This Week, Attention Shifts to U.S. and UK Rate Decisions
GBP
GBP/USD is presently trading at 1.2744 (interbank), while GBP/EUR is currently trading at 1.1697 (interbank).
Last week’s GDP data suggested that the UK economy experienced a technical recession in the latter half of 2023, with contractions in the last two quarters. January saw a modest growth of 0.2%, insufficient to confirm first-quarter economic recovery.
All eyes turn to Thursday's interest rate decision by the Bank of England. Investors anticipate the BoE maintaining interest rates at 5.25%, given inflation well above the 2% target. Market participants eagerly await guidance on the duration of high interest rates.
Markets currently project a reduction in interest rates at the BoE's August policy meeting. However, policymakers emphasise rate cuts contingent upon sustainable inflation reaching the 2% target.
Additional UK data releases this week include Wednesday's inflation figures, and PMI and retail sales data on Thursday and Friday, respectively.
No significant events are scheduled for today
EUR
EUR/USD is trading higher at 1.0894 (interbank) in this morning’s trading session.
Recent inflation data for Germany aligned with forecasts at 2.5% and 0.4% for February. Industrial production displayed sluggish growth at -3.2% for January.
Crucial eurozone data awaits release this week, starting with inflation figures projecting Core CPI at 3.1% and CPI at 2.6%.
Thursday brings ZEW Economic Sentiment data, with expectations at 20.6 for Germany and 25.4 for the eurozone.
Later in the week, manufacturing and services sector data for the entire eurozone will be released, alongside appearances from policymakers and ECB officials, influencing the euro's direction in financial markets.
Today’s Events (GMT):
CPI (Feb) - Forecast: 2.6%
Core CPI (Feb) - Forecast: 3.1%
USD
The dollar index, measuring against major currencies, trades at 103.47, reaching 103.50 earlier, its highest since March 6th, ahead of the Fed's meeting this week.
Downward pressure on the U.S. Dollar persists due to a correction in US Treasury yields, with the 2-year and 10-year yields at 4.72% and 4.30%, respectively.
Wednesday's Fed interest rate decision is the main economic event this week, with expectations for unchanged rates. Markets await potential changes in rate as the central bank may also strike a more hawkish chord than expected, especially as recent data showed stickier-than-expected inflation in February.
Traders currently price in 72 basis points of cuts for 2024, with a 58% chance of the first rate cut in June.
No significant events are scheduled for today
CAD
USD/CAD has slightly declined, trading at 1.3524 (interbank) in today’s session.
Concerns persist over Canada's rising government deficit possibly leading to higher corporate taxes, diverting foreign investment and hindering growth.
Oil prices rise, supported by supply concerns, with Brent crude oil futures for May delivery at $85.81 a barrel, and U.S. West Texas Intermediate (WTI) crude at $81.53.
Investors await tomorrow's Canadian inflation (CPI) data, expected to rise to 3.1% from the previous 2.9%.
Friday will see the publication of Retail Sales figures, also anticipated to contract, with markets expecting a -0.4% print versus the previous 0.9% figure.
Today’s Events (GMT):
RMPI (Feb) - Forecast: 0.8%
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