USD, EUR, GBP Show Volatility Amid Key Data Releases.
- USD Weakness: The US Dollar (USD) starts the last trading day of Q3 struggling, with focus on key Fed speeches and Germany’s CPI data.
- Fed Activity: Chairman Jerome Powell and other Fed officials will deliver important speeches, with the USD Index hovering below 100.50 after hitting a yearly low.
- Euro Volatility: The Euro (EUR) has been choppy, with key resistance at 1.12 and support at 1.10, indicating a neutral market until a breakout above 1.1250.
- GBP Strength Outlook: Goldman Sachs predicts the GBP/USD could rise to 1.40 within a year, driven by risk-on sentiment and steady UK growth.
- GBP Diverging Forecasts: Wells Fargo expects GBP/USD to weaken to 1.28 in 2024, while Bank of America anticipates one more Bank of England rate cut, supporting the Pound.
USD: Struggles Ahead of Fed Speeches
The US Dollar (USD) is off to a weak start on the final trading day of Q3, grappling with demand issues. Monday morning will bring key Consumer Price Index data from Germany, while later in the day, all eyes will be on the Federal Reserve. Chairman Jerome Powell, among other Fed officials, will be delivering speeches. The USD Index hit its lowest level in over a year at 100.15 on Friday but recovered slightly before the week ended. August data from the US Bureau of Economic Analysis showed the core Personal Consumption Expenditures (PCE) Price Index rose by just 0.1% monthly, falling short of the expected 0.2%. Early Monday, the USD Index remains below 100.50. Powell’s speech at the National Association for Business Economics in Nashville is scheduled for 17:00 GMT, with Fed Governor Michelle Bowman also speaking earlier in the day. US stock index futures remain slightly lower.
EUR: Euro’s Choppy Week
The Euro (EUR) has experienced a turbulent trading week, with significant fluctuations. The 1.12 level remains a critical resistance point, having served as a previous swing high. If broken, the next target could be 1.15, an area likely to attract considerable attention from options traders. A pullback from current levels could see strong support around 1.10, where traders may look for value. Below 1.10, the 1.08 level could become the next target. While the market remains noisy and somewhat neutral for now, breaking above 1.1250 could spark more decisive movement. For now, the Euro appears locked in a back-and-forth pattern, staying near the upper end of a 20-month trading range.
GBP: Diverging Outlooks on the Pound
The British Pound (GBP) is seeing contrasting forecasts. Goldman Sachs projects that the GBP/USD pair could rise to 1.40 within the next 12 months, bolstered by Sterling’s risk-on appeal and the Bank of England’s (BoE) steady growth momentum. They also note that the Fed’s easing this week has further supported risk assets like Sterling. On the flip side, Wells Fargo anticipates a weaker Pound, expecting the exchange rate to dip to 1.28 by the end of 2024 as the dollar rebounds. Bank of America shares a more cautious view, suggesting that the BoE will maintain its conservative stance, especially as inflation progress remains slow. They predict one more rate cut in November, which could offer some support for the Pound.