EUR: ECB to trigger further currency weakness.
In line with market expectations, we expect the ECB to commit to sovereign QE this week. More importantly, we do not rule out that a more aggressive announcement than expected could be considered in order to have a meaningful impact on inflation expectations. This is especially true as the risk of deflation has increased considerably of late. As such, it comes as no surprise that central bankers – including Governing Council member Nowotny – have stressed this week that they should decide on QE sooner rather than later.
All of the above stands in contrast to the US. The Fed regards moderating price developments as transitory, and the central bank will stay focused on further improving labour market conditions to steer interest-rate expectations.
We lower our 1M and 3M EUR/USD forecasts to 1.13 and 1.10, respectively.
GBP: Limited impact from labour data.
This week’s main focus will be employment data and the Bank of England minutes. Weakening business activity already points to more muted labour market conditions. However, even if this week’s data were to surprise higher it is unlikely to have any sustainable impact on investors’ interest-rate expectations.
This is especially true as BoE members have already indicated that weakening price developments, even if driven largely by weak commodity-price developments, support the case for a more moderate monetary policy stance. Such a cautious policy stance is likely to be reflected in Thursday’s BoE minutes release too.
As a result of the above-outlined conditions we anticipate further GBP weakness against the USD. EUR/GBP, however, is likely to trend lower on the back of the ECB’s more dovish stance.
Given our EUR forecast revisions, our 1M and 3M EUR/GBP forecasts are now 0.73 and 0.74 respectively.
This content has been provided under specific arrangement with eFXnews.
eFXnews is a financial news and information service. Articles and other information distributed in this service and published on this site are provided in general terms and do not take account of or address any individual user's position. To the extent that some of these articles include suggestions as to various possible investment strategies which users might consider, they do so in only general terms without reference to the personal factors which should determine any user's investment decisions to buy or sell a specific security or currency.
The service and the content of this site are provided and distributed on the basis of “AS IS” without warranties of any kind either, express or implied, including without limitations, warranties of title or implied warranties of merchantability or fitness for a particular purpose. eFXnews and its employees, officers, directors, agents, and licensors do not also warrant the accuracy, completeness or timeliness of the information in any of the articles and other information distributed in this service and included on this site, and eFXnews hereby disclaims any such express or implied warranties; and, you hereby acknowledge that use of the service and the content of this site is at you sole risk.
In no event shall eFXnews and its employees, officers, directors, agents, and licensors will be liable to you or any third party or anyone else for any decision made or action taken by you in your reliance on any strategy and/or advice included in any article and other information distributed in this service and published in this site.
Recommended Content
Editors’ Picks
AUD/USD favours extra retracements in the short term
AUD/USD kept the negative stance well in place and briefly broke below the key 0.6400 support to clinch a new low for the year on the back of the strong dollar and mixed results from the Chinese docket.
EUR/USD now shifts its attention to 1.0500
The ongoing upward momentum of the Greenback prompted EUR/USD to lose more ground, hitting new lows for 2024 around 1.0600, driven by the significant divergence in monetary policy between the Fed and the ECB.
Gold aiming to re-conquer the $2,400 level
Gold stages a correction on Tuesday and fluctuates in negative territory near $2,370 following Monday's upsurge. The benchmark 10-year US Treasury bond yield continues to push higher above 4.6% and makes it difficult for XAU/USD to gain traction.
Bitcoin price defends $60K as whales hold onto their BTC despite market dip
Bitcoin (BTC) price still has traders and investors at the edge of their seats as it slides further away from its all-time high (ATH) of $73,777. Some call it a shakeout meant to dispel the weak hands, while others see it as a buying opportunity.
Friday's Silver selloff may have actually been great news for silver bulls!
Silver endured a significant selloff last Friday. Was this another step forward in the bull market? This may seem counterintuitive, but GoldMoney founder James Turk thinks it was a positive sign for silver bulls.