Monthly Archives: January 2024

Last week we had a bag of mixed data, ending with some poor figures from the UK revealing that retails sales fell to its lowest level since January 2021. For the US, there was some stronger than expected data towards the end of the week. It is a quiet start to the week in terms of economic data as markets look ahead to this Thursdays ECB policy announcement. Markets remain cautious ahead of this week’s data following the mixed figures from last week. This has prompted renewed concerns that it may be too soon to begin thinking about cutting interest rates. Central Bank policy announcements will be the centre of attention over the next two weeks with the US Federal Reserve on the 31st January and Bank of England on the 1st February. No immediate change is expected to the Central Bank announcements, but markets will be keeping a close eye on any indications of their policy intentions for the rest of the year.Tomorrow, we have the EU flash figures for Consumer Confidence, followed by Wednesday’s busy day which is dominated by PMI’s. The results of the PMI reports will provide some insight into how trends in economic activity have started in 2024. The pound ended the week at its highest level against the euro but has since dipped a little. Cable is currently sitting at a weekly high this morning.

The European Central Bank is more cautious about the growth prospects but far from forgiving on inflation. The minutes of the ECB’s December meeting show that the bank was still a long way from questioning rate cuts. This is unlikely to change during next week’s meeting.

Due to the Christmas holiday, the minutes of the ECB’s December meeting are only released one week before the next meeting. The recently announced minutes from the December meeting still include some interesting insights for next week’s meeting.

The economic data calendar is expected to be quiet today, with UK retail sales being the only significant scheduled report with the ability to influence markets.

The Office for National Statistics predicts that retail sales will dip 0.5% in December, following a stronger-than-expected 1.3% growth in November.

In the United States, economic data will be limited, but December’s existing-home sales and the University of Michigan consumer sentiment index for January will be due for release, both of which are expected to show little to no change from the previous month.

Pound Sterling’s surge following mid-week inflation numbers is now providing exceptional value to customers wanting to exchange pounds into euros.

Already this morning, UK CPI inflation for December has risen over expectations. The headline rate increased to 4% from 3.9%, but the core CPI remained at 5.1%. Sterling has had a firmer tone in early trading since the release.

Later today, the final Eurozone inflation report is expected to reveal that headline HICP increased to 2.9% and core HICP fell to 3.9% in December. In the United States, retail sales and industrial production for December are due.

Retail sales and industrial output statistics for December are among the several data releases for the United States today. We expect retail sales to gain 0.4% during the holiday season, while industrial production to rise only 0.2%.

Both will provide hints of Q4 GDP growth, which is expected next week. It is predicted that this will have decreased following the exceptional 4.9% annualised expansion in Q3, but so far, the signs are that Q4 growth will still be strong.

On the currency front, the major FX pairings remained in tight trading ranges.

Early this morning the UK released their Unemployment figures where It was reported that the amount of people in the UK that are unemployed but actively seeking employment stayed the same at 4.2%.

Figures also revealed that wage growth has declined to 6.6%, which is still much higher than the rate of inflation in the UK. These figures could potentially link to the amount of strike days in November, which saw the lowest number of strike days in 18 months. 

Elsewhere this morning, Germany released their Consumer Price Index which came in at 3.8% which markets had expected. This will be followed later by the German ZEW Business Confidence report. 

Looking ahead this week, markets will keep an eye on the UK’s inflation report which is due for release tomorrow morning. Markets expect a minor decline to 3.8%, down from 3.9%. Any upside movement in this could result in some market movement for the pound. 

Due to the US national holiday yesterday, there was no economic data being released with the first key data for the US coming tomorrow. 

Looking at the latest movements in the currency market, the pound has somewhat flatlined against both the euro and the dollar with no real movements. However, as the week goes on markets expect some volatility to occur.