The euro and the pound have entered a consolidation phase after rising earlier in the week, reflecting a cautious market stance ahead of the release of a key set of US macroeconomic data. Trading activity has noticeably declined, as investors prefer not to increase positions before the publication of US GDP and personal spending figures, which could have a significant impact on expectations regarding future Federal Reserve policy.

Geopolitical developments are providing an additional backdrop, alongside discussions at the Davos summit, where the focus is on global economic prospects, trade tariffs and policy coordination among leading economies — factors that are further reinforcing caution in the foreign exchange market.

EUR/USD

The EUR/USD pair has returned to the 1.1670–1.1740 range following a strong advance at the start of the week. Technical analysis suggests the potential for further gains towards recent highs, as a bullish engulfing pattern has formed on the daily timeframe.

A break below support at 1.1670 could lead to a renewed test of key levels around 1.1580–1.1600.

The following events may influence EUR/USD price action in the near term:

– today at 13:00 (GMT+2): Bundesbank monthly report;
– today at 15:30 (GMT+2): US GDP;
– today at 15:30 (GMT+2): US initial jobless claims.

GBP/USD

The GBP/USD pair is also consolidating, mirroring the euro’s behaviour. The pound has held on to recent gains, but further movement is being constrained by anticipation of key macroeconomic releases from both the US and the UK.

Technical analysis of GBP/USD points to the possibility of a retest of the important resistance level at 1.3500, as a bullish engulfing pattern formed on the daily chart earlier in the week. However, stronger-than-expected US data could trigger a correction towards the 1.3340–1.3400 area.

The following events may affect GBP/USD price dynamics in the upcoming sessions:

– today at 13:00 (GMT+2): UK CBI Distributive Trades Survey (retail sales balance);
– today at 17:00 (GMT+2): US core personal consumption expenditure (PCE) price index;
– tomorrow at 09:00 (GMT+2): UK core retail sales index.

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