UK: Weekly FX Market Update 6 January 2025

GBP

• The New Year opens with GBPUSD trading close to lows not seen since April 2024.

• With UK growth stagnating at the end of 2024 and voter dissatisfaction evident with the Labour government, the early 2025 outlook for the Pound could be interpreted as being on the backfoot.

EUR

• French and German politics are both weighing on the Euro.

• Bloomberg analysts forecast Eurozone interest rates will be lower by 1% (from 3% to 2%) by April 2025.

• Will this widening interest rate premium favouring the US Dollar continue? Could we see EURUSD at parity again soon?

USD

• With yearly US GDP growing 3% and Eurozone and UK GDP growth both below 1%, is US Dollar strength set to continue in 2025?

• The market may be pricing in President Trump #2 and his perceived inflation hiking policies.

• Will these policies push the Fed to halt its expected rate cuts in 2025, supporting the US Dollar futher?

• Beyond expected tariffs and potentially higher inflation, uncertainty still exists over what policies President Trump will follow. As a result, is the direction for the US Dollar also uncertain?

Main events for this week:

Mon Jan 6

09:30 EUR Sentix Investor Confidence

09:30 GBP Final services PMI

15:00 USD ISM Services PMI

Tue Jan 7

00:30 AUD CPI

09:30 GBP Construction PMI

15:00 USD JOLTS Job Openings

Wed Jan 8

07:00 EUR German Factory Orders

19:00 USD FOMC Meeting Minutes

Thu Jan 9

07:00 German Industrial Production

Fri Jan 10

13:30 CAD Employment Data

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

09:00 EUR Flash Manufacturing & Services PMI

09:30 GBP Flash Manufacturing & Services PMI

14:45 USD Flash Manufacturing & Services PMI