Key FX Movements and Market Drivers This Week
The euro faced challenges last week as the European Central Bank maintained its cautious stance, signalling no immediate changes to monetary policy. Weak economic indicators, including sluggish industrial activity and subdued consumer spending across key Eurozone economies, added to the downward pressure. Looking ahead, the euro’s performance will depend on Eurozone industrial production figures and global Purchasing Managers’ Indexes (PMIs) later this week. Additionally, the Federal Reserve’s midweek policy announcement could influence the EUR/USD pair, particularly if the Fed strikes a hawkish tone.
The U.S. dollar strengthened last week, supported by robust economic data that highlighted resilience in retail and manufacturing sectors. The Federal Reserve’s consistent messaging around tight monetary conditions further bolstered the currency’s appeal. This week, the dollar’s trajectory will centre on the Federal Reserve’s meeting, where the tone of the statement will guide expectations for 2025. Key events include U.S. Consumer Price Index data on Tuesday, followed by labour market and housing statistics later in the week. Broader global data, including PMIs, may also play a role in shaping the dollar’s performance.
The British pound remained under pressure last week, weighed down by concerns over the UK’s sluggish economic growth and soft industrial output. Market expectations of limited future rate hikes from the Bank of England dampened sentiment further. This week, the pound’s outlook will be influenced by midweek UK inflation data, which could strengthen the case for additional monetary tightening if price pressures persist. However, stronger dollar dynamics following the Federal Reserve meeting may limit any upside for GBP/USD, while global PMIs at the end of the week will also be critical in shaping broader sentiment.
Key Events to Watch This Week:
Tuesday, December 10: U.S. Consumer Price Index (CPI) data release
Wednesday, December 11: Federal Reserve policy meeting and statement
Thursday, December 12: Eurozone industrial production figures
Friday, December 13: Global PMI releases
As we head into a week filled with key economic releases and central bank updates, FX markets are poised for potential volatility. Staying informed is essential for navigating these dynamic conditions effectively.
