GBP/EUR buoyed by French political turmoil

GBP/EUR climbed to 1.2075 as the euro weakened amid growing political uncertainty in France, the Eurozone's second-largest economy, following a budget standoff. French Prime Minister Michel Barnier invoked special constitutional powers to push his contested budget through the deeply divided National Assembly, triggering a no-confidence vote. These developments, coupled with market expectations of a substantial 50 bps rate cut by the European Central Bank (ECB) in December, could add downward pressure on the euro. Meanwhile, the US dollar rallied on deteriorating market sentiment following Donald Trump's threats to BRICS nations, further pressuring the euro due to its negative correlation with the USD. On the pound's side, strength came from a surprising acceleration in house price growth. The Nationwide House Prince Index rose by 1.2% in November, surpassing the 0.2% forecast. However, mixed UK data also revealed a decline in the Final Manufacturing PMI to 48.0 and a 3.4% YoY drop in the BRC Retail Sales Monitor, signalling a contraction in the sector and weaker consumer activity. Today's services PMI data from the Eurozone and the UK, along with a speech from Bank of England (BoE) Governor Andrew Bailey, will influence the GBP/EUR exchange rate.

EUR/USD softens ahead of Eurozone PMIs

EUR/USD trades near 1.0486 as investors brace for a no-confidence vote in France against Prime Minister Michel Barnier following his use of constitutional powers to push through a contentious budget. The Harmonised Index of Consumer Prices (HICP) rose to 2.3% YoY, exceeding the ECB's 2.0% target, while Core HICP increased to 2.8% YoY, meeting expectations. ECB policymaker Robert Holzmann noted in a speech that a 25 bps rate cut in December is "conceivable but no more." These factors, alongside expectations of a larger 50 bps ECB rate cut, may weigh on the euro. In contrast, robust US labour market data strengthened the USD. The JOLTs Job Openings exceeded forecasts, signalling resilience in the US economy. Investors will monitor today's US ADP Employment Change, ISM Services PMI data, and Eurozone services PMI for further direction in the EUR/USD exchange rate.

GBP/USD muted ahead of BoE Governor Bailey's speech

GBP/USD remains near 1.2650 as the US dollar gains support from stronger-than-expected labour market data. US Job Openings rose to 7.744 million in October, exceeding market estimates of 7.48 million, highlighting ongoing economic strength. President-elect Donald Trump's aggressive tariff proposals, including a 100% tariff on BRICS nations—Brazil, Russia, India, China, and South Africa—if they move away from the USD for trade, as well as major tariffs on Mexico, Canada, and China, have also boosted the USD by increasing concerns over global trade tensions. In contrast, mixed economic data has pressured the pound. The Nationwide HPI grew by 1.2% in November, exceeding forecasts of 0.2%, reflecting resilience in the UK housing market. However, the Final Manufacturing PMI dropped to 48.0, and the BRC Retail Sales Monitor recorded a 3.4% YoY decline, indicating sector contraction and subdued consumer activity. In the absence of significant UK economic data, the GBP/USD exchange rate will be driven by broader market sentiment surrounding BoE Governor Bailey's speech and US ISM Services PMI data.

AUD/USD subdued by US JOLTs data

AUD/USD hovers around 0.6430 as the USD retreats following better-than-expected labour market data. The US JOLTs Job Openings rose to 7.74 million in November, up from 7.37 million, exceeding market expectations of 7.48 million. Expectations that US President-elect Donald Trump's expansionary policies will boost inflationary pressures and limit the Federal Reserve's (Fed) ability to cut rates, alongside ongoing geopolitical risks, continue to shape market sentiment around the USD. On the Australian front, rising expectations of an interest rate cut by the Reserve Bank of Australia (RBA), coupled with concerns about a fragile economic recovery in China, President Trump's impending tariff plans, and escalating global trade war fears, are triggering volatility in the China-proxy Australian Dollar (AUD). Australia's GDP grew by 0.3% QoQ in Q3 2024, slightly above Q2's 0.2% but below the forecast of 0.4%. Annually, GDP expanded by 0.8%, falling short of the 1.1% consensus and Q2's 1.0% growth. Alongside weaker-than-expected Australian GDP figures, today's US ISM Services PMI will shape market sentiment around the AUD/USD exchange rate.

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