US inflation key for USD today

Market reports
Thanim Islam
  • Markets take profit on GBP gains, on signs of cooling job market
  • US inflation key today on whether inflationary pressures are persisting
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A bit of caution in the air for GBP yesterday ahead of this morning's job wage numbers, with markets booking profits on last week's gains. USD firmed up tracking treasury yields also.


Market rates

*Daily move - against G10 rates at 7:30am, 12.03.24

** Indicative rates - interbank rates at 7:30am, 12.03.24

Table (87)

Data points

Table (88)


  • GBP: BoE Mann and Bailey

Our thoughts

Signs of the UK job market cooling were signalled this morning, with wage growth declining more than expected, the unemployment rate rose, and there was a decrease in employment. As a result, GBP is slightly lower on the day. So, there are signs that there could be challenges for the job market, but this set of data isn’t warranting any repricing on earlier rate cuts by the BoE. Further GBP declines may be modest ahead of tomorrow’s GDP numbers, which may well show signs that growth rebounded in January.

For the rest of the day we wait for US inflation numbers, and whether any further easing in consumer prices will give markets the ammunition to continue to weaken USD, and thus see higher GBPUSD and EURUSD. The greenback has already lost 50% of the gains it made in 2024 in the last few weeks. Higher than expected inflation will confirm the persistence of inflationary pressures, and from this we would expect a sharp pullback on GBPUSD and EURUSD from its recent highs.

Chart of the day

CPI is the big risk event today, and whether it provides enough ammo for markets to continue to sell USD, or whether we see a sharp reversal of the recent weakness. Headline inflation is expected to have risen to 0.4% whilst core inflation is expected to have slowed.

12032024 cotd
Source: Bloomberg Finance L.P.

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