GBP/USD Strengthens on Dollar Softness and Policy

The GBP/USD pair traded near 1.3230^[1] in Friday’s Asian trading hours, continuing its upward stride amid ongoing US dollar weakness. This latest surge builds on the week’s overall bullish momentum, pushing the pair to its highest levels^[2] seen in several months. While market sentiment still leans towards further gains in the near term, momentum indicators are hinting that the rally could be approaching overextended levels ahead of upcoming important US economic data^[3].

Market reports^[4] point out that the recent market move has been driven by a swift repricing of expectations for Federal Reserve (Fed) policy. According to the CME FedWatch Tool^[5], markets now give over an 87% chance of a 25 bps rate cut in December, a sharp rise from roughly 39% just a week ago. Softer US economic data lately, combined with speculation that Kevin Hassett^[6] might be named the next Fed chair, has strengthened the belief that the Fed could pivot more decisively towards easing early in 2025. This shift has put downward pressure on US Treasury yields and weighed on the dollar across the board, providing support for the pair.

Market commentators^[7] point out that sterling has also benefited from some gentle support stemming from domestic developments. Market participants are absorbing UK Chancellor Rachel Reeves’^[8] recent budget proposals, where the reaffirmed focus on fiscal discipline has helped bolster the pound. While the early release of the Office for Budget Responsibility’s updated forecasts signalled slower UK growth, the unexpectedly large £22 billion^[9] fiscal buffer offered a reassuring counterweight. This helped ease some of the downward pressure on the currency.

Analysts^[10] suggest that in the coming weeks, US data, especially the ISM surveys and labour market statistics, will be crucial for short-term direction. Any indication of further slowing could strengthen expectations of a rate cut in December, providing extra support to the currency pair. Nevertheless, medium-term risks remain for sterling, particularly if UK fundamentals keep weakening or fiscal tightening ends up being more damaging to growth than expected. The GBP/USD exchange rate climbed to near 1.3230, buoyed by US dollar weakness and growing expectations of a Federal Reserve rate cut in December.

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EUR/USD Edges Lower Amid Shifting Policy Expectations

EUR/USD eased back, trading near 1.1590^[11] in Friday’s Asian session after gaining for three days in a row. This pullback reflects a steadying in the US dollar^[12], which is halting its recent fall as markets reassess the prospects for Fed policy. The pair’s failure to push higher points to short-term consolidation, though dips remain fairly modest as traders consider evolving expectations around US monetary easing.

Market reports^[13] indicate that sentiment has shifted decisively towards a December rate cut. The CME FedWatch Tool now prices in an 87% chance of a 25-basis-point reduction, significantly higher than last week’s 39%. This shift follows speculation that Kevin Hassett^[14], widely seen as favouring lower rates, is the frontrunner for the next Fed chair. Growing anticipation of a more dovish policy, along with expectations for further cuts throughout 2026^[15], continues to limit the dollar’s upside potential. Upcoming US data releases, especially inflation and labour-market figures, will be closely watched and could reinforce downward pressure if they suggest a further cooling in economic momentum.

Market commentators^[16] on the European side noted that the EUR found modest support following the release of the European Central Bank (ECB) Minutes. The report indicated that policymakers generally feel comfortable with current interest rate levels. While some Governing Council^[17] members recognised ongoing uncertainty, several suggested that the rate-cut cycle may be effectively over, citing steady growth and inflation gradually approaching the target. This lowers the chances of further easing in the near term and offers gentle support for the pair during dips.

Analysts^[18] suggest that, in the short term, the pair is expected to stay supported above the 1.1550–1.1580 zone, although the broader outlook still involves medium-term risks. Should forthcoming US data deteriorate further and strengthen expectations of an extended Fed easing phase, the dollar^[19] could come under renewed downward pressure. On the other hand, any signs of stabilisation in US economic indicators might curb EUR/USD gains and keep the pair confined to a cautious, data-driven range. The EUR/USD exchange rate remains supported above 1.1550, with market focus on upcoming US data and evolving expectations for Fed rate cuts.

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USD/CAD Edges Higher Amid Diverging Policy Outlook

The USD/CAD pair inched higher, trading close to 1.4040^[20] in Friday’s Asian trading hours as the US dollar seeks to steady itself after a week of softer sentiment. The price action remains positive in the short term, with the pair supported by a mix of steady US yields^[21] and renewed softness in the Canadian dollar. Yet, the broader upside seems limited as markets continue to factor in further monetary easing from the Fed, curbing the greenback’s ability to maintain gains over the longer run.

Market reports^[22] point out that expectations for a rate cut in December have risen notably following recent dovish remarks from Fed officials. Comments from San Francisco Fed President Mary Daly and Governor Christopher Waller^[23] underscored concerns about labour-market weakness. They also highlighted the impact of delayed economic data, reinforcing the likelihood of a further 25-basis-point cut next month. Fed funds futures currently imply an 87% chance of a December rate cut^[24], a sharp jump from roughly 39% a week ago, setting a slightly negative tone for the dollar over the medium term.

Market observers^[25] note that pressure on the Canadian dollar has increased as crude oil prices continue to slide, with optimism around a possible ceasefire between Russia and Ukraine weighing on energy markets. Given that Canada is the largest oil exporter^[26] to the US, weaker crude prices typically translate into less favourable domestic terms of trade, providing a tailwind to the currency pair in the near term.

Market reports indicate that focus is shifting to upcoming Canada’s third-quarter GDP release^[27], alongside forthcoming US data including PMIs, jobless claims, and personal consumption figures. Any indication of continued US economic softness could bolster expectations of Fed easing, dampening upside momentum in the pair, even as near-term support holds firm. The USD/CAD exchange rate edged toward 1.4040 as weaker crude prices supported the pair, even while expectations of a December Fed rate cut limited broader upside.

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NZD/USD Climbs as Sentiment Supports Kiwi Strength

The NZD/USD pair traded near monthly highs around 0.5710^[28] in Friday’s Asian session, consolidating the strong rebound observed over the past week. Price action has settled just below a short-term descending trend line drawn from the October peak, with bulls awaiting a clear break above this resistance before aiming for further gains. Until then, the pair is expected to maintain a constructive bias but remain within a fairly contained range.

Market reports^[29] highlight that support for the New Zealand dollar remains firmly anchored by the Reserve Bank of New Zealand’s (RBNZ) firm stance. Despite the central bank implementing a fully anticipated 25 basis points rate cut earlier this week, policymakers conveyed that the easing cycle is essentially over. This shift in tone helped bolster demand for the kiwi. Stronger-than-expected New Zealand Retail Sales figures^[30] on Thursday have further fuelled this momentum. A broadly improved risk appetite across markets has also helped keep the New Zealand dollar well supported against the softer US dollar.

Market commentators note that the US dollar^[31] has struggled to extend Thursday’s modest recovery, with buyers remaining cautious. Growing expectations that the Federal Reserve will deliver another rate cut in December continue to limit the greenback’s upside. Recent remarks from Fed officials have taken a dovish tone. This week’s mixed US economic data^[32], showing uneven labour market figures and easing activity indicators, has done little to dispel the likelihood of further policy easing. The absence of strong US economic momentum continues to weigh on the greenback’s short-term outlook.

Analysts^[33] suggest that, with no significant US data due for release on Friday, the pair appears set to close the week with steady gains. The core fundamentals back the ongoing recovery from last week’s April low near 0.5580^[34], though the pair faces medium-term risks if US data weakens further or global risk sentiment takes a turn for the worse. A sustained break above the October trendline remains the crucial trigger for the next bullish phase. The NZD/USD exchange rate is holding near monthly highs as strong New Zealand fundamentals and a softer US dollar support the pair’s continued recovery.

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