Weekly Round-Up & The Week Ahead

Weekly round-up and a look at the week ahead for EUR, GBP, and USD.

DAILY ANALYSIS

USD

The Dollar ended last week volatile after the Feds expected 25bps rate cut occurred, with the Feds Head Chair Powell labelling it as a “hawkish cut” and simultaneously signaling December easing is “far from certain”, pushing the rate cut odds down from 93% pre-announcement to a current 69%, prompting investors to reassess the future Policy direction from the Fed. Moreover, we saw the U.S’s Geopolitical risk stance improved as President Trump met with Xi Jinping to try and put a stop to the U.S. – China Trade War, in which they came to a year-long agreement, to which Trump provided positive optimism surrounding the two nations future trade agreements, though analysts remain weary debating on whether the agreement merely puts tensions on hold or actually marks progress.

As the U.S. Government shutdown drags into its sixth week we turn our attention to the numerous economic releases’ this week for the month of October, with deviations in these figures likely to drive volatility for the Dollar:

• ISM Manufacturing PMI expected 49.2 vs 49.1 previous.
• ISM Services PMI expected at 51 vs 50 previous.
• ADP Employment change expected at 25k vs -32k previous.
• Average Hourly Earnings expected to hold at 3.7%.
• Nonfarm Payrolls expected a 50k vs 22k previous.

EUR/USD trades around 1.1530 at the open this morning, down 0.82% compared to last week, as Fed rate cut bets decrease and investor caution increases.

EUR

It was a steady stretch for the Eurozone with regards to economic data, as we saw the ECB release its Monetary policy, holding steady at 2% as President Lagarde fuelled confidence through noting current policy remains “in a good place” amid easing global economic risk. Moreover, with GDP coming out at 1.3%, marginally beating expectations (of 1.2%), and HICP for October coming out at 2.4%, beating expectations of 2.3%, investors saw underlying resilience within the Eurozone.

We see a quiet week for the Euro ahead due to there being little economic releases, meaning traders will look to scrutinise any tone changes or future policy suggestions from ECB policymakers in their speeches this week, whereby ECB President Lagarde could offer insight to the future direction for the Eurozone. Also, we see Retail Sales for September being released on Friday morning, which is expected to remain at 1%, yet deviations may pressure the Euro in the near-term.

GBP/EUR trades below 1.1395 at the open this morning, down 0.48% compared to Friday’s session.

GBP

There were few economic releases for the Pound last week, with Sterling moving largely from ongoing political noise and uncertainty, with the £8bn Eurofighter – Turkey deal despite Espionage claims, the OBR’s productivity downgrade, and Reeves breaking house rules, the Pound trades under severe amounts of negative pressure as analysts show their Fiscal concern surrounding the UK economy.

We remain forward-looking as investors look to pick up on any clues from the BoE’s Breeden speaking on Tuesday and Wednesday, whereby we hope to obtain any sentiment lying within the BoE before the Monetary Policy decision on Thursday, where a 25bps rate cut is 68% likely. In the meantime, Sterling will likely remain vulnerable to further external sentiment throughout this week.

GBP/USD trades below 1.3125 at the open this morning, down 0.5% compared to Fridays session, hitting 7-month lows.


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