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Pound Slumps on Weak Data, Euro Bolstered amid Souring Risk Appetite 

The Pound was met by notable selling pressure this week as GBP investors were left disappointed by some high-profile UK data releases. 

At the same time, the Euro marched higher this week, as it was undermined by a downbeat market mood and sharp improvement in German economic sentiment. 

Pound Tumbles on Disappointing Data 

GBP/EUR – Down one cent on the week’s opening levels 

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

The Pound trended broadly lower over the past week in the wake of lacklustre UK data. The latest wage growth and inflation figures left Sterling to stumble in the first half of the session as they were seen as unlikely to encourage the Bank of England (BoE) to raise interest rates next month. 

GBP exchange rates then came under additional pressure in the latter half of the week in response to abysmal UK retail sales data. 

Next week, the UK will publish its latest PMI figures. Expect the GBP selling bias to remain firmly in place if these also disappoint. 

Euro Firms in Risk-Off Trade 

EUR/GBP – Up one pence on the week’s opening levels 

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

The Euro trended broadly higher over the past week as the single currency was underpinned by safe-haven demand and mixed trade in the US Dollar. 

Also providing a boost to EUR exchange rates was a much stronger-than-expected improvement in German economic sentiment. 

Centre stage next week will be the European Central Bank’s (ECB) latest interest rate decision. While the ECB is expected to leave its monetary policy untouched this month, if the bank hints it may be open raising rates in response to recent shocks, the Euro could rise. 

US Dollar Upside Capped by Falling Fed Rate Hike Bets 

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

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

The US Dollar faltered at the start of this week, amid a continued pullback in Federal Reserve interest rate expectations. 

Risk-off flows then revived USD demand in the latter half of the week, although these gains were tempered by some dovish remarks from Fed Chair Jerome Powell. 

Looking ahead, the US will publish its latest GDP figures next week. The preliminary estimate for the third quarter is expected to show a sharp acceleration of growth. Will this help to underpin the US Dollar? 

Australian Dollar Finds Fleeting Gains on Hawkish RBA 

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

AUD/USD – Unchanged on the week’s opening levels 

The Australian Dollar got off to a strong start this week as it was bolstered by hawkish minutes from the Reserve Bank of Australia’s (RBA) October policy meeting and additional comments from RBA Governor Michele Bullock. 

However, the ‘Aussie’ was unable to sustain these losses through the latter half of the week amid a souring market mood. 

Australia’s quarterly inflation report will be in focus for AUD investors next week. Could a stronger-than-expected reading boost RBA interest rate expectations and revive demand for AUD? 

Key Data  

Oct 23 AUD Manufacturing PMI (Oct) 

Oct 23 AUD Services PMI (Oct) 

Oct 24 EUR Services PMI (Oct) 

Oct 24 GBP Manufacturing PMI (Oct) 

Oct 24 GBP Services PMI (Oct) 

Oct 25 AUD Inflation Rate (Q3) 

Oct 25 EUR German Business Climate (Oct) 

Oct 26 EUR ECB Interest Rate Decision 

Oct 26 USD GDP (Q3) 

Oct 26 USD Durable Goods Orders (Sep) 

Oct 27 USD Core PCE Price Index (Sep)