GBP took a dive yesterday after UK construction PMI showed the sector contracted more than expected in February, falling to the lowest level since May 2020 and highlighting concerns in the sector.
The European Central Bank (ECB) cut rates by 0.25% as widely expected and EUR drew additional support after the ECB stated that rates are “becoming meaningfully restrictive”. Current expectations are now only two additional rate cuts by the ECB this year.
*Daily move - against G10 rates at 7:30am, 07.03.25
** Indicative rates - interbank rates at 7:30am, 07.03.25
It is nonfarm payroll day and markets expect 160,000 jobs to have been added, whilst the unemployment rate is expected to remain at 4%. As we said earlier this week, it will need a really strong number to stop the USD depreciation that we’ve seen all week. GBPUSD and EURUSD still remain near four-month highs.
The main talking point has been the EUR rally this week, with the currency eyeing up its best weeks versus USD since 2009 bolstered by Germany being perceived as more of a fiscal stimulator than a detractor. Versus USD, technical indicators suggest that EURUSD is overbought and a retracement could be due. Against GBP, the same indicator doesn't suggest the move is overdone, leaving potential for EUR to gain further versus GBP. The next level of support for GBPEUR is at the low last seen in January.
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