USD Retreat Sparks Optimism, Euro Holds Ground, and UK Eyes Economic Boost.
USD: Last week, U.S. Treasury yields took a notable dip as lower-than-expected U.S. inflation and rising jobless claims signaled a diminished chance of further tightening by the central bank. This gave traders room to anticipate aggressive rate cuts for the next year, resulting in a surge in stocks and a significant drop in the U.S. dollar. The Nasdaq 100 edged closer to breaking out to the upside, potentially bringing bullish prospects for the tech benchmark. Amid declining rates and a weakened U.S. dollar, EUR/USD broke through its 200-day moving average, closing at its highest point in nearly three months. Gold also benefited, nearing the $2000 mark, while silver faced resistance near $24.00.
EUR: In the Eurozone, economic data indicates a slowdown, with expectations of the European Central Bank considering an interest rate cut around April/June next year. Despite ECB officials pushing back against this notion, market forecasts remain unchanged. German economic indicators reflect a challenging economic environment, suggesting potential disinflation ahead, which could impact the Euro negatively.
GBP: In the UK, ahead of the Autumn Statement, Prime Minister Rishi Sunak pledges to reduce debt and cut taxes to boost the economy. Ongoing weakness in the U.S. dollar is currently benefiting the British pound. As the U.S. dollar index tests key technical levels, a confirmed break could leave the dollar vulnerable to further downside, impacting global currencies, including the pound. The Autumn Statement on Wednesday will be closely watched for its implications on the UK’s economic direction.