Dollar Near 2-Year Highs, UK and European PMI's in Focus
GBP
GBP/USD is currently trading at 1.2454 (interbank), recovering from last week’s low of 1.2334. GBP/EUR is trading at 1.2065 (interbank). The pound’s recent losses stem from a disappointing UK manufacturing PMI and another increase in wholesale gas prices late last week.
Growing expectations for dovish policy from the Bank of England could exert further downward pressure on sterling, with markets now anticipating nearly 60 basis points of interest rate cuts this year, up from 53 basis points projected at the end of December. Policymakers and traders will closely monitor today’s services PMI data, as the services sector plays a far larger role in the UK economy than manufacturing.
Later this week, the latest inflation, GDP, and retail sales data will be crucial in shaping sterling’s performance heading into the new year.
Today’s Events (GMT):
09:30 - S&P Global Composite PMI (Dec) – Forecast: 50.5
09:30 - S&P Global Services PMI (Dec) – Forecast: 51.4
EUR
EUR/USD is currently trading at 1.0326 (interbank), having recovered somewhat from 1.0224, its lowest level since November 2022.
In the Eurozone, ECB policymakers remain committed to a gradual pace of monetary easing. Markets are now pricing in a 113 basis point reduction in interest rates this year, equivalent to at least four 25 bps cuts, reflecting concerns over inflation remaining below the ECB’s 2% target.
Analysts expect the euro-dollar pair to reach parity in 2025, a level last seen in 2022 during the escalation of the Ukraine conflict.
Today’s focus includes Eurozone composite and services PMI data, alongside German and French inflation figures, which could shape monetary policy expectations.
Today’s Events (GMT):
08:55 - HCOB Germany Services PMI (Dec) – Forecast: 51.0
09:00 - HCOB Eurozone Composite PMI (Dec) – Forecast: 49.5
09:00 - HCOB Eurozone Services PMI (Dec) – Forecast: 51.4
13:00 - German CPI (YoY) (Dec) – Forecast: 2.4%
USD
The dollar index, which measures the currency against a basket of other major currencies, is at 108.778, retreating slightly from last weeks high of 109.53. Last week, the index hit its highest level since November 2022, buoyed by robust employment data and economic resilience.
The US dollar has maintained its strength amid a hawkish shift in Federal Reserve policy and optimism around economic performance under Trump’s presidency.
Key focus this week will be the Fed’s December meeting minutes, due Wednesday, where policymakers delivered a third consecutive 25 bps rate cut, termed a “closer call” by Chair Powell.
Friday’s non-farm payrolls report, anticipated to show 154,000 new jobs in December and a steady unemployment rate of 4.2%, will also be closely monitored.
Today’s Events (GMT):
14:45 - S&P Global Composite PMI (Dec) – Forecast: 56.6
14:45 - S&P Global Services PMI (Dec– Forecast: 58.5
CAD
USD/CAD is currently trading at 1.4392 (interbank) in today’s session.
The Canadian dollar weakened further against the US dollar on Friday, continuing its streak of weekly declines as concerns over a slowing Chinese economy and domestic political uncertainty weighed on sentiment. Reports indicate that Prime Minister Justin Trudeau is likely to announce his resignation ahead of Wednesday’s national caucus meeting, adding to the political challenges.
This week, Statistics Canada will publish international trade data for November and the Labour Force Survey for December. The latter follows November’s figures, which showed a rise in unemployment to 6.8%, despite 51,000 jobs being added.
Crude oil prices have risen to a more-than-two-month high with Brent crude currently at $76.20 a barrel, while West Texas Intermediate crude currently at $73.66 a barrel.
No significant events are scheduled for today
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