Introduction

The forex market is deeply influenced by economic fundamentals, monetary policies, and geopolitical trends. As of November 26, 2024, the seven major currencies—USD, EUR, JPY, GBP, CAD, AUD, and CHF—present varied outlooks shaped by updated macroeconomic data and fundamental drivers. This article provides a detailed analysis of each currency and examines how their respective fundamentals impact their performance in the forex market.

United States Dollar (USD)

Fundamental Analysis

• Economic Growth: GDP growth at 2.8% reflects moderate expansion, though slightly lower than the previous 3%.
• Inflation Trends: YoY inflation remains contained at 2.6%, aligning with the Fed’s target.
• Monetary Policy: The Federal Reserve has cut interest rates to 4.75% from 5% to support slowing growth. This signals a dovish policy shift, reducing the dollar’s yield appeal.

Fundamental Drivers

• A stable services PMI of 57 supports USD resilience in the services sector.
• Strong consumer confidence at 71.8, indicating optimism in the U.S. economy, offsets concerns over the slowing growth rate.

Outlook: The USD faces a neutral to slightly bearish outlook due to dovish monetary policy and marginally slowing growth.

Euro (EUR)

Fundamental Analysis

• Economic Growth: GDP growth at 0.4% shows a slight improvement but remains weak.
• Inflation Trends: YoY inflation at 2% indicates that price pressures have moderated, giving the ECB room to pause aggressive rate hikes.
• Monetary Policy: The ECB reduced its interest rate to 3.4%, reflecting caution amid weak economic data.
• Trade Surplus: The trade surplus expanded significantly to 12.5 billion, providing a tailwind for the euro.

Fundamental Drivers

• The widening trade surplus bolsters the euro’s external position, partially offsetting weak GDP growth.
• Business confidence remains subdued at -0.96, limiting investor optimism.

Outlook: The EUR is neutral, as a strong trade surplus balances weak economic fundamentals.

Japanese Yen (JPY)

Fundamental Analysis

• Economic Growth: GDP growth slowed to 0.2%, highlighting Japan’s economic stagnation.
• Inflation Trends: YoY inflation at 2.3% shows moderate price growth, but still below global peers.
• Monetary Policy: The Bank of Japan maintains its ultra-loose monetary stance, with interest rates unchanged at 0.25%.
• Trade Deficit: The deficit widened to -461 billion, driven by weak exports.

Fundamental Drivers

• The JPY is under pressure due to a persistently dovish BoJ and weak trade data.
• Safe-haven demand may temporarily strengthen the yen in times of global risk-off sentiment.

Outlook: The JPY is bearish due to weak fundamentals and monetary divergence.

British Pound (GBP)

Fundamental Analysis

• Economic Growth: GDP growth slowed significantly to 0.1%, reflecting stagnation.
• Inflation Trends: YoY inflation remains elevated at 2.3%, indicating persistent price pressures.
• Monetary Policy: The BoE cut rates from 5% to 4.75%, signaling caution amid slowing growth.
• Current Account Deficit: Widened to -28.4 billion, raising concerns over the UK’s external position.

Fundamental Drivers

• Elevated inflation and resilient services PMI (50) support the pound in the short term.
• Weak GDP growth and a widening current account deficit are significant drags on the currency.

Outlook: The GBP is neutral to slightly bearish, as inflationary pressures are countered by weak growth.

Canadian Dollar (CAD)

Fundamental Analysis

• Economic Growth: GDP growth remains steady at 0.5%, indicating stability.
• Inflation Trends: YoY inflation holds at 2%, reflecting controlled price pressures.
• Monetary Policy: The BoC reduced rates to 3.75%, signaling caution but maintaining a relatively hawkish stance compared to global peers.
• Trade Balance: The trade deficit narrowed to -1.26 billion, reflecting improving external conditions.

Fundamental Drivers

• Stable growth and a narrowing trade deficit support the CAD.
• Strong business confidence at 52 further underpins the currency.

Outlook: The CAD is neutral to slightly bullish, with stable fundamentals supporting its performance.

Australian Dollar (AUD)

Fundamental Analysis

• Economic Growth: GDP growth remains low at 0.2%, unchanged from the previous quarter.
• Inflation Trends: YoY inflation declined to 2.8%, down from 3.8%, easing pressure on the RBA to tighten policy.
• Monetary Policy: The interest rate remains steady at 4.35%, with the RBA adopting a wait-and-see approach.
• Trade Surplus: The surplus narrowed to 4.6 billion, reflecting weaker export demand.

Fundamental Drivers

• The AUD remains closely tied to China’s economic health, and weaker trade data weighs on sentiment.
• Retail sales growth stagnated at 0.1%, highlighting subdued domestic demand.

Outlook: The AUD is bearish, as external and domestic headwinds weigh on the currency.

Swiss Franc (CHF)

Fundamental Analysis

• Economic Growth: GDP growth improved to 0.7%, reflecting resilience.
• Inflation Trends: Extremely low YoY inflation at 0.6% underscores price stability.
• Monetary Policy: The SNB maintained its interest rate at 1%, ensuring monetary stability.
• Trade Surplus: The surplus expanded to 5.97 billion, supporting the franc.

Fundamental Drivers

• The CHF is well-supported by strong trade data, low inflation, and its status as a safe-haven currency.
• Business confidence remains high at 99.5, indicating robust economic sentiment.

Outlook: The CHF is bullish, particularly during periods of global uncertainty.

Conclusion

The forex market reflects diverging economic and monetary trends across the major currencies. Key highlights include:

• USD: Neutral to slightly bearish due to dovish Fed policy and slowing growth.
• EUR: Neutral, supported by a strong trade surplus despite weak growth.
• JPY: Bearish, due to ultra-loose policy and weak fundamentals.
• GBP: Neutral to slightly bearish, balancing inflationary pressures with weak growth.
• CAD: Neutral to slightly bullish, supported by stable economic conditions.
• AUD: Bearish, with external and domestic headwinds dragging performance.
• CHF: Bullish, as strong fundamentals and safe-haven demand underpin its strength.

Traders should align their strategies with these insights, considering evolving global trends and market dynamics.

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