE CHART CHART SOURCE: TradingView Meanwhile, market focus is on the approaching Federal Reserve meeting. Investors are anxiously awaiting any indication from the Fed on the direction of future US monetary policy. Chair Jerome Powell’s comments will be crucial in determining expectations for interest rate movements. Concurrently with this, progress in US-China trade relations, notably the scheduled talks in Switzerland, is also under close observation. These global developments will have an important bearing on investor attitude and currency market direction in the short term. TECHNICAL ANALYSIS NZD/USD could not hold above the 0.6000 psychological level, showing high resistance around the 0.6020–0.6025 region. The pair’s rejection around this region may indicate a temporary halt in the recent upsurge. Major support comes in around 0.5960, and then firm demand around 0.5925. A near-term close back above 0.6000 would be required to renew short-term bullish sentiment, or a break below support levels may risk further losses. Momentum indicators also soften, underpinning the defensive near-term outlook. FORECAST Should risk appetite strengthen and market sentiment improve—especially on the back of favorable US-China trade talks news or a dovish stance by the Federal Reserve—NZD/USD may try and recapture the 0.6000 level. A continued break through this level could lead to further advances towards the 0.6025 resistance area, and if pace is maintained, the pair may aim at the 0.6060–0.6080 band. Also, any RBNZ surprise indicating a more dovish approach towards rate reductions could also provide upside support to the Kiwi. To the contrary, in the event of the Fed pursuing a hawkish stance or transmitting rate delay hints, the US Dollar would surge higher, depressing NZD/USD further. A violation below near-term support at 0.5960 would open up the pair for further declines down to 0.5925, with prospects for extended decline down towards 0.5900. Additionally, sustained weakening in New Zealand’s economic markers or a weakness in global trade sentiment would contribute to the bearish pressure in the near term.

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Currencies GBP/USD

GBP/USD Price Prediction: Bulls Target 1.2724 In Continuing Uptrend

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  • March 4, 2025
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The GBP/USD currency pair trades below the 1.2700 level at a three-month high, looking bullish in an uptrend channel formation. The 14-day RSI is still above 50, indicating firm momentum, while the pair stays above the nine- and 14-day EMAs to confirm short-term strength. Near-term resistance is at 1.2724, with further potential gains to 1.2780 and the psychological 1.2800 figure. On the negative side, early support is at 1.2639, then 1.2613, with a break below having the potential to undermine the bullish bias and leave the pair vulnerable to 1.2560. A firm fall below the channel could take losses down to the three-month low of 1.2249. KEY LOOKOUTS • GBP/USD has immediate resistance at 1.2724, with a possible breakout taking it to 1.2780 and the psychological 1.2800 level in the near term. • The nine-day EMA at 1.2639 is also main support, with a breakdown below potentially undermining bullish momentum and sending the pair to 1.2560. • The 14-day RSI is still above 50, suggesting ongoing bullish momentum and backing the expectation of further strength in the near term. • A clean break below the rising channel would change the trend bearish, leaving the pair vulnerable to the crucial support level of 1.2249. The GBP/USD currency pair continues in a bullish trend, trading below the 1.2700 level with the important resistance of 1.2724 in sight. A clean break above this level may take the pair to 1.2780 and the psychological level of 1.2800. The 14-day RSI remains above 50, indicating ongoing bullish pressure, and the pair trading above the nine- and 14-day EMAs, affirming short-term strength. On the negative side, the nearest support is at 1.2639, with support at 1.2613 afterwards. A fall below these levels might undercut bullish sentiment, leaving a fall to 1.2560 or even the three-month low at 1.2249 if the rising channel breaks. GBP/USD is still bullish, trading below 1.2700 with major resistance at 1.2724. A breakout would take it to 1.2780, while support at 1.2639 would cap downside risks. A fall below the rising channel would undermine momentum, revealing 1.2249. • A breakout above this level would take GBP/USD to 1.2780 and the psychological resistance at 1.2800. • The 14-day RSI is still above 50, reflecting ongoing strength and a bullish bias in the market. • These levels (nine- and 14-day EMAs) serve as integral support levels, holding off an anticipated downside action. • GBP/USD continues to trade within an upward-moving channel, emphasizing a bullish outlook in the near term. • A breach through the lower trend line of the upward-moving channel at 1.2560 may erode the bullish action. • Depending on bullish strength being maintained, GBP/USD may test 1.2800, which is a serious psychological resistance level. • A sharp fall below the 1.2560 support area may leave the pair vulnerable to further losses, testing the three-month low at 1.2249. The GBP/USD currency pair continues to attract attention from investors, mirroring the economic interactions between the US and the UK. Traders keenly monitor economic data releases, interest rate announcements, and geopolitical events impacting the pair’s price action. Other factors, including inflation reports, jobs reports, and monetary policies, also influence the market’s sentiment. Moreover, more general global events, such as trade policy and economic projections, also influence demand swings for both the British pound and the US dollar. GBP/USD Daily Price Chart Chart Source: TradingView Risk appetite also influences the sentiment of the GBP/USD market, with currency flows affected. In periods of economic stability, traders tend to opt for riskier assets at the expense of the pound, while uncertainty tends to fuel demand for the US dollar as a safe-haven. The dynamic interaction between Bank of England monetary policies and Federal Reserve monetary policies is still the principal driver that guides long-term currency pair trends. Additionally, economic performance, political events, and trade relations in both nations will continue to influence market expectations, making GBP/USD an important pair to follow for forex traders and investors. TECHNICAL ANALYSIS GBP/USD is bullish as the currency pair continues in an uptrend channel, pointing to ongoing bull run. Price action continues to be above pivotal moving averages, supporting short-term strength, and the 14-day RSI remaining above 50 showing consistent buying pressure. Resistance is seen at 1.2724, with a possible breakout setting the stage for further advances to 1.2780 and the psychological mark of 1.2800. On the other hand, near-term support is at 1.2639, with a break below having the potential to test the lower limit around 1.2560. A firm move below this level has the potential to change momentum in the bears’ favor, challenging the overall uptrend. FORECAST GBP/USD might see its further ascend, particularly in case that momentum remains healthy on the bull and the pair gets past the resistance level of 1.2724.  A breach could open up even more strength all the way towards the subsequent level of resistance of 1.2780 before the psychologically charged level of 1.2800. Encouraging economic news in the UK, like better GDP growth, falling inflation, or a hawkish policy from the Bank of England, may continue to underpin the strength of the pound. A weaker US dollar, propelled by dovish messages from the Federal Reserve or risk-on flows in international markets, may also add to bullish pressure in the pair. To the downside, GBP/USD has major support at 1.2639, and a move below it will perhaps indicate the loss of momentum, triggering a fall to 1.2560. In case bearish pressure builds and the pair moves below the rising channel, a further fall is possible, with the next strong support being at 1.2500. Factors that may trigger a bearish perspective are dismal UK economic data, a tougher Federal Reserve line on interest rates, or heightened risk aversion in international markets that boosts demand for the US dollar. A more severe correction may leave GBP/USD open to additional downward risks, and potentially challenge the three-month trough of 1.2249 if selling pressures continue.

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Currencies EUR/USD

EURUSD Bounces Back to the Highs of Almost 1.0550 After a Dive from New Yearly Lows

EURUSD Bounces Back to the Highs of Almost 1.0550 After a Dive from New Yearly Lows EUR/USD erased substantial losses after a run of five consecutive negatives, bouncing to the areas around 1.0540 during Asian trading on Friday. This followed the US Dollar Index (DXY) taking its first retreats from the newest yearly high reached at 107.06. Both dovish comments by Federal Reserve Chairman Jerome Powell and mixed US economics data influenced the move. Despite the strength in Euro, the European Central Bank still remains cautious on the economic outlook, leaving its future movements toward the pair subject to developments both in the US and the Eurozone. EUR/USD’s Recent Rebound and the Pullback in the US Dollar The currency pair EUR/USD recovered some of the losses because of a correction within the US Dollar. As the US Dollar Index (DXY) had skyrocketed to 107.06 for the year, the reversal in this upward trend for the greenback, as well as its corresponding reversal for the Euro itself, contributed to a modest rebound for the Euro, and EUR/USD advanced toward 1.0540. US Dollar Pulls Back Some of the factors behind the U.S. Dollar’s pullback have been the slowdown of so-called “Trump trades,” that had been helping the dollar out in the first half of the year. These trades-tied very closely to expectations surrounding economic policies from the previous U.S. administration-have started to lose some of their momentum as market sentiment shifts. Simultaneously, comments from Fed Chair Jerome Powell regarding the US economy lighten the tone of the US Dollar. Powell described the US economic performance as “remarkably good, thus giving Federal Reserve some leniency to slowly trim its interest rates. Contrastively, such rhetoric is diametrically opposed to the more hawkish tone that had prevailed in communications until now by the Fed, thus questioning a change in policy that should continue to weaken the Dollar at least in the short term. Mixed US Economic Data Powell’s comments came simultaneously with the release of US PPI numbers. The PPI index increased 2.4% year-over-year in October, beating the revised 1.9% of September and more than the market’s expectations of 2.3%. Meanwhile, the Core PPI for the month rose 3.1% YoY from 3.0% expectation, which eliminates food and energy prices. Although the data showed inflationary pressures were on the rise, which would play into the hands of the USD in the long run, the immediate reaction was tame because attention shifted to Powell’s more dovish talk over interest rates.The convergence of these factors saw DXY pull back, falling to around 106.80 at time of writing, providing some respite to the Euro and pushing EUR/USD higher from recent lows. EUR/USD Daily Chart Source: TradingView, by Richard Miles ECB in a Catch 22 Situation: How to Cut Rates while Tackling Inflation Though the Euro has gained a few percent against the US Dollar, European Central Bank ECB is now caught between the politics of rate cuts, and home-grown inflationary concerns. Home-grown inflationary pressures-the central issue for ECB officials-arise from the boost in wages. ECB is emphasizing more on cutting of interest rates. Showing an increased receptivity to cut rates, the central bank at the monetary policy meeting in October signaled that it was indeed turning its ears to the calls of the reducing economy. This news marks a change in tone especially since the growth fell way slower than expected, and equally, inflation data in the Eurozone remains weak. For Isabel Schnabel, an ECB board member, interest rates remain the prime instrument for policy changes but the secondary adding instruments are buys on bonds and forward guidance. While the ECB is paying increasing attention to cuts in rates, it has been quite cautious in taking concrete steps for some time now because the inflationary pressures continue unabated in the Eurozone. With hard-striving increases in wages coupled with the growth in labor productivity lagging behind, the raised fears of a wage-price spiral – where the increase in wages leads to higher prices that trigger even more wage increase in a spiral ride – belie this potential outcome working adversely for the ECB’s desired goal of putting inflation back on track. ECB Cautious on Inflationary Pressures The ECB is more sensitive to the realization that an early policy response, in this case, even some rate cuts, will mean high inflationary pressures. The central bank has thus indicated a need for more data before doing significant policy changes. The situation remains fluid, and the ECB is likely to continue monitoring the economic and inflationary landscape very carefully before making its next move. Meanwhile, the Eurozone is likely to continue struggling to find elusive momentum in growth. Most analysts think it will slow down in 2025. Cut in rates by the ECB would weaken the Euro further though the timing and full quantum of cut are still unclear. Key Economic Data to Watch The movements of the EUR/USD pair are likely to be sensitive to these upcoming data releases, especially from both the US and the Eurozone. Here are some of the key economic events and indicators to monitor in the coming days: US Economic Data US Retail Sales (October): Details about US retail sales may help explain the soundness of the US consumer-the very pulse of the whole economy. Better-than-expected retail sales can also be an additional strength for the US dollar if it translates to continued demand despite higher inflation. US CPI (Consumer Price Index): The main ‘event’ in the Dollar’s line-up will be the release of the US CPI report. In case inflation remains at these levels or even increases further, then this might lead to ideas about the Fed rate policy turnaround and hence a boost for the USD. Eurozone Economic Data Eurozone GDP Growth (Q3): The GDP data for the Eurozone will say much about its general health. Weaker growth than expected would only raise more concerns regarding the Euro outlook, while stronger growth could support the Euro in the short term.Eurozone CPI (Oct): Eurozone inflation

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