Forex Friday

Today's growth figures are unlikely to force the RBA into any easing action, but it has been enough to weigh on the Australian dollar and ASX 200. And this could allow EUR/AUD to continue higher after a 4-day retracement.

We will maintain our bearish EUR/USD forecast for the time being. This pair remains rooted in a bear trend, not just because of the threats of tariffs in 2025, but more so because of weakness in the eurozone economy and therefore the potential for more ECB rate cuts than from the Fed in the US, where even a December rate cut is not fully priced in, let alone cuts in 2025, after Trump’s election victory.

Against a backdrop of weakening economic data, looming tariffs from the US in 2025 and a struggling Chinese economy (bad for Eurozone exports), the euro outlook remains negative, putting pairs such as the EUR/USD and EUR/JPY into focus – the latter having just formed a bearish technical signal.

With Kashkari throwing the word ‘pause’ into the mix ahead of a US CPI report, traders should brace themselves for further USD gains should it come in hotter than expected.

While one can argue the greenback has made a short-term peak, the overall dollar forecast remains positive, especially against currencies subject to increased tariff risks from Trump’s administration.

Market participants are closely watching the potential impact of a Trump victory on European and Chinese assets, given the possibility of renewed tariffs. This is the primary factor affecting the EUR/USD forecast, likely limiting gains to around 1.0900 and exposing further downside in the near-term outlook.

Soft data and month-end flows jolted the USD at its cycle highs. If the USD pulls back even slightly, it could help lift AUD/USD from its lows and track the yuan higher.

EURUSD, GBPUSD Analysis: Both EURUSD and GBPUSD are facing downward pressure as inflation trends in the UK and Eurozone decelerate, while inflation and employment data in the US exceed expectations. Both pairs are retesting critical support levels ahead of a busy week in the economic calendar.

While up today, the release of weaker UK inflation data in mid-week, with headline CPI falling to 1.7% y/y, has given the Bank of England a greenlight to proceed with more aggressive rate cuts, keeping the British pound forecast modestly bearish. In this week’s edition of Forex Friday, we will look at two popular pound pairs: the GBP/USD and GBP/JPY.

Welcome to another edition of Forex Friday. The EUR/USD was unable to close above the key 1.0950 short-term resistance level on Thursday, despite the US dollar weakening against most other currencies on the day on the back of mixed data. Consequently, the single currency was on the backfoot again with the greenback rebounding from earlier weakness at the time of writing on Friday. Investors were looking forward to the release of more inflation data from the US, with PPI and UoM Inflation Expectations both coming up.

GBPUSD, Gold Analysis: Growing economic uncertainty, coupled with upcoming US elections, rising geopolitical tensions, and easing monetary policies, is boosting both the US Dollar Index and Gold, while pressuring the British Pound toward critical support levels.