the forex markets in Europe
As of January 20, 2025, the forex markets in Europe and the United States are experiencing significant movements influenced by recent economic data and geopolitical developments.
Euro (EUR) and US Dollar (USD):
The EUR/USD pair has been under pressure, with key support at 1.0176 (year-to-date low on January 13) and the parity level (1.0000). Resistance is observed at 1.0436 (2025 high on January 6) and 1.0506 (55-day Simple Moving Average). The broader bearish trend persists as long as the pair remains below the 200-day SMA at 1.0779. Recent U.S. economic data, including a 0.4% rise in retail sales and an increase in unemployment benefit applications, have contributed to the dollar's movements. Additionally, the Philadelphia Fed Business Index surged unexpectedly, contrasting with the overall dip in the U.S. dollar index to 108.97. Market expectations are for the Federal Reserve to implement rate cuts this year, influenced by softer consumer price data and anticipation of President Donald Trump’s policies upon his return to the White House.
British Pound (GBP):
The British pound remains under pressure following a surprisingly weak retail sales report, which unexpectedly dropped by 0.3% in December 2024. This follows a disappointing GDP report for November that fell short of market expectations. These developments have led to a decline in GBP/USD, with the pair trading around 1.2300. The pound also experienced a sharp drop against the yen, influenced by monetary policy divergence after last week's selloff in gilts and the pound.
Japanese Yen (JPY):
The U.S. dollar weakened against the yen, reaching a near one-month low at 155.2 yen. This shift is attributed to softer-than-expected U.S. economic data and growing confidence in a potential interest rate hike by the Bank of Japan (BOJ). Remarks from BOJ officials suggest a 79% chance of a 25-basis-point increase, with Japan's annual wholesale inflation steady at 3.8% in December.
These developments highlight the dynamic nature of the forex markets in Europe and the United States, influenced by economic indicators, central bank policies, and geopolitical events.