Australian Dollar Rebounds as Federal Reserve Signals Likely Pause; Focus on Job Growth and Rate Expectations

UK economy shrinks 0.3% in October
Markets price in three rate cuts from the BoE next year
EURGBP spikes ahead of BoE and ECB announcements tomorrow

The UK economy got the fourth quarter off to a bad start, contracting by 0.3% in October from the month before.

The UK economy is struggling under the pressure of higher interest rates and it seems wet weather compounded those challenges for retailers, encouraging consumers to stay indoors.

There’s every chance spending bounces back in November and December, with the weather being less of a deterrent and households spending more ahead of the festive period. That said, they may well be looking at a more slimmed-down Christmas this year after two years of high inflation which could leave the economy at risk of recession. Which may explain why interest rate expectations have fallen next year.

EURGBP pares losses ahead of ECB and BoE

The euro has recently clawed back some losses against the pound after slipping back toward the summer lows, which it fell just short of.

The question now is whether the pair has simply respected an established support zone or is going to take another run at it. The Fibonacci retracement levels could offer some insight on this front after such a sharp sell-off towards the end of November.

There’s a potential confluence of resistance around these as well from recent areas of support – which could become resistance – to simple moving averages. A rotation around these points could be a bearish signal either in the run-up to, or after the BoE and ECB interest rate decisions on Thursday.

Kenny Fisher

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.