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currency market update
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Money News Overview Thursday 22nd February 2024: Flash PMIs are due today

Overnight, Federal Reserve policymakers expressed concern that inflation might remain stubbornly high at their policy meeting last month, according to minutes released yesterday evening. This might keep interest rates at a 23-year high for longer than anticipated.

On the currency front, the main FX pairings remained in tight ranges. The yen and the dollar were on the defensive, given the minimal activity that was evident. 

Looking ahead, a packed data schedule includes the flash PMIs for February in the Eurozone, US, and UK. However, barring any huge surprises, the data is unlikely to have an influence on markets. The final measurement of Eurozone inflation for January, as well as initial jobless claims in the United States, are upcoming.

On the monetary policy front, the most recent ECB Monetary Policy Meeting Account will draw attention. Remarks from other Fed officials will also be analysed.

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Money News Overview Wednesday 21st February 2024: Latest Fed meeting minutes will garner attention

Currency-wise, the dollar was under some downward pressure. The dollar fell 0.3-0.4 percent against the euro, pound, and yen. The weaker dollar tone was related to a slight drop in US rate forecasts.

Meanwhile, UK market rate expectations fell slightly after BoE Governor Bailey’s dovish remarks to the Treasury Select Committee. Governor Bailey remarked that the BoE does not require inflation to return to goal before lowering interest rates.

Today’s flash measurement of Eurozone consumer confidence for February is due. The indicator is expected to increase somewhat, but it is unlikely to affect the euro.

The minutes of the US Federal Reserve’s late January policy meeting will be revealed this evening. The outcome of that meeting disappointed consumers because it did not provide a clear signal on the timing of the first interest rate drop.

In addition, since then, different economic statistics have led markets to delay the beginning of the reduction cycle until at least the middle of the year.

CPI inflation, which was the most significant piece of data, came in significantly below the market consensus at 1.7 percent.
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Money News Overview Thursday 15th February 2024: UK enters a recession

Following an impressive start to the year for the UK in terms of economic data, todays Growth figures have revealed the UK has fallen into a recession.

This morning, a flurry of UK economic data has been released. UK GDP came in negative and showed that growth in the UK fell by 0.3 percent in the fourth quarter of 2023.

It means that the UK has now entered a recession, as there has now been two consecutive quarters of negative growth. This will be the first time there has been a recession in the UK since the first half of 2020, when the Covid-19 lockdown occurred.

 This was expected; however, today’s figures were worse than the -0.1 reading markets had pencilled in. This explains why the pound has taken a tumble this morning, following the latest data.

2023 was tough for the UK following the cost-of-living crisis. The side effects of higher interest rates deployed to tackle that have also hit spending, incomes, and profits.

The UK is not alone, the EU narrowly avoided recession in the second half of the year.

Markets will now shift their attention to the Bank of England in anticipation of when they will look to cut interest rates.

 GBPEUR dropped to a weekly low after achieving an 18-month high since August 2022 earlier this week. GBPUSD is close to its lowest level since mid-December.

 Later this afternoon, investors will shift their attention to US Retail Sales. Markets expect this to fall to -0.1 percent in January, down from 0.7 percent in December. US industrial output is anticipated to rise by 0.3 percent.

Data-wise, the Eurozone flash PMIs for October were roughly consistent with predictions. The industrial sector remained in deep contraction area.
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Money News Overview Wednesday 14th February 2024: UK CPI remains stable

The UK January CPI was released earlier this morning and remained steady at 4.0%, despite market forecasts of a 4.1% increase. Core inflation, excluding energy and food, remained constant at 5.1%.

It is expected that CPI inflation will resume its downward trend next month and return to the 2% target by the spring. Nonetheless, Bank of England policymakers are likely to be wary about lowering interest rates too quickly.

Looking ahead, the Eurozone economy is predicted to expand somewhat in Q1, while its largest economy, Germany, is expected to stagnate. Next week’s German IFO and Eurozone flash PMI surveys will provide additional evidence of the strength of activity in early 2024.

Currency-wise, the dollar was on the rise. Meanwhile, the euro and yen were on the defensive. Indeed, EUR/USD and EUR/GBP reached new year-to-date lows. As trading begins this morning, the euro remains extremely close to current levels.

Yesterday, the BoE MPC voted 5 to 4 in favour of a 25bps rate drop. In the run-up to the announcement, markets anticipated a close call, with pricing leaning slightly towards a rate drop.
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Money News Overview Friday 9th February 2024: Main FX pairings are firmly range bound

Currency-wise, the key FX pairs remained limited and rather modest yesterday. Sterling edged higher versus both the US dollar and the euro. This week has been low on the types of data releases that often move markets. In contrast, next week is expected to be packed, with UK and US inflation figures being particularly anticipated.

Market rate expectations in the United States and the Eurozone shifted somewhat higher. Fed and ECB officials emphasised in statements yesterday that they need further signs that inflation will fall to 2% on a sustained basis before reducing interest rates.

Looking ahead, today’s economic calendar is quiet, with no data releases in the UK. December Italian industrial production, which is scheduled this morning, will provide insight into next week’s Eurozone figures. Some of the other main economies in the region have had mixed results, with French output rising rapidly but Germany falling sharply and Spain declining more modestly.

Overall, the Eurozone’s factory sector appears to be under notable pressure, but the general consensus is that Italian output will have recovered following a sharp drop in November. As a result, range trading is likely to continue today on currency markets.

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