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The UK's goods exports to the US account for just under 2% of GDP, compared to 3% for the eurozone, with potential trade deals favoring British exports amid ongoing negotiations. Analysts foresee downside risks for EUR/GBP in the near term, possibly dropping below 0.830, while a longer-term rebound may occur as Bank of England rate expectations adjust.
The Reserve Bank of Australia is expected to hold interest rates steady amid concerns over tariffs and recent inflation data, which, while cooler, remains too high for further cuts. The Australian and New Zealand dollars have struggled against G10 currencies, with predictions of further declines, particularly against the US dollar. A cautious tone is anticipated from Governor Michele Bullock as the RBA navigates these uncertainties.
Yen bulls are considering positions as the USD/JPY experiences a decline driven by long positions in the yen, contrasting last year's short covering. Analysts suggest a potential correction to 152.50 this week, but caution against chasing higher rates due to upcoming US tariffs and a possible Bank of Japan rate hike in May that could strengthen the yen.
The Bank of England's recent hold on interest rates led to a slight hawkish repricing in the sterling curve, with only one member opposing the decision. Despite expectations of three rate cuts this year, data uncertainty looms due to upcoming corporate tax hikes and US tariffs, raising concerns about growth and inflation. The outlook for GBP remains cautious, with a preference for trading GBP weakness through Cable rather than EUR/GBP.
EUR/SEK is expected to rebound to the 11.10-11.20 range in the coming weeks, as the krona remains undervalued despite the Riksbank holding rates steady. Meanwhile, the Swiss National Bank's recent rate cut to 0.25% has led to a decline in the Swiss franc, with EUR/CHF projected to return to 0.950 in the second quarter.
ECB President Christine Lagarde maintained a neutral stance in her recent EU Parliament speech, indicating no guidance until data trends emerge. The EUR/USD pair is expected to face downward pressure, with the next major support at the 200-day moving average of 1.0725, as market uncertainty persists.
The European Central Bank cut rates by 25 basis points, maintaining a dovish stance amid a challenging growth outlook. Despite a media leak suggesting a potential shift in language regarding interest rates, the overall communication remains too dovish to alter expectations. EUR/USD may drop below 1.030 if tariffs are imposed on Canada and Mexico, driven by USD strength and heightened tariff risks.
New Zealand's fourth quarter inflation figures showed a flat headline CPI at 2.2%, with the non-tradable index dropping to 4.5%, below the Reserve Bank's projections. This data supports expectations for a 50 basis point rate cut at the RBNZ's February meeting, followed by additional cuts. The NZD/USD may find support above 0.570, influenced by reduced US tariff risks on China, although domestic monetary policy is likely to limit currency strength.
Francesco Pesole
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The information provided herein is generated by experimental artificial intelligence and is for informational purposes only.
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