EUR/USD, GBP/USD Forecast: Two trades to watch

EUR/USD falls ahead of the ECB rate decision

ECB is expected to cut rates by 25 basis points
The focus will be on guidance
EUR/USD falls below the 200 SMA

EUR/USD is falling for a fourth straight day ahead of the ECB interest rate decision. The central bank is expected to cut interest rates by 25 basis points, bringing the deposit rate to 3.25%. This will mark the third interest rate cut since the central bank started reducing rates in June and the first back-to-back rate cut by the central bank since 2013.

With inflation now below the 2% target for the first time since 2021 and a deteriorating economic outlook, the central bank appears to be ramping up the pace of rate cuts.

Given that the rate cut is priced in, attention will be on the ECB's guidance, which will need to be dovish to pull the euro lower. The market is expecting the ECB to cut rates again in December.

Meanwhile, the US dollar is trading at a 2.5-month high against its major peers on expectations that the Federal Reserve could cut interest rates at a slower pace. Given recent resilience in U.S. economic data and rising expectations that Trump will win the election in November, Trump's core policies are inflationary, which could support further USD gains.

EUR/USD forecast – technical analysis

EUR/USD formed a double top at 1.12 and rebounded lower, taking out 1.10 support and the 200 SMA. The price has steadied at 1.0850, with the RSI in overbought territory. So there could be a period of consolidation or even a move higher.

While the price remains below 1.10, sellers have control. Sellers will look to take out 1.08 and 1.0780 the August low.

Buyers will need a rise above the 200 SMA at1.0870 to extend gains towards 1.10. Above here the recent downtrend is negated.

GBP/USD falls after UK inflation data paves the way for more rate cuts

UK inflation paves the way for a BoE November cut
US rises on Trump trades & lower Fed rate cut expectations
GBP/USD falls below 1.30

GBP/USD Is falling, extending losses from yesterday, with the pair trading at a 2-month low, below 1.30, following yesterday's cooler-than-expected UK inflation data.

With inflation well below the Bank of England's 2% target and service sector inflation falling by the most since 2020, the Bank of England is widely expected to cut rates by 25 basis points next month and could cut rates by a further 25 basis points in December.

The UK economic calendar is quiet today, leaving investors to continue mulling over yesterday's inflation data.

The U.S. dollar is rising to a 2.5-month high versus its major pairs after recent strong data highlighted the resilience of the US economy and led investors to rein in aggressive Fed rate cut bets.

The Trump trade is also supporting the US dollar as Trump takes the lead in some polls, pointing to a possible win in the upcoming US election. Trump's policies surrounding tariffs, immigration, and taxes are inflationary and could further lower expectations for aggressive Fed cuts across the cycle.

Looking ahead, attention will be on US retail sales, which are expected to rise 0.3% after rising 0.1% in August. US jobless claims will also be in focus, and they are expected to remain at 258k, the same as last week and the highest level in a year.

GBP/USD forecast – technical analysis

After consolidating below the 50 SMA between 1.3020 and 1.31, GBP/USD broke lower, moving below 1.30 key support. Sellers supported by the break below 1.30 and the RSI below 50 will loo to extend losses to the 100 SMA at 1.2950, ahead of the rising trendline support at 1.29.

Should buyers manage to retake the 1.30 resistance, a rise above the 1.3020 -1.31 resistance zone is needed to extend gains towards 1.32.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.