Created on November 14, 2024

• Alongside the anticipated Trump policies – a stronger US dollar – US inflation figures came in stronger than expected.
• This brought more heavy losses to the performance of the EUR/USD currency pair, with losses extending to the support level of 1.0533.
• Historically, this is the lowest level for the currency pair in a year which it is stable near it at the time of writing the analysis.

What do US inflation figures mean for the strength of the dollar?

Undoubtedly, the rise in US inflation rates has eased the pace of monetary policy easing by the US Federal Reserve, which is positive for the US dollar against other major currencies. Conversely, the European Central Bank is adopting an easing path. The US dollar has gained in the forex market following the rise in the main US consumer price index by 0.2% on a monthly basis in October, bringing the annual rate to 2.6% from 2.4% in September. Generally, the strength of the US dollar reflects the fading expectations of future US interest rate cuts, especially as investors are prepared for inflation to remain above the Federal Reserve’s target of 2.0% for a long time.

Will the EUR/USD reach parity?

There has been increasing talk about the possibility of the EUR/USD moving to parity at 1.1. According to reliable trading platforms, the EUR/USD pair has entered a downward trend in October, with selling intensifying after the unexpectedly strong performance of Donald Trump and the Republicans in the US presidential election vote. Expectations for further collapse of the euro against the dollar have increased as Trump wants to raise tariffs on US imports, which will affect the economies of exporters such as the eurozone. As is known, the United States is the main market for exporting manufactured goods in the eurozone, while any economic blow to China from tariffs will also affect another critical market.

Meanwhile, the ruling coalition in Germany has collapsed, and Europe’s largest economy is now facing a winter of political uncertainty ahead of the February elections.

EUR/USD Technical analysis and forecast:

The overall downward trend of the EUR/USD is gaining strength with the breaking of a key support level of 1.0600. As mentioned in previous technical analyses of the currency pair that this could give bears more strength. Therefore, dear reader, you should expect more downward pressure on the euro against the dollar daily as the picture becomes clearer for the upcoming Trump policies. At the same time, the eurozone, led by Germany, is going through political and economic turbulence.

EUR/USD Buying Signals Today:

Investing.com — UBS has raised its forecast for the in a note Thursday, expecting significant fluctuations in the exchange rate over the coming year.

The bank now projects the currency pair to reach 155 by December 2024, followed by 152 in March 2025, 150 in June, and 147 in September.

By year-end 2025, UBS targets 145, a revision from its earlier predictions of 147, 143, 140, and 138, respectively.

According to UBS, a near-term surge to 158-160 remains possible, especially if U.S. 10-year yields rise another 30-40 basis points, potentially hitting 4.8%.

“Based on sensitivity analysis over the past three years, a 10bp widening of the US-Japan 10-year yield differential coincides with a one-yen rise in the USDJPY exchange rate,” UBS explained.

If U.S. bond yields indeed spike to 4.8%, the bank says USD/JPY could temporarily reach 160, though they view this level as “unsustainable” and likely to invite Japanese intervention, as observed during similar peaks earlier in 2024.

UBS analysts believe the USD/JPY will face downward pressure in 2025, driven by several factors. A key factor is the anticipated Fed rate-cutting cycle, which UBS expects will lead to lower U.S. yields.

“We think current USDJPY levels are higher than justified by yield differentials,” UBS notes, estimating that the currency pair should trend toward 145-146.

Additionally, trade tensions and a potential Trump-led administration’s focus on a stronger yen may reinforce this trend.

For investors, UBS suggests that any near-term spike toward 160 could be an opportunity to “tactically sell USDJPY.” Over the long term, UBS sees multiple forces supporting a downtrend, with USD/JPY likely to end 2025 at 145.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Swiss Franc.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Investing.com — UBS has raised its forecast for the in a note Thursday, expecting significant fluctuations in the exchange rate over the coming year.

The bank now projects the currency pair to reach 155 by December 2024, followed by 152 in March 2025, 150 in June, and 147 in September.

By year-end 2025, UBS targets 145, a revision from its earlier predictions of 147, 143, 140, and 138, respectively.

According to UBS, a near-term surge to 158-160 remains possible, especially if U.S. 10-year yields rise another 30-40 basis points, potentially hitting 4.8%.

“Based on sensitivity analysis over the past three years, a 10bp widening of the US-Japan 10-year yield differential coincides with a one-yen rise in the USDJPY exchange rate,” UBS explained.

If U.S. bond yields indeed spike to 4.8%, the bank says USD/JPY could temporarily reach 160, though they view this level as “unsustainable” and likely to invite Japanese intervention, as observed during similar peaks earlier in 2024.

UBS analysts believe the USD/JPY will face downward pressure in 2025, driven by several factors. A key factor is the anticipated Fed rate-cutting cycle, which UBS expects will lead to lower U.S. yields.

“We think current USDJPY levels are higher than justified by yield differentials,” UBS notes, estimating that the currency pair should trend toward 145-146.

Additionally, trade tensions and a potential Trump-led administration’s focus on a stronger yen may reinforce this trend.

For investors, UBS suggests that any near-term spike toward 160 could be an opportunity to “tactically sell USDJPY.” Over the long term, UBS sees multiple forces supporting a downtrend, with USD/JPY likely to end 2025 at 145.

• US consumer prices increased by 0.2% in October.

• Traders expect Trump’s policies to drive inflation and pause or significantly slow Fed rate cuts.

• BoE’s Catherine Mann noted that inflation might be higher than expected in the medium term.

The GBP/USD forecast shows the dollar at new peaks as the Trump trade overshadows recent inflation figures. As a result, the pound remained weak against the greenback despite hawkish remarks from policymakers.

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On Wednesday, the US released its CPI report, which aligned with expectations. Consumer prices increased by 0.2% in October, while core prices increased by 0.3%. Meanwhile, the annual figure rose by 2.6%. Since the increase in inflation was expected, the Fed will likely lower borrowing costs in December.

The dollar initially retreated before climbing as market participants shifted their focus to Trump’s win. Traders expect Trump’s policies to drive inflation and pause or significantly slow Fed rate cuts.

The next significant reports will include wholesale inflation and retail sales. Producer prices are a leading indicator of future consumer prices. Therefore, rate-cut bets might ease if producer prices are higher than expected. The opposite is also true. Meanwhile, retail sales will show consumers’ financial health. High sales will show robust consumer spending, reducing rate-cut bets. On the other hand, low sales will indicate weak consumer spending, solidifying bets for a December rate cut.

Meanwhile, in the UK, Bank of England policymaker Catherine Mann noted that inflation might be higher than expected in the medium term. Mann is the only policymaker who voted against a rate cut at the last BoE meeting. Market bets for rate cuts in the UK have dropped since the reading of the new government budget. The BoE might only cut rates twice next year. 

GBP/USD key events today

• Core PPI m/m
• PPI m/m
• Unemployment Claims
• Fed Chair Powell Speaks

GBP/USD technical forecast: Bearish momentum head for the 1.2650 level

On the technical side, the GBP/USD price has broken below the 1.2750 key support to make a new low in the downtrend. Moreover, the price trades well below the 30-SMA, showing bears have a strong lead. At the same time, the RSI is in the oversold region, indicating solid bearish momentum. 

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The next target for the pair is at the 1.2650 support level. However, after such a steep collapse, bulls might be preparing to return for a pullback to the 1.2750 level or the 30-SMA.

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• The yen has lost around 30% of its value against the dollar since 2020.

• US Treasury yields and the dollar have risen since Trump won.

• US consumer inflation rose as expected in October.

The USD/JPY outlook shows sharp declines in the yen as the dollar scales new peaks due to optimism about Trump’s election win. Meanwhile, top officials in Japan are getting concerned about a weak yen, with some urging the BoJ to hike rates.

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According to data from the Bank of Japan, the yen has lost around 30% of its value against the dollar since 2020. This decline has come from low interest rates in Japan, which has created a wide rate differential with the US. However, the BoJ recently shifted to rate hikes before pausing amid concerns about market volatility. 

Meanwhile, US Treasury yields and the dollar have risen since Trump won the election. At the same time, Fed rate cut expectations have dropped. Therefore, the hope of quickly shrinking the rate gap is fading. 

On Thursday, a top opposition leader said that the Bank of Japan should raise rates to 1% to support the weak yen. Moreover, he added that the central bank should be vocal about its plans.

Meanwhile, data on Wednesday revealed that US consumer inflation rose as expected in October. On a monthly basis, it increased by 0.2%, while annually, it rose by 2.6%. Therefore, the Fed will likely lower borrowing costs by 25-bps in December. 

However, the outlook for rate cuts in 2025 has changed with Trump as the new president. His policies on taxes and trade will likely be inflationary. Therefore, the Fed might have to pause or cut rates more slowly than expected. 

Elsewhere, the US will release wholesale inflation and retail sales figures, which will continue to shape bets on a December Fed rate cut. Moreover, market participants will pay attention to Powell’s speech.

USD/JPY key events today

• US core PPI m/m
• US PPI m/m
• US unemployment claims
• Fed Chair Powell speaks

USD/JPY technical outlook: Uptrend continues above 156.02

On the technical side, the USD/JPY price has reached a new peak near the 156.02 key level. The price trades well above the 30-SMA, indicating a strong bullish move. Moreover, bullish momentum is strong, with the RSI in the overbought region. 

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Initially, the price had struggled to breach the 154.00 resistance level. However, when it did, bulls confirmed a continuation of the previous bullish trend.

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