World Economic Forum Starts, Eurozone Industrial Production Monitored
GBP
GBP/USD is currently trading at 1.2730 (interbank), nearing a two-week high achieved last week. GBP/EUR has slightly dipped and is now at 1.1630 (interbank).
In November, the UK's industrial sector showed signs of improvement, with Industrial Production meeting expectations and rebounding compared to the previous decline. However, Total Industrial Output decreased by 0.1% during the same period.
Tomorrow, investors will closely monitor UK labour data, including the anticipated increase in the Unemployment Rate from 4.2% to 4.3, highlighting the significance of Average Earnings data and the expected slowdown in wage growth.
No significant events today
EUR
EUR/USD is currently trading near 1.0953 (interbank), up 0.03% for the day.
Recent consumer inflation data for December showed a reversal in the eurozone, with a rise to 2.9%, breaking a six-month trend of declines. However, this increase is seen as temporary, and economic growth remains challenging in the region.
On Saturday, ECB Chief Economist Philip Lane mentioned that the central bank would wait until June to make decisions about potential interest rate cuts to avoid premature action.
Last week also saw ECB President Christine Lagarde noted that the worst of inflation might be behind us and mentioned potential rate cuts if inflation falls below 2%.
Today's spotlight is on Eurozone Industrial Production, while keen attention will be paid to any hawkish tones emerging during the World Economic Forum event in Davos throughout this week.
Today’s Events (GMT):
10:00 - Eurogroup Meetings
10:00 - Industrial Production (Nov) Forecast: -0.3%
USD
The U.S. dollar index, measuring the dollar against a basket of six currencies, climbed 0.26% to 102.48, with a 1.1% rise this month following a 2% drop in 2023.
Last week, the unexpected drop in the U.S. Producer Price Index (PPI) in December raised the possibility of Fed interest rate cuts in the coming year. The annual PPI increased by 1.0% in December, down from November's 0.8%, while the core PPI remained flat, reducing the yearly increase from 2.0% to 1.8%.
With cooling inflation signals, investors expect additional monetary easing throughout 2024, with markets pricing in 160 basis points (bps) of rate cuts from the Fed this year.
No significant events - Public Holiday: Martin Luther King, Jr. Day
CAD
USD/CAD is holding steady at 1.3410 (interbank) in the current trading session.
The BoC is expected to initiate interest rate cuts this year after a series of rate hikes, possibly beginning in the spring.
The market suggests a rate cut is fully priced in for the April meeting, with almost 150 bps of total rate cuts expected for the year.
Additionally, Canadian inflation data for December, set to be released on Tuesday, may provide insights into further BoC monetary policy decisions, with headline inflation expected to be 3.3% annually, up from 3.1% in November.
Today, Canadian Wholesale Sales, Manufacturing Sales, and the Bank of Canada Business Outlook will also be released.
Today’s Events (GMT):
10:00 - Trade Balance (Nov) Forecast: -11.2B
13:30 - Wholesale Sales (Nov) Forecast: -0.8%
15:30 - BoC Business Outlook Survey
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