UK: Weekly FX Market Update 29 January

CalendarJanuary 29, 2024
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GBP
  • Last week, sterling remained steady against the US dollar whilst gaining against the euro.

  • UK PMI data was well received, with Services PMI reflecting a strong upturn in private sector output.

  • All eyes are on the Bank of England (BoE) on Thursday as it sets interest rates.

  • If any central bank needs to improve its credibility, it’s the BoE. Will it use Thursday to push back against ideas of early rate cuts?

  • BoE Economist Pill speaks on Friday. Could he mention ‘Table Mountain’ again or will he be open to interest rates falling off a cliff?

EUR
  • The ECB held rates steady last week while President Lagarde spoke candidly about the weakness in the Eurozone economy.

  • However, on Friday, ECB Governing Council members Kazaks and Vujcic of the respective Latvian and Croatian central banks, struck a more hawkish tone, stressing that the real mistake for the ECB would be to cut rates too early.

  • The FT reports that the ECB will wait until the effects of the April wage negotiations are seen before cutting interest rates. Could this mean the ECB waits to cut rates until June?

  • Eurozone GDP is due for release on Tuesday. Will it be another weak number?

  • If so, can EURUSD stay above 1.0800 despite the negative economic backdrop?

USD
  • Annual GDP was an excellent 3.3% last week, however, the GDP price index, only rose by 1.5%, much weaker than the expected +2.2%. Does this support the narrative of a US economic ‘soft landing’ and therefore bringing forward US rate cuts?

  • US Personal Consumption Expenditure, a favourite from the Fed when judging inflation pressures, slightly decline from 3.2% to 2.9% in December.

  • With the FOMC meeting on Wednesday, will the above data points trigger a more dovish vote?

  • Could the Fed decide to steer well clear of the US election and start to cut rates in March or April?


Main events for this week:

Mon Jan 29

No top tier data

Tues Jan 30

00:30 AUD Retail Sales

10:00 EUR Flash GDP

15:00 USD Consumer Confidence/JOLTS Openings

Wed Jan 31

00:30 AUD CPI

07:00 EUR German Preliminary CPI

13:15 USD ADP Non-Farm Employment Change

13:30 CAD GDP

19:00 USD FOMC Interest Rate Decision/FOMC Statement

19:30 USD FOMC Press Conference

Thu Feb 1

09:00 EUR Final Manufacturing PMI

09:30 GBP Final Manufacturing PMI

10:00 EUR CPI Flash Estimate/Unemployment rate

12:00 GBP Interest Rate Decision/Monetary Policy Summary

13:30 USD Unemployment Claims

15:00 ISD ISM Manufacturing PMI/Prices/Construction Spending

Fri Feb 2

12:15 GBP MPC Pill Speaks

13:30 USD Non-Farm Payrolls/Average Hourly Earnings/Unemployment Rate

15:00 USD Uni Of Michigan Revised Consumer Sentiment

Author

Trevor Charsley

Trevor Charsley

Senior Market Strategist

Trevor has over 25 years' trading and sales experience. He produces regular market and technical analysis as well as help with the structure and management of FX hedging policies. Trevor is often listed among the top "currency forecaster on Bloomberg".

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