The euro plunged to new lows after the European Central Bank rate cut but could still have further to fall should eurozone GDP data covering the third quarter raise concerns of additional ECB stimulus. In contrast, the US dollar appears to be building a broad upward trend after much stronger-than-expected US non-farm payrolls data revived speculation about the Federal Reserve possibly cutting its stimulus programme at its December meeting. The sterling could strengthen going into the announcement but any rally may collapse if Governor Mark Carney toughens the BoE’s low-rates-for-longer message to keep the bank’s forward guidance policy acting as stimulus for the UK economy.Several Federal Reserve officials will be speaking ahead of weekly US jobless claims data. The UK house price report could have a strong impact on the British pound.

Sterling

The pound may strengthen going into this week’s key Bank of England quarterly inflation report if strong UK house price data, due for release, bolsters views that Governor Mark Carney may suggest that interest rates could rise sooner than initially forecast. Analysts expect RICS housing survey to show another gain in prices in October after September’s report showed that prices rose at their fastest rate in 11 years. Any hints about rate hikes in the inflation report could see sterling retest January highs against the US dollar.

US dollar

The US dollar rose sharply at the end of last week and may start to build an upward trend after better-than-expected US GDP and jobs data revived speculation about a Federal Reserve stimulus taper in December. October non-farm payrolls data showed US firms adding 204,000 jobs which were almost double the 120,000 markets were anticipating as a result of last month’s government shutdown. Initial third quarter GDP data showed the US economy expanded at an annual rate of 2.8 per cent versus analysts’ estimates of two per cent growth.

Euro

The euro plunged to a nine-month low against the British pound after the European Central Bank slashed interest rates to a new record-low. There could be further downside ahead for the single currency if GDP data shows the eurozone economy barely grew over the third quarter with the region’s bigger economies suffering slowdowns. Economists expect euro area growth of just 0.1 per cent between July and September, down from a 0.3 per cent jump in Q2 which ended a record-long recession.

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