Created on January 31, 2025

• The euro has gone back and forth pretty significantly during the trading session on Thursday, as we have seen a lot of noise, mainly due to the idea of the ECB out there cutting rates.
• The noise around the press conference kind of left people wondering if they are really going to continue to cut or are they in a wait and see mode? And they may very well be in a wait and see mode.

One thing is for sure, the Jerome Powell press conference the previous day did not help this situation. So, I think we’re settling into a trading range in between the 1.05 level and the 1.03 level below. All things being equal, this is a market that I prefer to be short of instead of long, but I also recognize that it’s not always going to be moving. And right now, it’s just not moving. It’s a lot of back and forth Brownian motion.

Looking to Fade this Market on Rallies

I like the idea of fading a short-term rally anywhere near the 1.05 level that shows signs of exhaustion and that resistance extends all the way to the 1.06 level. If we were to break down below the 1.03 level, then it opens up the possibility of 1.02 and then maybe even lower than that down to the parity level, which I do think we get to sooner or later, because despite the fact that the Fed really didn’t do much, there is a very real world in which the Federal Reserve does not cut interest rates at all in 2025. At this point in time, I think it’s going to come down to European data, but for what it’s worth, the advanced GDP numbers in the United States came in cooler than anticipated. So that’s part of the confusion as well.

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• GBP/USD extends sideways action near 1.2450, remains directionless on Thursday.
• The Fed left the monetary policy settings unchanged, as anticipated.
• The US BEA will publish the first estimate of the fourth-quarter GDP data.

GBP/USD struggles to find direction and fluctuates in a tight band at around 1.2450 after closing virtually unchanged on Wednesday. The Federal Reserve’s (Fed) monetary policy announcements fail to influence the US Dollar’s (USD) valuation in a noticeable way as market focus shifts to US growth data.

The Fed said late Wednesday that it left the policy rate unchanged at 4.25%-4.5%. In the policy statement, the Fed removed the language suggesting inflation had “made progress” toward its 2% target and said the pace of price increases “remains elevated” instead.

In the post-meeting press conference, Fed Chairman Jerome Powell acknowledged that there was elevated uncertainty because of significant policy shifts. “We don’t need to be in a hurry to make any adjustments,” he repeated. Although the USD edged higher with the immediate reaction, it struggled to preserve its strength as the Fed event offered little to nothing new on the rate outlook.

On Thursday, the US Bureau of Economic Analysis (BEA) will release its first estimate of the fourth-quarter Gross Domestic Product (GDP) data. Investors expect the US economy to grow at an annualized rate of 2.6% following the 3.1% growth recorded in the third quarter. A weaker-than-forecast print could weigh on the USD and help GBP/USD gain traction. On the flip side, a GDP print at or above the market consensus could force GBP/USD to stay on the back foot.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart holds slightly above 50 but moves sideways, suggesting that the bullish bias remains intact, while lacking momentum. 

GBP/USD was last seen trading at around 1.2450, where the Fibonacci 50% retracement level of the latest downtrend and the 200-period Simple Moving Average (SMA) align. In case GBP/USD confirms 1.2450 as resistance, 1.2400 (static level, round level) could be seen as next support before 1.2370 (Fibonacci 38.2% retracement) and 1.2310 (100-period SMA). Looking north, resistances could be spotted at 1.2500 (round level, static level) and 1.2530 (Fibonacci 61.8% retracement).

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January 30, 2025 – Written by Tim Boyer

STORY LINK Pound to Euro Forecast Today: GBP/EUR Steady Ahead of ECB

The Pound Sterling (GBP) held firm near its recent highs against the Euro (EUR) on Wednesday morning, with investors adopting a wait-and-see approach ahead of key events later this week.

At the time of writing, Pound Euro (GBP/EUR) exchange rate was trading at approximately €1.1937, showing little movement from Wednesday’s opening levels.

The Euro (EUR) remained flat on Wednesday as market participants refrained from making any aggressive bets ahead of the European Central Bank’s (ECB) latest interest rate decision.

The ECB is widely expected to cut interest rates by 25 basis points when it concludes its first policy meeting of 2025 on Thursday.

While the rate cut itself appears largely priced in, the Euro’s performance will likely hinge on the bank’s forward guidance.

Should ECB officials hint at further monetary easing in the months ahead, the single currency could face additional downside pressure.

Conversely, if policymakers suggest that they would prefer to hold off from further cuts for now, it may help stem losses in EUR exchange rates.

All eyes will be on ECB President Christine Lagarde’s comments, with investors seeking clarity on the central bank’s assessment of the Eurozone economy and its resilience amid ongoing global trade tensions.

The Pound (GBP) traded in a narrow range on Wednesday as UK Chancellor Rachel Reeves outlined her ambitious plans for boosting economic growth.

In her latest speech, Reeves unveiled proposals to establish a high-tech hub between Oxford and Cambridge, dubbed ‘Europe’s Silicon Valley,’ alongside renewed government backing for Heathrow’s third runway.

The government estimates these initiatives could contribute £78bn to the UK economy over the next decade.

However, Sterling’s reaction has been muted, with businesses seeming unconvinced as they still face the increased tax burden of Reeves’s previous Budget.

GBP/EUR Exchange Rate Forecast: Eurozone GDP Weakness to Weigh on the Euro?

The ECB’s policy decision is expected to dominate the movement in the Pound to Euro exchange rate on Thursday.

However, before the ECB announcement, the Euro could come under pressure from the Eurozone’s fourth-quarter GDP figures.

Economists predict growth slowed sharply, dropping from 0.4% to just 0.1%. Signs of a stalling Eurozone economy could amplify expectations for extended ECB easing, potentially dragging the Euro lower.

Meanwhile, the absence of major UK economic data through the second half of the week may leave the Pound’s movements tied to broader market sentiment.

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