Top 3 Currency Pairs to Add to Your Watchlist in July 2024

Top 3 Currency Pairs to Add to Your Watchlist in July 2024

Reading time: 10 minutes

Turnover in the foreign exchange market (Forex market) averaged US$7.5 trillion per day in April 2022, according to the latest Bank for International Settlements (BIS) Triennial Central Bank Survey. This marks a +14% increase (US$6.6 trillion) from three years earlier. The Forex market is the largest financial market in the world and attracts a range of market participants from stay-at-home retail traders to central banks – think the US Federal Reserve (Fed) and the European Central Bank (ECB) – and well-known investment banks, such as Goldman Sachs, JPMorgan Chase, Citigroup, and the Bank of America.

Given current market conditions across the macroeconomic spectrum, the FP Markets Research Team has listed three of the most traded currency pairs that may be worthy of your watchlist, briefly spotlighting their respective central banks and their economic picture.


The euro (EUR), which is the official currency for 20 out of 27 countries in the European Union (EU), and the US dollar (USD), the official currency in the United States (US), are two of the most heavily traded currencies globally. The USD is the most widely traded currency, on one side of nearly 90% of transactions, followed by the EUR at approximately 30%.

Due to its high liquidity – meaning the ease at which a currency can be bought or sold in the currency market and not influence its price movements, resulting in tight spreads for traders – and a reasonable amount of volatility, the EUR/USD currency pair is often referred to as one of the ‘major currency pairs’. And given its reputation for high liquidity, the EUR/USD Forex pair is a go-to for many traders, particularly following the release of high-impacting news events.

The ECB reduced its three key benchmark interest rates by a quarter of a percentage point (25 basis points) at its June policy meeting, a move widely expected by markets and economists. While inflation slowed in June on a year-on-year basis, ECB officials expressed concern about the stickiness of inflation and elevated wage growth, therefore the path for further reductions is uncertain at this point. However, investors still forecast another two more rate cuts this year, with the market looking to September’s policy meeting as a possible date for another quarter of a percentage point reduction.

Stateside, unlike the ECB, the Fed has kept its target range on hold at 5.25%-5.50% for seven consecutive meetings and signalled only one rate cut for the year ahead (down from three in their previous projections). Minutes from the latest FOMC meeting stressed that Fed officials remain cautious and await further evidence of disinflation before having the confidence to begin easing policy. However, last week’s data increased the odds for rate cuts sooner than expected. The US June ISM (Institute for Supply Management) PMIs are now both in contractionary territory along with easing wage pressures and job growth and unemployment increasing to 4.1%. Markets are now pricing in two rate cuts. Therefore, this week’s US CPI (Consumer Price Index) inflation release will be important. A broad miss on headline and core measures could weigh on the dollar and ramp up expectations of a rate cut this September (currently pricing in around 20 basis points of easing).

EUR/USD Daily Chart Created by Trading View


The EUR/GBP exchange rate, or euro (EUR) versus the British pound (GBP), is known as a ‘cross’ or ‘minor currency pair’. Such currency pairs are often less liquid and do not include the USD.

We have already briefly discussed the ECB and Europe’s economy in the EUR/USD section, so the focus here will be on the Bank of England (BoE) and the UK economy.

In June, the BoE’s Monetary Policy Committee (MPC) voted 7-2 in favour of maintaining its Bank Rate at 5.25% (16-year peak), a level held since August 2023 (external member Swati Dhingra and Deputy Governor Dave Ramsden were the two dissenters who opted for a rate cut for a second consecutive meeting). The decision and votes were as expected. However, the seven MPC members who voted for no-change were split, with three members supposedly in a group whose vote was finally balanced. The minutes of the latest MPC meeting highlighted this division among policymakers regarding recent inflationary pressures. Some MPC members acknowledged the risk of second-round effects on inflation; others downplayed the recent upside surprises. The city viewed the June meeting as a ‘dovish hold’, signalling that the BoE is gearing up to ease policy. Markets indicate a 60% probability of a 25-basis point cut at the 1 August meeting (15 basis points of easing priced in), with 43 basis points priced in for the year (or two rate cuts). 

Regarding the UK’s economy, for the first time since mid-2021, headline CPI inflation cooled to +2.0% in the twelve months to May, falling from +2.3% in April. This matched market expectations and officially hit the BoE’s inflation target. However, while core inflation also eased to +3.5% in May (year on year), services inflation is still problematic. Although inflation in the service sector slowed to +5.7% in May from April’s +5.9%, the release was 0.2 percentage points north of the market’s median estimate (+5.5%) and above the +5.3% BoE May forecast.

Unemployment also rose to its highest level since late 2021 at 4.4% (February to April this year), while wage growth remained unchanged at elevated levels from the three months to April this year, boosted by the rise in minimum wages and the rise in real terms due to the progress in disinflation. On the growth front, Gross Domestic Product (GDP) growth data was revised higher in the Final quarterly print, up +0.7% in Q1 of 2024 from the Preliminary report of +0.6%. This officially moved the UK economy out of technical recession at a faster pace of growth than previously anticipated, bolstered by easing inflation and boosts in real income.

EUR/GBP Daily Chart Created by Trading View


Serving as another ‘minor’ currency pair, the Australian dollar (AUD) versus the New Zealand dollar (NZD), or the AUD/NZD currency pair, is an interesting market to monitor this month.

The Reserve Bank of Australia (RBA) held its Cash Rate on hold at 4.35% at its June policy meeting (12-year high) for a fifth straight meeting and left the door open to a potential rate hike: adopting a hawkish stance, similar to the Reserve Bank of New Zealand (RBNZ). The key issue for the RBA right now is that while inflation is easing, it is cooling slower than expected. The latest monthly CPI Indicator showed inflation increased by +4.0% in the twelve months to May, its highest level since late 2023. As a note, the RBA works with an inflation target range between 2% to 3%. This throws light on Q2 CPI inflation released at the end of this month; the Q1 report cooled to +3.6% from +4.1% in Q4 2023. Markets expect that the RBA will remain on hold until 2025, with some desks claiming a rate hike could be on the table. The minutes of the latest meeting revealed that the RBA’s Board are reluctant to increase the Cash Rate.

The RBNZ is meeting this Wednesday and is not expected to change its Official Cash Rate (the OCR has remained on hold at 5.5% for an eighth consecutive meeting) or forward guidance. The surprisingly hawkish stance the central bank presented at its May policy meeting lifted the NZD, suggesting that the OCR would remain higher for longer than anticipated. Despite record migration levels, New Zealand’s economy is combating paltry economic growth – the country recently exited a technical recession after GDP growth rose +0.2% in Q1 this year after two back-to-back quarters of negative GDP growth in the second half of 2023 – as well as unemployment increasing to 4.3% in Q1 this year (its highest reading since early 2021). Inflationary pressures, however, remain front and centre. According to the latest release from Statistics New Zealand, consumer price pressures are easing but not as swiftly as the central bank had hoped. Annual inflation slowed to +4.0% in March, down from +4.7% in December, though higher than the +3.8% RBNZ forecast. The expectation is that the RBNZ will maintain its hawkish stance this week, possibly weighing on the AUD/NZD pair.

AUD/NZD Daily Chart Created by Trading View

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Source - database | Page ID - 40403

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