UK: Weekly FX Market Update 30 January
GBP
The Bank of England (BoE) sets interest rates this Thursday. Bloomberg gives a 70% probability of a 0.5% rate hike.
UK data released last week showed increasing Public Sector Borrowing, car manufacturing at its lowest in 66 years and weak Services PMI
Money markets priced in a 0.25% rate cut by the BoE in Q3 2023
With all eyes on the central banks this week, will the BoE hike rates by 0.50% or 0.25%? Will the recent housing data have an impact on the decision making? Could any hike also be accompanied by dovish commentary?
If GBPUSD can’t gain ground above 1.2450 - technical resistance - will the rally from the 1.0360 September low be over? Could GBPUSD subsequently start to trend lower again?
With the ECB continuing to state that 0.5% rate hikes are expected at the next two meetings, could GBPEUR finally move out of recent trading ranges?
EUR
ECB President Lagarde insists she will ‘stay the course’ on interest rates.
The European Central Bank (ECB) sets interest rates this week. Bloomberg gives a 95% probability of a 0.5% rate hike on Thursday.
Will the ECB be as good as their word and hike interest rates by 0.5% on Thursday, whilst maintaining that another 0.5% rate hike can be expected in March?
German IFO President Fuest said that ‘companies are telling us that they are optimistic regarding the next six months, and that suggests overall we will avoid a technical recession’. If this is the case, can EURUSD take another step higher above the psychologically important 1.1000 level?
USD
The Federal Reserve also sets interest rates this Wednesday. Bloomberg gives a 95% probability of a 0.25% rate hike.
The week ends with the release of US Non-Farm Payrolls on Friday. The Fed points to a consistently tight labour market as reason for rate hikes.
US interest rates are currently 4.5%, with Bloomberg suggests a terminal rate of 4.9%. Are we nearing the end of this US rate hiking cycle?
Will Friday’s employment data support the Fed taking their foot off the rate hike accelerator?
Events for the weekend ahead:
Tue Jan 31
09:00 EUR German Prelim GDP
10:00 EUR Prelim GDP
13:30 CAD GDP
Wed Feb 1
10:00 EUR CPI Flash Estimate
19:00 USD FOMC Interest Rate Decision/Statement/Press Conference
Thu Feb 2
12:00 GBP BoE Monetary Policy Report/Interest Rate Decision
13:15 EUR ECB Interest Rate Decision/Statement
13:45 EUR ECB Press Conference
Fri Feb 3
09:00 EUR Final Services PMI
13:30 USD Unemployment Rate/Non-Farm Employment Change/Average Hourly Earnings
15:00 USD ISM Services PMI