Created on December 31, 2024

• Bulls failed again to push the EUR/USD price higher in the last trading of 2024 as it tried to rebound towards the resistance level of 1.0458.
• With no strength factors, the EUR/USD price returned in its broader downward path, settling down around the support level of 1.0372, near its lowest in two years.
• Furthermore, the recent gains of the euro came with temporary momentum after the announcement of stronger-than-expected Spanish inflation figures. But why Spain?

According to economists, the inflation process is moving faster in Spain compared to other Eurozone countries. Therefore, this data will confirm the assessment of a member of the European Central Bank’s Governing Council who confirmed that the next interest rate cut by the ECB may take longer after the recent rise in inflation.

Euro Dollar losses may continue in 2025

Forecasts from forex market analysts indicate that the performance of the EUR/USD pair during January 2025 will continue the current downward trend. Experts believe that January is historically negative for the performance of the euro against the US dollar. In addition, the US dollar finds strength factors at the same time, which ensures stronger downward breakouts for the euro dollar in the coming days.

Trading Tips:

The recent performance confirms the strength of our technical view of the Euro that it will remain under downward pressure and any attempts to rebound upwards may be temporary

US Stock Markets May Close for an Exceptional Event

The US stock markets have been officially announced to close on January 9, 2025, in celebration of a National Day of Mourning for former US President Jimmy Carter. In this regard, the companies listed on the market said that the New York Stock Exchange and the US stock exchanges of Nasdaq and CBOE Global Markets will be closed. For its part, CME Group, the operator of stock markets and interest rates in the United States, has not yet commented on its plans. Meanwhile, the US bond market will close at 2pm New York time, as recommended by the Securities Industry and Financial Markets Association. Generally, the closures are part of a long-standing US tradition where financial institutions cease operations after the death of a US president.

EUR/USD Analysis Today:

The broader trend of the EUR/USD pair remains downward. Clearly, the chances of the EUR/USD moving towards parity are strong if the factors of euro weakness persist. Meanwhile, the US dollar price remains supported by Trump’s trade and the demand for it as a safe haven. Technically, the gains made by the EUR/USD pair raised the exchange rate above its nine-day exponential moving average (EMA), which represents the first truly positive technical development in some time. If the EUR/USD pair closes above this indicator – which is currently at 1.0432 – further gains could take it into the first week of January 2025. However, this will not be until next Friday when the first real test of important economic data for 2025 comes in the form of the first US non-farm payrolls report for the year.

The broader expectation is that the report will show continued strength in the US labour market, justifying the Federal Reserve’s decision to pause US interest rate hikes. However, the biggest surprise would be a weaker-than-expected US jobs number, which could lead to a decline in the US dollar. Moreover, given all the survey evidence we see, this is unlikely, and the US dollar’s ​​superiority could extend.

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Image © Bank of England

Corpay releases forecasts for the GBP/USD and GBP/EUR exchange rates.

The British pound is likely to experience a volatile year, with initial weakness followed by a potential recovery.

This is according to Corpay, the global financial payments firm, which has released its 2025 forecasts for the major currencies.

Karl Schamotta, Chief Market Strategist at Corpay, says the British pound is set for a turbulent 2025 owing to a mix of domestic economic challenges, potential interest rate cuts, and international factors, including U.S. policy changes.

While the start of the year may be difficult, there are factors that could support a recovery later in the year and GBP/USD could breach the 1.30 threshold is possible by year-end.

Initial Weakness

The pound is expected to experience a turbulent start to the year, with a potential for weakness against the dollar amidst a loss of economic momentum

The UK economy slowed sharply over the second half of 2024, leading to softening labour markets, wage pressures, and lower inflation expectations.

Bank of England Rate Cuts: The Bank of England (BoE) is expected to cut interest rates more aggressively than markets anticipate. This will limit the extent to which interest differentials can support the currency against the euro.

“We think the Bank of England will cut rates more aggressively than markets anticipate in the near term, limiting the extent to which interest differentials can support the currency against the euro,” says Schamotta.

Goldman Sachs point forecasts for 2025 are out, showing ongoing resilience for GBP/EUR. But how high can the exchange rate go? Find out more.

Consumer Spending: With Bank Rate projected to fall well below 4%, consumers should experience a substantial improvement in real disposable incomes, adding to an already resilient demand backdrop.

Potential for Dollar Strength: If the US dollar gains in the first quarter, the pound could suffer along with other global currencies, says Corpay. The trade protectionist policies of Donald Trump are widely cited as being a potential source of support to the Dollar in the coming year.

This can put Pound-Dollar under pressure.

Services-Focused Economy: Underpinning Sterling’s resilience is the UK’s services-focused economy. This offers some insulation against a turn toward trade protectionism in the US, especially when compared to goods-dependent countries in the Eurozone.

Fiscal Policy: Corpay says the Labour government’s expansionary fiscal policy is likely to provide a strengthening tailwind to growth as the year progresses.

Potential for Recovery: Despite the initial challenges, Corpay analysis shows the pound can recover as the year progresses. A recovery is expected once markets have more soberly evaluated the likely direction of US policy.

The forecast for the Pound to Dollar pair in the source is 1.27 in Q1, 1.28 in Q2, 1.29 in Q3, and 1.30 in Q4.

“We think the pound could suffer along with its global counterparts if the greenback adds to its recent gains in the first quarter, but expect that a recovery will begin once markets have more soberly evaluated the likely direction of US policy,” says Schamotta.

GBP/USD investment bank consensus forecasts: The end-2024 and 2025 guide from Corpay has been released. It shows a sizeable uplift was made to the consensus forecasts for GBP/USD. Please request a copy here.

Possible Euro to Pound Scenarios

Early 2025: The Euro may initially struggle against the Pound due to the Eurozone’s economic issues and the anticipated European Central Bank (ECB) rate cuts.

However, the Pound is also facing its own headwinds, meaning there may not be a decisive move in either direction initially.

Mid- to Late-2025: As the year progresses, the Pound’s recovery, driven by fiscal policy and potential consumer spending increases, could see it outperform the Euro.

However, a Eurozone recovery based on increased spending and investments could counter this.

The derived EUR/GBP forecast from Corpay suggests a gradual appreciation of the Euro against the Pound throughout 2025:

Q1 2025: The EUR/GBP rate is approximately 0.8190.

Q2 2025: The EUR/GBP rate is approximately 0.8200.

Q3 2025: The EUR/GBP rate is approximately 0.8220.

Q4 2025: The EUR/GBP rate is approximately 0.8230.

Based on this calculation, the derived GBP/EUR forecast suggests a gradual depreciation of the Pound against the Euro throughout 2025:

Q1 2025: The GBP/EUR rate is approximately 1.2210.

Q2 2025: The GBP/EUR rate is approximately 1.2200.

Q3 2025: The GBP/EUR rate is approximately 1.2170.

Q4 2025: The GBP/EUR rate is approximately 1.2150.

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December 31, 2024 – Written by Frank Davies

STORY LINK US Dollar to Yen Forecast: Clash of Economics and Politics, 140 or 160 in 12 months

The latest monetary policy statements triggered dollar gains and yen losses, with the dollar-to-yen (USD/JPY) exchange rate jumping to five-month highs near 158.

The Pound to Yen (GBP/JPY) exchange rate is trading around 197.

Monetary policies will remain a key element during 2025, although geo-political developments will also have a key impact as the Trump Administration takes office.

HSBC expects a firm dollar tone will dominate; “our view is that it will resume rising when the broad USD breaks out of its consolidation and starts to strengthen again.”

It has an end-2025 USD/JPY forecast of 160. It also expects GBP/JPY to hold at 197 by the end of next year.

Danske Bank expects further Fed interest rate cuts will be the dominant factor with USD/JPY sliding to 140 at the end of 2025.

It forecasts GBP/JPY will post sharp losses to 171 by the end of 2025.

The Bank of Japan made no changes to monetary policy at the December meeting with interest rates held at 0.25%.

MUFG commented; “More importantly, Governor Ueda refrained from sending a strong signal that the BoJ is planning to hike rates at the next policy meeting on 24th January. He only added that there will be a certain amount of information available by the next meeting while emphasizing that the full picture on the wage trend will be clear in March or April.”

According to Bank of America; “Looking ahead, we remain comfortable with our forecast that the BoJ will deliver its next hike, to 0.5% at the January ’25 MPM, followed by two more 25bp hikes to 0.75% in July ’25 and 1% in January ’26.”

It added; “As the US presidential inauguration day comes a few days ahead of the BoJ’s Jan MPM, a hike at the Jan MPM is not a done deal.

MUFG added; “It has provided a green light for speculators to rebuild short yen positions and increases the likelihood that USD/JPY will rise back up toward year to date highs at just above the 160.00-level.”

The Federal Reserve cut interest rates by 25 basis points to 4.50%, but there was a significant shift in forecasts with committee members now only projecting two rate cuts for 2025 compared with four in the September set of forecasts.

Fed Chair Powell’s rhetoric was also relatively hawkish with comments that the pace of rate cuts could slow.

ING commented; “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%.”

In contrast, Danske Bank expects a firm yen tone; “We believe the Fed is likely to cut rates more aggressively than markets currently anticipate in 2025, which could push the pair lower.”

Dollar and wider currency policies will be potentially very important.

ING commented; “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.

There will also be pressure for Bank of Japan intervention to support the yen if there is excessive weakness.

At this stage it has an end-2025 forecast of 160.

ING also forecasts GBP/JPY at 198 at the end of 2025.

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TAGS: Japanese Yen Forecasts

Created on December 31, 2024

• The British pound has initially tried to rally during the trading session on Monday, but as you can see, the 1.26 level has offered a significant amount of resistance. And then we turned around and fell hard.
• The 1.25 level is an area that continues to see a lot of support.
• It’s a large round, psychologically significant figure, and an area that’s been important times.

The question now is what happens next because we are at a major inflection point. If the market were to break down below the 1.25 level, then you could see a drop to the 1.23 level pretty quickly. The US dollar is by far the strongest currency of the majors around the world and with interest rates in America being so high it makes quite a bit of sense. With this I think you’ve got a situation where you continue to look at rallies as selling opportunities. Now, having said that, the British pound is faring better against the US dollar than many other currencies.

British Pound Decent Overall, but not Here.

So, you can also take this and use this as part of your analysis to perhaps buy the British pound against the Australian dollar, which is doing so much worse. It isn’t necessarily that the British pound is going to go flying. It’s just that it’s doing better than these other currencies. As far as against the US dollar is concerned, the 1.2750 level above will continue to be a significant barrier. It’s not until we break above there that I think the market really has a significant chance to take off to the upside. And it’s probably worth noting that the 1.2750 level is also backed up by the 50-day EMA as well as the 200-day EMA. I remain a fade the rallies trader in this market.

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Created on December 31, 2024

• We initially tried to rally a bit and recover, but I think it’s obvious that the only currency that you want to own as far as the majors will be the US dollar.
• Interest rates continue to favor the US dollar as they are going higher, despite the fact that the Federal Reserve has been cutting.
• This isn’t normal, and therefore it is something that must be paid close attention to.

Furthermore, you also have to keep in mind that the ECB is going to have to cut rates, and the European Union economy is just poor. EUR/USD is a market that I think continues to consolidate between the 1.03 level and the 1.06 level. Any rally that leads towards the 1.06 level I would look at with suspicion, I would not hesitate to start shorting it at the first signs of exhaustion. It looks like that’s what traders did during the session on Monday.

Liquidity and Volume During this Time of the Year

Now, having said all of that, we do have to worry about liquidity, and that might have made the move in both directions a little overdone as far as the reality of it is concerned. But it is still a market that I do not want to get long in. I want to short this market, and we need to break above the 1.06 level to even have the conversation of going long the euro. I don’t want to play the bounce because there’s no reason for this thing to stay up here from a fundamental standpoint at the moment. You can’t just buy something because it’s fallen too far. That’s a great way to lose money. If we clear 1.03 to the downside, we’re going to parity. And that is what I expect to see sometime in 2025.

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Created on December 30, 2024

My previous GBP/USD signal on 16^th December produced a losing short trade from the rejection of the resistance level at $1.2667.

Today’s GBP/USD Signals

• Risk 0.75%.
• Trades must be entered prior to 5pm London time today.

Long Trade Ideas

• Long entry following a bullish price action reversal on the 1H1 time frame H1H1H1 timeframe immediately upon the next touch of $1.2555or $1.2502. 
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 25 pips in profit.
• Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

Short Trade Ideas

• Short entry following a bearish price action reversal on the 1H1 time frame H1H1H1 timeframe immediately upon the next touch of $1.2589 or $1.2609.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 25 pips in profit.
• Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

GBP/USD Analysis

I wrote in my previous GBP/USD forecast two weeks ago that price was likely to range between nearby support and resistance levels. I was wrong about that.

The technical picture now is more bearish in the sense that the price is lower, but the key takeaway about this currency pair is that both the British Pound and the US Dollar are showing relative strength, with the US Dollar taking the lead.

As both are strong currencies, and as markets are quiet on this year-end Monday without any obvious rally going on, we are likely to see very limited price movement today.

Limited movement means that if you must trade this currency pair, the best strategy to adopt today will likely be to scalp bounces off the nearest support and resistance levels.

The resistance level at $1.2589 looks likely to be strong, so that might be the best scalping opportunity that could set up today.

There is nothing of high importance due today concerning either the GBP or the USD.

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Created on December 30, 2024

• You can see that the Euro has gone back and forth during the trading session on Friday, as we continue to hang around the 1.04 level.
• All things being equal though, this is a market that is probably going to struggle to continue any type of momentum between now and possibly as long as the non-farm payroll announcement in January.
• The holiday season, the New Year’s, Christmas, etc. are all coming in and taking out some of the liquidity.

It might be the thing that saved the euro. Interest rates in America continue to climb and I think that does end up being a thorn in the side of the euro as the US dollar will remain very strong. But ultimately this is a situation where traders will have to look at this as a market I believe that consolidates between the 1.03 level on the bottom and the 1.06 level on the top.

The market trading back and forth in this 300 point range is very choppy and very difficult to get aggressive in. If we do get the occasional rally, and I think we probably will, the 50 day EMA is near that crucial 1.06 level. And of course, the 1.06 level has been important multiple times.

Still Fading Rallies

So, I think this remains very much a fade the rally type of scenario if we were to break down below the 1.03 level. And I’m not surprised if we do, we go looking to parity sometime in 2025 and that actually is my forecast. I just see no reason for the Euro to gain any real strength. At best, you’re looking at sideways action for the foreseeable future. In fact, I don’t really have a scenario in which I’m willing to buy the euro against almost anything, perhaps with the exception of the Japanese yen. Even then, there are a handful of other currencies I’d rather run to.

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December 22, 2024 – Written by David Woodsmith

STORY LINK Pound to Euro Rate End-of-Year Forecast: Steady Path to 1.25 in 2025

Foreign exchange strategists at HSBC forecast that the Pound to Euro (GBP/EUR) exchange rate will strengthen steadily to 1.25 at the end of 2025.

Nordea, however, expects that GBP/EUR will slide to 1.1365 at the end of next year.

GBP/EUR fleetingly hit a 33-month best at 1.2160 during the week before a sharp retreat to around 1.2060 following the Bank of England (BoE) policy meeting.

The BoE held interest rates at 4.75% at the latest policy meeting which was in line with strong consensus forecasts.

There was, however, an unexpected 6-3 vote for unchanged rates as Dhingra, Ramsden and Taylor voted for a cut.

The bank also expressed some reservations over the economic outlook and stagnation risk.

The vote plot and statement triggered stronger expectations of a cut in February and the Pound lost ground.

Danske Bank still expects a cautious BoE stance; “The still cautious guidance highlights the more gradual approach of the BoE compared to European peers. We think this supports our case of a continued move lower in EUR/GBP.”

Credit Agricole added; “All in all, it would require a shockingly fast deterioration in the UK jobs market to eventually revive the prospects of more frontloaded monetary easing than the quarterly cut being priced in by UK money markets. In the meantime, the GBP could continue to make the most of its status as a higher-yielding safe-haven proxy for the EUR.”

ING, however, expects that the BoE will be much more dovish; “The apparent growing dovish front within the MPC in spite of the latest hawkish wage data potentially suggests a greater focus on slowing activity. That reinforces our dovish view on the Bank of England for next year – we expect 150bp of cuts, against market expectations for around 55bp.”

At this stage, Nordea expects the ECB will cut rates to 2.25% by April and then turn more cautious; “After this, we do not have any rate changes in our baseline until the end of 2026. The rebound in the services PMI number earlier this week kept alive the prospect of the economy gradually recovering.”

HSBC, however, expects that the central bank will be more aggressive; “we think there is a growing risk that the ECB cuts interest rates below the perceived neutral rate to stimulate the economy, possibly even to as low as 1.00%. In doing so, this would widen the interest differential between the eurozone and UK, sending EUR-GBP lower.”

Nomura took a similar view; “We expect GBP to continue to gain ground gradually against other currencies where their respective central banks are more concerned about the downside risks to growth rather than sticky price pressures.”

HSBC also considers that the Pound structural position has improved; “Although still plagued by numerous headwinds to growth, we think the UK is better positioned to face the current set of global challenges than the eurozone.”

Bank of America noted some positioning concerns, but suggests buying on dips; “Heading into 2025, we think the case for further GBP gains are likely.”

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TAGS: Currency Predictions Pound Euro Forecasts