Euro (EUR) Banknotes

Euro Tumbles as ECB Pauses Rate Hiking Cycle, Pound Weakens amid UK Economy Fears

The Pound fell this week as downbeat UK data raised concerns about the country’s economic health.

Meanwhile, the Euro dropped as the European Central Bank (ECB) left interest rates unchanged.

Pound Declines amid Weak Economic Data

GBP/EUR – Unchanged on the week’s opening levels

GBP/USD – Down half a cent on the week’s opening levels

After a muted start to the week, the Pound then fell sharply after signs of a cooling UK labour market and another contraction in British business activity dampened Bank of England (BoE) interest rate hike bets.

Later in the week, a worrying decline in the Confederation of British Industry’s (CBI) distributive trades survey kept Sterling on the defensive, with the UK currency ending the session lower against many of its peers.

Turning to next week, the BoE interest rate decision is in the spotlight. With the bank expected to leave interest rates unchanged, GBP could suffer further losses.

Euro Slides as ECB Hits Pause

EUR/GBP – Unchanged on the week’s opening levels

EUR/USD – Down half a cent on the week’s opening levels

The Euro faced selling pressure early this week after new data showing contracting Eurozone business activity raised fears of a recession in the bloc.

While positive German data inspired a brief recovery, the single currency then fell again after the European Central Bank hit pause on its tightening cycle and warned that the Eurozone economy would ‘remain weak’.

Next week, the Euro could fall further as economists expect the latest data to show a contraction in Eurozone GDP and a sharp cooldown in inflation.

US Dollar Recovers on Strong Economic Data

USD/GBP – Up half a penny on the week’s opening levels

USD/EUR – Up half a cent on the week’s opening levels

The US Dollar stumbled early last week as a pullback in Federal Reserve interest rate hike bets dented the ‘Greenback’.

However, strong US economic data and a souring market mood saw the safe-haven currency recover as the week went on. Then US GDP at the end of the week smashed forecasts, which cheered markets and limited USD’s gains.

The Fed interest rate decision is in focus next week. Could another rate hold see USD cede ground?

Australian Dollar Wavers Higher amid RBA Bets

AUD/GBP – Up half a penny on the week’s opening levels

AUD/USD – Up half a cent on the week’s opening levels

The Australian Dollar climbed through the first part of the week’s trade, as an improving mood and hotter-than-forecast inflation boosted the ‘Aussie’.

AUD exchange rates then retreated after Reserve Bank of Australia (RBA) Governor Michele Bullock downplayed the inflation figures, but a cheery market mood and a stronger producer price index helped the Australian Dollar recover at the end of the week.

An expected improvement in Australia’s trade balance may boost AUD next week. Otherwise, risk appetite may drive the ‘Aussie’.

Key Data

Oct 30 EUR DE GDP Growth Rate (Q3)

Oct 30 EUR DE Inflation Rate (Oct)

Oct 31 EUR GDP Growth Rate (Q3)

Oct 31 EUR Inflation Rate (Oct)

Nov 1 USD ADP Employment Change (Oct)

Nov 1 USD Fed Interest Rate Decision

Nov 2 AUD Balance of Trade (Sep)

Nov 2 GBP BoE Interest Rate Decision

Nov 3 USD Non Farm Payrolls (Oct)

Nov 3 USD ISM Services PMI (Oct)