- GBP/USD holds positive ground near 1.3135 in Monday’s early Asian session.
- Fed rate cut expectations continue to undermine the US Dollar.
- The BoE is expected to cut one more 25 bps for the remaining year, according to a Reuters poll.
The GBP/USD pair gains ground around 1.3135, snapping the three-day losing streak during the early Asian session on Monday. In the absence of top-tier economic data releases from the UK this week, the USD price dynamic will be the main driver for the GBP/USD. The US Nonfarm Payrolls (NFP) for August will take center stage on Friday.
The US Federal Reserve (Fed) easing expectations remain weigh on the Greenback. Fed Chair Jerome Powell last week signalled that a rate cut was imminent, citing labor market concerns. According to the CME FedWatch tool, traders are now pricing in a nearly 70% of the 25 basis points (bps) rate cut by the Fed in September, while the odds of a 50 bps reduction stand at 30%.
The key US employment data on Friday will help determine whether the US Dollar (USD) recovery can continue. The US economy is expected to see 163K job additions in August, while the Unemployment Rate is expected to tick lower to 4.2%. Average Hourly Earnings are projected to rise to 0.3% MoM in July. In case of weaker-than-expected outcomes, this could raise concern about an economic slowdown in the US economy and drag the Greenback lower.
On the other hand, investors are gaining confidence that the policy-easing cycle by the Bank of England (BoE) will be gradual in the remainder of the year, which might lift the Pound Sterling (GBP). Economists anticipate one more 25 basis points (bps) rate cut from the BoE this year, according to a Reuters poll.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD turns south toward 0.6750 despite upbeat China's Caixin PMI
AUD/USD turns south toward 0.6750 in the Asian session on Monday. Aussie traders digest the latest mixed Australian housing, operating profits data and upbeat China's Caixin Manufacturing PMI amid tepid risk tone and US holiday-thinned trading conditions.
USD/JPY drops below 146.00 as risk-off flows intensify
USD/JPY drops below 146.00 in Asian trading on Monday, reversing a modest recovery, as intensifying risk-off flows lift the demand for the safe-haven Japanese Yen. Japan's Capex data fans hawkish BoJ bets, adding to the weight on the pair amid thin trading.
Gold price extends its decline below $2,500 on firmer US Dollar
Gold price extends its decline below the $2,500 psychological level on Monday. The firmer Greenback after the US July's Personal Consumption Expenditures Index has weighed on the precious metal. Furthermore, the concerns about the sluggish economy in China contribute to the precious metal’s downside.
Week ahead: US labour data and the BoC rate announcement in focus
With US Federal Reserve Chair Jerome Powell’s recent speech at the Jackson Hole Symposium confirming that it is time to begin easing policy as well as underlining the importance of the jobs market, this week’s jobs data may help determine how the Fed approaches its easing cycle.
Bitcoin breaks below $58,800 support level
Bitcoin and Ripple prices close below their key support level, suggesting a decline on the horizon. Moreover, Ethereum's price was rejected around its resistance level, signaling a continuation of its downward trend.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.