GBP/USD Firms Ahead of UK/US PMIs

GBP/USD edges higher to 1.2630 as investors await December's preliminary Purchasing Managers' Index (PMI) data from both the UK and US. Market expectations for the Federal Reserve's interest rate decisions amid slowing disinflation could inject volatility into the dollar. Trump's proposed policies, such as mass deportations, new tariffs, and tax cuts, are seen as potential upside risks to inflation, supporting a less dovish Fed outlook for 2025. On the sterling front, the BoE is expected to maintain interest rates and cut them more gradually than other central banks amid rising inflation expectations, pressuring the pound. Additionally, BoE Governor Andrew Bailey's dovish outlook, hinting at four interest rate cuts in 2025, could weigh on the currency. In the upcoming week, the GBP/USD exchange rate will be influenced by key data, including flash PMI prints from both the UK and the US, UK monthly employment data, US Retail Sales, final US GDP figures, UK consumer inflation data, and UK Retail Sales figures.

EUR/USD Rises Before Fed Decision

EUR/USD ticks higher to near 1.0515 following mixed German data. German HCOB Manufacturing PMI fell to 42.5 from November's 43.0, below the expected 43.8. Services PMI rebounded to 51.0 in December from 49.3, exceeding the forecast of 49.2, while the HCOB Preliminary German Composite Output Index rose to 47.8 in December from 47.2. The ECB's decision to reduce interest rates for the fourth time this year, coupled with several ECB policymakers' support for further easing and a gradual move towards the neutral rate, could dampen the Euro. On Monday, ECB President Christine Lagarde hinted at further cuts if upcoming data shows the eurozone's growth and deflation remain on track. On the dollar front, uncertainty ahead of the Federal Reserve's interest rate decision and Trump's policies weigh on the USD. Today's US S&P Global PMI report for December and sluggish US Treasury yields will be key drivers for the EUR/USD exchange rate.

EUR/GBP Struggles Following Eurozone PMIs

EUR/GBP lost momentum near 0.8315 following mixed Eurozone PMI data. The Eurozone Manufacturing PMI held steady at 45.2 in December, surpassing the expected 45.0. The Services PMI rose to 51.4, up from 49.5 in November, exceeding the forecast of 49.4 and reaching a two-month high. The HCOB Eurozone PMI Composite also improved to 49.5 in December, compared to 48.3 in November. The HCOB Flash France Manufacturing PMI fell to 41.9 in December from 43.1 in November, while its Services PMI rose to 48.2 in December from 46.9, surpassing expectations of 46.7. ECB President Lagarde stated today that the central bank is ready for further rate cuts if disinflation continues as expected. Conversely, BoE Governor Andrew Bailey's suggestion of four interest rate cuts in 2025 limits sterling’s upside potential. Market sentiment around the BoE policy easing pace and PMI data from both regions will significantly influence EUR/GBP exchange rates.

NZD/USD Gains on Mixed Chinese Data

NZD/USD gains ground near 0.5783 as the New Zealand dollar (NZD) benefits from mixed Chinese economic data. China's Industrial Production grew 5.4% in November, exceeding the 5.3% forecast, while Retail Sales rose by 3.0%, below the expected 4.6% and the previous 4.8%. On the domestic front, the Services Index increased to 49.5 in November, up from 46.2 in October, its highest since February. The Food Price Index also rose by 1.3% year-on-year, slightly above the 1.2% increase in October. However, speculation of aggressive easing from the Reserve Bank of New Zealand (RBNZ) could cap the kiwi’s gains. Meanwhile, the USD remains subdued, weighed down by sluggish US Treasury yields ahead of Wednesday’s Federal Reserve interest rate decision. Investors will closely monitor policy statements and Fed Chair Jerome Powell's comments at the post-meeting press conference for future policy hints. Today's preliminary US December Purchasing Managers Index (PMI) will influence the NZD/USD exchange rate.

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