USD Pullback, GBP Resilience, and EUR Caution.

  • USD anticipated to pull back after recent gains against Euro, with UBS strategist highlighting limits to further USD strength.
  • GBP initially weakens due to comments from former BoE economist, but rebounds on positive UK PMI data, indicating potential economic resilience.
  • Euro experiences brief rallies against USD but faces resistance near 1.09 level, reflecting cautious market sentiment amid potential dovish central bank actions.
  • BoE officials hint at potential interest rate cuts amid inflation concerns, contributing to flat performance of Pound against its peers.
  • Overall, forex market outlook suggests limited short-term trading opportunities with EUR-USD ranging between 1.10 and 1.07, while GBP remains relatively stable amid minimal data influence.

USD:
Last week’s rise in the Euro-Dollar was foreseen in the previous Week Ahead forecast edition, hinting at a likely pullback in the U.S. Dollar’s strength. While the dollar remains favored, its recent surge was expected to taper, paving the way for the euro-dollar exchange rate to climb. Dominic Schnider from UBS suggests that while the dollar may still see short-term gains, there are limitations. Month-end rebalancing could prompt spikes in the Euro to Dollar rate, driven by USD-selling from investors adjusting their portfolios.

GBP:
The Pound faced initial pressure from comments by former BoE economist Andy Haldane but rebounded on Thursday with positive UK PMI data indicating a potentially resilient economy. Despite manufacturing sector challenges, the services PMI offered optimism. BoE officials hinted at possible interest rate cuts amid inflation concerns. The Pound closed the week mostly flat, reflecting minimal data influence.

EUR:
The Euro showed brief rallies but encountered resistance near 1.09 against the US Dollar. Market sentiment reflects a cautious outlook, with both central banks expected to adopt dovish stances. Speculation surrounds potential rate cuts by the Fed and ECB amid economic challenges. The Euro-Dollar pair is likely to range between 1.10 and 1.07, with short-term trading opportunities but limited potential for significant movements.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.