• EUR/USD Stability: Despite mixed economic data from Germany and France, EUR/USD remains relatively stable, hovering around 1.0792. Germany’s stronger performance offsets weaker French figures, though the Eurozone economy still shows signs of contraction.
• Euro Rate Cut Expectations: Market expectations remain for an ECB rate cut in December, likely less than the hoped-for 50 bps. Traders anticipate about 122 bps in cuts over the next five ECB meetings.
• Pound’s Sideways Trading: GBP trades flat ahead of the UK’s PMI data, which is expected to show moderate economic expansion. Volatility remains due to expectations of Bank of England rate cuts in November and December.
• BoE Comments Impact: Bank of England Governor Andrew Bailey’s comments on faster-than-expected disinflation fuel speculation of dovish moves, while MPC member Catherine Mann’s hawkish stance will be in focus during her speech later today.
• USD Strength: The US Dollar strengthened on cautious market sentiment and increased likelihood of a Trump re-election, supported by tax-cut expectations. Major movements in the Dollar Index are likely to stay muted until early November.

EUR/USD:
Not much has shifted for the Euro. Before the latest data, EUR/USD was holding around 1.0787, and it’s now hovering at 1.0792. Germany’s stronger-than-expected performance helped offset weaker figures from France. Yet, both major European economies are showing signs of contraction as Q4 begins, highlighting a generally soft Eurozone economy. The good news is that things aren’t deteriorating too quickly—at least not for now. This data reinforces expectations of a December rate cut, though it may not be as large as the 50 basis points some traders were hoping for. Currently, markets are pricing in about 122 bps of rate cuts over the next five ECB meetings. For EUR/USD, after an earlier dip to 1.0771, the pair is recovering. However, large option expiries around 1.0800 could limit any significant upside. Technically, resistance is expected near the 100-hour moving average at 1.0818.

GBP/USD:
The British Pound is trading sideways ahead of the UK’s October PMI data release. The report, due at 08:30 GMT, is expected to show moderate growth, with a slight uptick in manufacturing activity to 51.4 (from 51.5 in September) and a marginal dip in the services sector to 52.2 (from 52.4). Any signs of continued economic expansion would suggest a robust outlook. However, the Pound’s volatility remains a concern, especially with Bank of England Governor Andrew Bailey expressing optimism about faster-than-expected disinflation. Bailey’s comments fueled speculation of an upcoming rate cut in November, with markets also anticipating another in December. BoE MPC member Catherine Mann, known for her hawkish stance, is scheduled to speak later today at 13:00 GMT. At 19:45 GMT, Bailey will deliver a lecture at the US Commodity Futures Trading Commission, potentially offering more insight into the BoE’s next steps.

USD:
As of now, GBP/USD is trading around $1.2974, unchanged from Tuesday’s levels. The US Dollar gained strength on Wednesday, driven by cautious market sentiment and growing speculation of Donald Trump’s return to the White House, with markets pricing in a 60% chance of a Trump victory. This scenario could lead to tax cuts, potentially complicating future Federal Reserve interest rate decisions. The USD, being a safe-haven currency, also benefitted from risk-averse trading. Significant movements in the US Dollar Index (DXY) are expected to remain muted until early next month when the US election heats up.