To use chat, please login.
Back to contacts

UK Rate Expectations and Economic Outlook for EUR

The Eurozone's PMI figures, released last Friday, slightly exceeded expectations, but they still indicated a significant contraction in economic activity. This has raised concerns about the possibility of negative GDP growth in the second half of the year.

EUR: Focus on inflation this week.

The Eurozone's PMI figures, released last Friday, slightly exceeded expectations, but they still indicated a significant contraction in economic activity. This has raised concerns about the possibility of negative GDP growth in the second half of the year. CFTC data reveals that net long positions in EUR/USD have been reduced even further, falling below 15% of open interest for the first time since October 2022 in the week leading up to the Federal Reserve (Fed) meeting. The Fed's hawkish stance and the absence of positive economic news from the eurozone likely encouraged speculators to continue unwinding their long euro positions.

Later this week, the eurozone's Consumer Price Index (CPI) releases could be a critical event for the euro. A surprise increase in CPI could rejuvenate expectations for another European Central Bank (ECB) interest rate hike this year.

However, unless there is a bullish CPI outcome for the euro, it appears that EUR/USD is poised to test the 1.0600 level, with the risk leaning towards a drop to 1.0500 in the short term. Nevertheless, the euro's responsiveness to ECB speakers has been relatively muted recently.

GBP: Weak PMIs suggest rates have peaked.

The British pound is on course to be the weakest among G10 currencies in the third quarter. This decline has been driven by a significant adjustment in expectations for domestic interest rates, following the Bank of England's decision to pause its rate hikes. The PMI data released on Friday unequivocally justified the BoE's choice to keep rates unchanged, as the numbers were lower than anticipated and signalled greater economic challenges for the UK in the third quarter.

Prior to the November meeting, the Bank of England will receive one more set of inflation and wage data. However, economics team from ING now predicts that the central bank will maintain its current stance, signalling the end of the tightening cycle in the UK. Market sentiment aligns with this projection, with only a 25% chance of a rate hike in November and a 50% probability of an increase by December.

This week, the UK is not slated to release any major economic data, aside from the final second-quarter GDP figures. Additionally, there are only two scheduled speakers from the Bank of England. While EUR/GBP has surged to 0.8700, it may struggle to maintain these gains, primarily because a substantial portion of the dovish adjustment in the Sonia curve has already occurred. Moreover, the euro's momentum is currently subdued. In the case of GBP/USD (Cable), the risks are tilted toward a test of the crucial 1.2000 level soon if the US dollar remains strong.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Regulation: ASIC (Australia), VFSC (Vanuatu)
read more
Yen Surges, Bets Build – BOJ to Scrap Negative Rates; DXY Falls

Yen Surges, Bets Build – BOJ to Scrap Negative Rates; DXY Falls

The Dollar plummeted against the Japanese Yen to 143.45 in late New York after the Bank of Japan signaled that it would scrap its negative interest rate regime this month. The Japanese currency strengthened against all Rivals but most against the US Dollar. A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) fell to 103.55 from 104.05 yesterday.
ACY Securities | 12h 56min ago
Yen Rallies on BoJ Hawkish Comment

Yen Rallies on BoJ Hawkish Comment

The Japanese Yen staged a robust rally in the previous session, leading to a substantial 2% drop in the USD/JPY pair overnight. This surge in the Yen's value was significantly influenced by statements from BoJ Governor Kazuo Ueda following discussions with the Japanese Prime Minister.
PU Prime | 17h 33min ago
Short End Yields Down Sharper in EZ Encourages EUR/USD Retracement

Short End Yields Down Sharper in EZ Encourages EUR/USD Retracement

The recent rebound of the US dollar over the past four trading days serves as a reminder that foreign exchange rates are relative, influenced by various factors. Although there's compelling evidence suggesting that the Federal Reserve's tightening cycle has concluded and the labour market may be slowing, similar indicators are emerging elsewhere.
ACY Securities | 1 day ago
DXY Rebounds on Mixed US Data, Euro Tumbles

DXY Rebounds on Mixed US Data, Euro Tumbles

The Dollar Index (DXY), a favored gauge of the Greenback’s value against a basket of 6 major currencies, rebounded to 104.05, a key level (103.25 yesterday). Economic data released yesterday saw US JOLTS Job Openings decline to 8.73 million from 9.35 million previously. The monthly Job Openings and Labor Turnover Survey was the lowest level since March 2021.
ACY Securities | 2 days ago
Dollar Bolsters Due to  PMI Readings

Dollar Bolsters Due to PMI Readings

The latest U.S. Job Opening data, dropping to its lowest level since March 2021 at 8.73 million, offers a preliminary insight ahead of the crucial Non-Farm Payrolls (NFP) report scheduled for Friday. Despite this downbeat job data, the U.S. dollar found support from better-than-expected PMI readings, indicating a resilient U.S. economy.
PU Prime | 2 days ago