The GBP/USD pair is trading near 1.3135 in the early Asian session on Monday, breaking a three-day losing streak. The focus this week will be on the US Dollar dynamics as there are no major economic releases planned in the UK. The US Nonfarm Payrolls (NFP) report scheduled for Friday will be closely watched. Expectations of a rate cut by the US Federal Reserve continue to weigh on the Dollar, with the CME FedWatch tool indicating a 70% likelihood of a 25 bps cut in September. The key US employment data on Friday will play a crucial role in determining the direction of the Greenback.
Investors are optimistic about the Bank of England (BoE) maintaining a gradual policy-easing cycle for the rest of the year, which could support the Pound Sterling (GBP). Economists anticipate one more 25 bps rate cut by the BoE this year, according to a Reuters poll. The US economy is expected to add 163K jobs in August, with the Unemployment Rate falling to 4.2%. A strong employment report could lift the US Dollar, while weaker-than-expected data could fuel concerns about a slowdown in the US economy and drag the Greenback lower.
The Euro is the currency used by 20 European Union countries in the Eurozone and is the second most heavily traded currency in the world after the US Dollar. The European Central Bank (ECB) in Frankfurt, Germany is the central bank for the Eurozone, responsible for setting interest rates and managing monetary policy. The ECB’s primary mandate is to maintain price stability through controlling inflation or stimulating growth. Key indicators such as the Harmonized Index of Consumer Prices (HICP), GDP, Manufacturing and Services PMIs, and employment data all impact the Euro’s movement.
Eurozone inflation data, which is measured by the HICP, is an important economic indicator for the Euro. High inflation may prompt the ECB to raise interest rates, benefiting the Euro. Strong economic data from major Eurozone economies like Germany, France, Italy, and Spain can support the Euro and attract foreign investment. The Trade Balance indicator, which measures the difference between exports and imports, also influences the Euro’s value. A positive Trade Balance can strengthen the Euro by increasing demand for exports.
The Euro is the most traded currency pair in the world, with EUR/USD accounting for the majority of transactions. The ECB Governing Council makes monetary policy decisions at regular meetings. Investors closely watch economic data releases and indicators to assess the health of the Eurozone economy. Positive data can attract foreign investment and encourage the ECB to raise interest rates, boosting the Euro. On the other hand, weak economic data can lead to a decline in the Euro’s value. Data releases from major Eurozone economies and the Trade Balance are crucial factors influencing the Euro’s performance in the foreign exchange market.
