Friday started off with with the EUR getting some support on month-end flows, as well as strong corporate demand for the currency. GBPEUR eased off the highs seen on Thursday, and EURUSD climbed back above the 200-day moving average. USD trading was flat after the core PCE inflation year-on-year came in lower than expected, and personal spending came in higher. So mixed data but there was a minor pick up in treasury yields, and a slight easing of March rate cut expectations.
* Daily move - against G10 rates at 7:30am, 29.01.24
** Indicative rates - interbank rates at 7:30am, 29.01.24
No major data points today but the rest of the week is going to be busy. Lets begin with the EUR. So last week markets added to the odds of a rate cut in April which weakened the EUR. There is an upside risk of these bets being eased should Q4 GDP numbers on Tuesday come in higher (Expected -0.1%), and inflation numbers on Wednesday come in higher than an expected drop to 3.2%.
For GBP, Thursday's Bank of England meeting will be in focus. Recent data showing an uptick in services inflation will likely prompt the Bank to stick to their mantra that interest rates will stay at 5.25% for longer. Communication and the voting will likely indicate no more hikes are on the cards but there will be a hesitancy to show an inclination to cut interest rates. So as long as this plays out and the environment in the market remains risk on, GBP seems likely to stay well supported.
Finally USD. The Fed in December took a dovish turn, but Fed speak has been pushing back against the market pricing of the amount of rate cuts expected this year. Fed chair Powell will likely continue to push back especially on the current expectation of a rate cut in March. Job numbers are also out throughout the week in the form of JOLTs job openings, the ADP payroll report, and on Friday the nonfarm payroll numbers, unemployment rate, and hourly earnings. Anything to suggest the job market remains strong will likely lead to the market easing expectations of a cut in March, and this will be USD positive.
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