Euro to make modest gains despite weak growth – SocGen

The US Dollar has bounced this month, though Sterling is 2024’s top G10 currency. Economists at Société Générale analyze FX market outlook.

GBP is vulnerable to a weak economy

We expect the Fed to cut rates much more aggressively than the ECB in 2024, allowing the Euro to make modest gains despite weak growth, but the data we have seen so far this month hasn’t shifted market sentiment. 

Lower US rates should also help the Yen, but that may be a story for the spring rather than mid-winter. Certainly, there is no indication that the Bank of Japan is going to help yen bulls by adjusting monetary policy in the near term. 

GBP may be doing well for now but is vulnerable to a weak economy and the Bank of England has more room than the ECB to cut rates. 

NOK and SEK look more attractive, as they continue to get respite as relative rates move back a little in their favour. Meanwhile, AUD/NZD looks increasingly low relative to yield differentials.