ExchangeRates.org.uk - The Pound to Dollar (GBP/USD) exchange rate was unable to regain the 1.2700 level and retreated to just below 1.2650 after the latest US jobs data. Scotiabank (TSX:BNS) commented; “The potential for a bit more strength in the pound remains but, realistically, this is not something that is likely to develop without other currencies making a move against the USD as well.
Resistance is 1.2760.
Support is 1.2610.”
The Pound to Euro (GBP/EUR) exchange rate consolidated just below 1.2050 with the Pound unable to take further advantage of a fragile Euro.
There are further concerns surrounding the French political situation with a no-confidence vote due on Wednesday.
There are also strong expectations that Prime Minister Barnier will be defeated and that the government will collapse.
ING commented; “Given the challenges in appointing Barnier as prime minister, the likelihood of finding a replacement quickly is highly uncertain.
With an extremely polarised National Assembly divided into three major camps – left, centre-right and extreme right – who are unable to reach a compromise, the risk of a new vote of no confidence for any new government is very high.”
President Macron is unable to call fresh elections until July 2025, increasing the risk of prolonged uncertainty.
ING added; “This French political stand-off is just one more negative for the euro.
With the eurozone economy facing the threat of tariffs in 2025 and the region lacking any prospect of cohesive fiscal support, the potential fall of the French government merely adds to views that the ECB will have to do the heavy lifting in 2025.”
MUFG took a similar view; “The unfavourable political developments add to downside risks for the euro alongside a potential trade war with the US.”
As far as US interest rates are concerned, Fed Governor Waller stated, “I lean towards supporting a cut in December.”
He did, however, comment that he could change his mind if the data releases are very strong.
The latest JOLTS data recorded an increase in job openings to 7.74mn for October from a revised 7.37mn previously and above consensus forecasts of 7.50mn.
The release was not strong enough to shift the dial on Fed expectations, but data will continue to be watched closely given the potential impact on interest rates.
In particular, Friday’s employment report will be a key focus for markets.
According to Danske Bank (CSE:DANSKE); “We still expect the Fed to cut by 25bp and also continue to reduce rates well below markets' current pricing in 2025.
A dovish shift to the markets' Fed expectations could also cool down the latest USD rally, even if the structural outlook remains strong.”
It added; “improved risk sentiment and seasonal equity strength in especially the latter half of the month tend to reduce demand for the safe-haven USD.
This content was originally published on ExchangeRates.org.uk