EUR/USD looks to the ECB rate decision

• ECB is likely to cut rates by 25 bps
• The focus will be on rhetoric and staff projections
• US PPI & jobless claims are due
• EUR/USD trades between 1.05 – 1.06

EUR/USD steadies above 1.05 after 4-days of losses, amid USD weakness and ahead of the ECB rate decision.

We expect the ECB to cut rates by 25 basis points, bringing them to 3%; however, a 50-basis-point cut cannot entirely be excluded. In fact, the market would likely focus more on communication. The updated staff forecast could see the inflation target being reached sooner next year, which could enable the ECB to cut rates by 25 basis points but with a more dovish tone.

Recent data, including the composite PMI at a 10-month low and political uncertainty in Germany and France affecting economic sentiment, also give the ECB reason to adopt a more dovish stance.

The market is pricing in 150 basis points worth of cuts between now and the end of next year. A dovish-sounding Christine Lagarde could fuel rate-cut bets, pulling EUR lower.

The USD is easing but continues to trade in a narrow range, following US CPI data yesterday, which supports the view the Fed will cut rates next week and ahead of PPI data today.

PPI is expected to rise to 2.6%, YoY up from 2.4%. This comes after CPI rose to 2.7% from 2.6%.

Signs that disinflation is stalling underpin the USD. While a December rate cut looks certain, a more gradual pace of cuts is likely next year. 

EUR/USD forecast – technical analyst

EUR/USD fell from 1.12 in late September to a low of 1.0330 on November 2025. The price is currently consolidating between 1.05 to 1.06 and is once again testing the lower band of this holding pattern.

Sellers must take out 1.05 to extend the longer-term bearish trend towards 1.04 and 1.0330.

However, should 1.05 hold, buyers will look to extend the gain to 1.06. Beyond here, 1.07 comes into play.

GBP/USD stays in range ahead of US PPI data & jobless claims

• US CPI rose to 2.7% YoY from 2.6%
• US PPI is expected to rise to 3.2% from 3.1%
• GBP/USD hovers around 1.2750, just below the 200 SMA

GBP/USD continues to trade in a tight range around the 1.2750 level following US CPI data and ahead of more US stats. The UK economic calendar is quiet, leaving the USD in the driving seat.

US CPI rose to 2.2%, up from 2.6%, in line with expectations, while core CPI held steady at 3.3%. Despite the increase in inflation, the data was in line with forecasts, giving the green light to a December rate cut.

According to the CME Fed watch tool, the market is pricing in a 95% chance of a 25 basis point cut at the FOMC meeting next week, up from 85% ahead of the meeting.

Today, attention is on US PPI inflation, which is expected to rise. PPI is forecast to rise to 3.2%, up from the 3.1% previously.

US jobless claims data will also be under the spotlight. It is expected to show the ongoing resilience in the US labour market, with 220K initial claims forecast down from 224 K.

The pound has been supported by expectations that the Bank of England will cut interest rates at a slower pace than its major central bank peers. The BoE is expected to leave rates unchanged in the meeting next week, and the market is only pricing in 60 basis points worth of cuts between now and the end of next year.

The central bank has adopted a more hawkish tone following the New Labour government’s budget, which is seen as inflationary.

There is no high impact UK economic data today. Attention will be on GDP figures tomorrow.

GBP/USD forecast – technical analyst

GBP/USD extended its recovery from 1.25 rising out of the multi-month descending channel, but the recovery has stopped short below the 200 SMA.

Buyers will look to extend the recovery above the 200 SMA1.2825 towards 1.2875 static resistance and 50 SMA. A rise above her brings 1.29 and then the key 1.30 level into play.

Failure to retake the 200 SMA could see sellers retest the 1.27, the weekly low ahead of 1.2630 the December low and 1.26. A breakdown here brings 1.25 into focus.

Created on December 12, 2024

• Since the start of this important trading week, the Pound Sterling has managed to gain against other major currencies, even in the absence of any significant impactful British data.
• Furthermore, its gains came thanks to positive trading conditions.
• In the case of the GBP/USD pair, it rose to the resistance level of 1.2798 before settling around 1.2738 at the time of writing this analysis.

As a currency that has become more sensitive to risk, the Pound Sterling benefited from the optimistic market sentiment at the beginning of the week. However, with little other support, the Pound Sterling’s gains were relatively modest, with the Pound Sterling primarily rising against safer currencies rather than its riskier counterparts.

Dollar Price Affected by US Inflation Figures

According to licensed trading platforms, the US dollar has retreated from its previous highs after US inflation rates came in line with expectations. According to economic data results, the US Consumer Price Index rose to 2.7% in November, as expected, but this was higher than 2.6% in October, marking the fifth consecutive increase.

It was also announced that the US Consumer Price Index rose by 0.3% on a monthly basis, which is also in line with expectations. The core Consumer Price Index recorded 0.31% in November, with the 12-month rate remaining at 3.3%, which is in line with analysts’ forecasts. Overall, the main conclusions are that US inflation is proving to be stubborn, which will limit the pace of the Federal Reserve’s interest rate cuts in 2025. However, the Federal Reserve is likely to cut interest rates again next week as the numbers were in line with expectations.

Pound Sterling Supported by China’s Policies

China’s stimulus measures this week have supported risk appetite and expectations of further cuts in Chinese interest rates. There were reports that the Politburo had changed its 2025 forecast for China’s monetary policy from cautious to appropriately loose. This would be the first official change in language since 2010. As a result, hopes for political stimulus have supported commodities and British stocks, which in turn helped support the Pound Sterling. However, there are still significant geopolitical pressures and uncertainties.

US Interest Rate Expectations

After financial markets and investors reacted to the US jobs and inflation announcements, financial markets are expecting another US interest rate cut by the Federal Reserve next week, with markets pricing in a near 90% chance of a 25bp cut. The US Federal Reserve will generally enter a blackout period this week, but there will be increased focus on the 2025 outlook. President-elect Trump has recently indicated that he will not ask Fed Chairman Powell to resign, although there is an element of ambiguity as he has stated that Powell may resign if asked. As such, uncertainty may limit the scope for buying the US dollar.

Trading Tips:

It seems clear that the performance of the British pound is waiting for more stimulus so that it does not get sold and lose its recent gains, as the sterling is a risk currency

Technical Analysis for the GBP/USD pair today:

According to the performance on the daily chart, the GBP/USD pair remains in a neutral position with an upward bias. The bulls’ success in moving towards the resistance levels of 1.2840 and the psychological resistance of 1.3000 will strengthen the upward trend. Conversely, and on the same time frame, a return to the vicinity of the 1.2610 support will undermine the current upward outlook. The Relative Strength Index is in a neutral position, confirming the balance between bears and bulls. Technically, the MACD is turning upwards but still needs more gains to confirm. Today, GBP/USD will be affected by the announcement of weekly US jobless claims and the reading of the Producer Price Index. Furthermore, this is in addition to the extent of investor risk appetite.

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The Japanese Yen might not see a strong 2025 after all.

Analysts at ING Bank see a route to 160 in Dollar-Yen (USD/JPY) over the next year, disappointing a consensus looking for Yen outperformance.

Currently, market forward points show the market looks for USD/JPY to move towards the mid-140s next year, in a steady trend of Yen appreciation.

Part of this assumption rests on the view that the Bank of Japan will raise interest rates in a world where everyone else is cutting, creating a favourable interest rate convergence story for JPY.

ING’s economists maintain that the Bank of Japan will hike by 25bp on 20 December, and further hikes will follow, but these won’t put a rocket under the Yen as was seen earlier this year when the Bank raised rates for the first time in years.

“Recall that it was the hawkish hike in July that prompted the disorderly unwind of the carry trade. This time, however, the market is not as short yen as it was in July and the BoJ has probably learned its communication lesson. We do, however, look for two further 25bp rate hikes next year,” says ING.

Bank of Japan hikes won’t be able to close the gap with U.S. yields, which will remain elevated as the Trump 2.0 era commences.

“Our forecast profile of a higher USD/JPY is largely down to the fact that we expect the US 10yr Treasury to end 2025 at 5.50%. There is some talk of a ‘Mar-a-Lago accord’ to weaken the US dollar. We think Trump’s policies are dollar positive, but if Washington’s dollar policy were to make an impact, especially if US growth disappoints, we suspect USD/JPY would lead $ lower,” says ING.

The bank forecasts USD/JPY at 153 in one month, 155 in three months, 157 in six months and 160 in 12 months.

EUR/USD looks to the ECB rate decision

• ECB is likely to cut rates by 25 bps
• The focus will be on rhetoric and staff projections
• US PPI & jobless claims are due
• EUR/USD trades between 1.05 – 1.06

EUR/USD steadies above 1.05 after 4-days of losses, amid USD weakness and ahead of the ECB rate decision.

We expect the ECB to cut rates by 25 basis points, bringing them to 3%; however, a 50-basis-point cut cannot entirely be excluded. In fact, the market would likely focus more on communication. The updated staff forecast could see the inflation target being reached sooner next year, which could enable the ECB to cut rates by 25 basis points but with a more dovish tone.

Recent data, including the composite PMI at a 10-month low and political uncertainty in Germany and France affecting economic sentiment, also give the ECB reason to adopt a more dovish stance.

The market is pricing in 150 basis points worth of cuts between now and the end of next year. A dovish-sounding Christine Lagarde could fuel rate-cut bets, pulling EUR lower.

The USD is easing but continues to trade in a narrow range, following US CPI data yesterday, which supports the view the Fed will cut rates next week and ahead of PPI data today.

PPI is expected to rise to 2.6%, YoY up from 2.4%. This comes after CPI rose to 2.7% from 2.6%.

Signs that disinflation is stalling underpin the USD. While a December rate cut looks certain, a more gradual pace of cuts is likely next year. 

EUR/USD forecast – technical analyst

EUR/USD fell from 1.12 in late September to a low of 1.0330 on November 2025. The price is currently consolidating between 1.05 to 1.06 and is once again testing the lower band of this holding pattern.

Sellers must take out 1.05 to extend the longer-term bearish trend towards 1.04 and 1.0330.

However, should 1.05 hold, buyers will look to extend the gain to 1.06. Beyond here, 1.07 comes into play.

GBP/USD stays in range ahead of US PPI data & jobless claims

• US CPI rose to 2.7% YoY from 2.6%
• US PPI is expected to rise to 3.2% from 3.1%
• GBP/USD hovers around 1.2750, just below the 200 SMA

GBP/USD continues to trade in a tight range around the 1.2750 level following US CPI data and ahead of more US stats. The UK economic calendar is quiet, leaving the USD in the driving seat.

US CPI rose to 2.2%, up from 2.6%, in line with expectations, while core CPI held steady at 3.3%. Despite the increase in inflation, the data was in line with forecasts, giving the green light to a December rate cut.

According to the CME Fed watch tool, the market is pricing in a 95% chance of a 25 basis point cut at the FOMC meeting next week, up from 85% ahead of the meeting.

Today, attention is on US PPI inflation, which is expected to rise. PPI is forecast to rise to 3.2%, up from the 3.1% previously.

US jobless claims data will also be under the spotlight. It is expected to show the ongoing resilience in the US labour market, with 220K initial claims forecast down from 224 K.

The pound has been supported by expectations that the Bank of England will cut interest rates at a slower pace than its major central bank peers. The BoE is expected to leave rates unchanged in the meeting next week, and the market is only pricing in 60 basis points worth of cuts between now and the end of next year.

The central bank has adopted a more hawkish tone following the New Labour government’s budget, which is seen as inflationary.

There is no high impact UK economic data today. Attention will be on GDP figures tomorrow.

GBP/USD forecast – technical analyst

GBP/USD extended its recovery from 1.25 rising out of the multi-month descending channel, but the recovery has stopped short below the 200 SMA.

Buyers will look to extend the recovery above the 200 SMA1.2825 towards 1.2875 static resistance and 50 SMA. A rise above her brings 1.29 and then the key 1.30 level into play.

Failure to retake the 200 SMA could see sellers retest the 1.27, the weekly low ahead of 1.2630 the December low and 1.26. A breakdown here brings 1.25 into focus.

• GBP/USD holds comfortably above 1.2750 in the European morning on Thursday.
• The technical outlook suggests that the pair remains bullish in the near term.
• The pair could face the next stiff resistance at 1.2800.

GBP/USD registered small losses on Wednesday but didn’t have a difficult time holding its ground. The pair trades modestly higher on the day above 1.2750 on Thursday and the technical outlook suggests that the bullish bias remains intact in the near term.

The US Dollar outperformed its major rivals midweek following the inflation report. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) and the core CPI both increased by 0.3% on a monthly basis, matching market forecasts.

Later in the day, the BLS will publish the Producer Price Index (PPI) data for November and the US Department of Labor will release the weekly Initial Jobless Claims figures. Markets expect the number of first-time applications for unemployment benefits to decline to 220,000 from 224,000. In case this data arrives above 230,000, the USD could come under pressure and help GBP/USD push higher.

Meanwhile, US stock index futures were last seen losing between 0.2% and 0.3%. A bearish opening in Wall Street could cap GBP/USD’s upside in the early American session.

Investors will also pay close attention to the European Central Bank’s (ECB) policy announcements. A dovish ECB surprise, be it a 50 basis points (bps) rate cut, or a 25 bps cut with a dovish policy statement, could trigger a Euro selloff. In this scenario, Pound Sterling could capture capital outflows out of the Euro and stay resilient against the USD.

GBP/USD Technical Analysis

In case GBP/USD continues to trade above 1.2750-1.2760 area, where the Fibonacci 50% retracement of the latest downtrend and the 200-period Simple Moving Average (SMA) are located, it could meet the next resistance at 1.2800 (Fibonacci 61.8% retracement) before targeting 1.2850 (static level).

On the downside, immediate support aligns at 1.2730 (50-period SMA) ahead of 1.2700 (Fibonacci 38.2% retracement) and 1.2670 (100-period SMA).

Created on December 11, 2024

• As previously anticipated, the EUR/USD pair remains under downward pressure near and below the psychological support level of 1.0500.
• This is pending the reaction of financial markets and investors to the announcement of US inflation figures today, which will directly impact market expectations for the future of US Federal Reserve policies.
• Tomorrow, the important European Central Bank announcement will take place.

US Inflation Expectations

The most important data in today’s economic calendar. The announcement of the US consumer price index readings, and the index is expected to rise for the fourth consecutive month. The core CPI reading – without food and energy prices – is expected to record 0.3 percent. With the announcement of consumer prices and the announcement of US producer prices later this week, the complete picture of what the US Federal Reserve’s decision will be next week is formed, and the comparison between them and the numbers that will occur under Trump’s official leadership of the US economy during the year 2025. As is known, Trump’s hostile trade policy supports the rise in inflation rates, which may affect the path of the US Federal Reserve’s policy in the coming months, as a result of which I expect the bank to stop the path of reducing US interest rates.

German Inflation Hits a 4-Month High

According to an official announcement, the annual inflation rate in Germany rose to 2.2% in November 2024, up from 2% in October, in line with initial estimates, and the announcement represents the highest level in four months. According to the announcement, service inflation remained unchanged at 4%, while energy costs declined at a slower pace (-3.7% versus -5.5% in October). At the same time, food inflation slowed to 1.8%, compared to 2.3% in the previous period. On a monthly basis, German consumer prices fell by 0.2%, in line with initial estimates, following a 0.4% increase in October.

Core inflation, which excludes volatile food and energy prices, reached a six-month high of 3% in November. The harmonized inflation rate for the European Union remained at 2.4% annually, confirming the initial estimates. Harmonized consumer prices fell by 0.7% monthly, in line with preliminary data, reversing a 0.4% increase from the previous month.

European stocks halt rally

According to stock trading company platforms, European stock market indices halted a recent upward wave, and according to trades, the Stoxx 50 index declined by 0.7% and the Stoxx 600 index fell by 0.5%, led by a 1.1% decline in industrial stocks. Weaker-than-expected Chinese import and export data affected mining stocks, which fell by 0.8%, and at the same time, investors are cautiously awaiting the announcement of US inflation figures today.

Trading Tips:

The euro-dollar price will remain on a downward path, whatever the US inflation figures today. Cautiously, eyes are turning with the European Central Bank announcement, and selling the euro-dollar is still in place.

EUR/USD Analysis Today:

My technical view of the EUR/USD pair performance has not changed. The overall trend is still downward, and the movement around and below the psychological support level of 1.0500 still supports the bears’ strong control over the trend. Regarding the performance of technical indicators, the RSI is still heading downward, and at the same time, the MACD is strongly bearish, confirming the bears’ opportunity to move towards deeper support levels, the closest of which is currently 1.0435 and 1.0300, which in turn will move the technical indicators towards strong oversold levels and increase expectations towards the future of the Euro-Dollar’s equilibrium price.

On the other hand, and on the same time frame, the daily chart will not witness an initial break of the downtrend without moving towards the resistance levels of 1.0680 and 1.0800 respectively.

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