Forex Market Insights: GBP Holds Steady, USD Awaits NFP, and EUR’s Battle for Support.

GBP: The British pound maintained its recent gains as the Bank of England (BoE) decided to keep interest rates steady. BoE Governor Andrew Bailey emphasized the need to keep rates unchanged for a longer period to combat inflation. This policy is in line with the BoE’s inflation forecasts but contrasts with the market’s expectations of additional rate cuts in December 2024. As time and data unfold, the BoE’s future trajectory will become clearer. While the economic calendar is centered around US data, the UK services PMI may not have a significant impact on the pound. Volatility is expected to increase later due to the Non-Farm Payroll (NFP) report.

USD: The US, as a primarily services-driven economy, sees the ISM services PMI as a crucial metric. Unlike the UK, the US has remained in the expansionary zone for this index. Federal Reserve speakers will share their thoughts post-FOMC, with Fed Chair Powell emphasizing the possibility of additional policy tightening. However, Powell also pledges caution in the face of growing uncertainties, indicating that future decisions will rely heavily on incoming information. The market currently gives a 20% chance of a quarter-point rate hike at the December Fed meeting. A strong NFP report could boost these odds, particularly if payroll numbers significantly exceed projections, potentially leading to a hawkish repricing of Fed policy and a boost for the US dollar.

EUR: The EUR/USD pair’s rally paused after reaching 1.0667 but held above the key support at 1.0600. Factors supporting the pair include a drop in US Treasury bond yields and a correction in the US Dollar (USD). Traders are eagerly awaiting the US Nonfarm Payrolls (NFP) report for fresh insights. The report is expected to show an increase of 180,000 jobs in October. On the Euro front, Eurozone Manufacturing PMI figures have been below 50, indicating a contraction in activity. With various Eurozone nations experiencing economic challenges, this could limit the Euro’s upward momentum and pose a headwind for the EUR/USD pair.

Economic Calendar