Loonie strengthens on strong GDP data and rising oil prices

Key Movers

The US dollar index (DXY) fell from 103.6 to trade around 103.13 this morning. Today’s focus will be on the US Federal Reserve’s interest rate decision which is expected to remain unchanged at 5.5%. If this is the case, it will be the fourth meeting in a row in which the Fed has kept the policy rate unchanged. Investors will also be looking towards the Fed’s statements in their press release for insights into future 2024 rate decisions. According to the CME Fed Watch Tool, the probability of a 0.25 basis point (bps) rate cut at the next Fed meeting in March is around 60%

The euro traded around 1.086 against the US dollar. Following yesterday’s release of key economic data. This release showed the overall GDP growth rate for the eurozone improved by 0.1% on an annual basis following stagnant growth in the previous quarter. Consumer Price Index (CPI) data for the Eurozone’s largest economy was released today showing both German and French inflation fall. German CPI came in at 2.9% from 3.7% previously. French CPI data was reported at 3.1% from 3.7%. The European Central Bank’s (ECB) next meeting is in April. After comments by ECB policymaker Joachim Nagel saying that the “central bank has tamed the greedy beast of inflation,” the market is now expecting the bank to begin cutting rates.

The pound was down against the USD, trading near 1.27198 today. Data for the UK today featured the release of January’s nationwide housing prices which fell by 0.2% on an annual basis, improving from the 1.8% drop in the previous months. This reading beat market expectations of a 0.9% decrease. The Bank of England (BoE) will be announcing its interest rate decision tomorrow where it is expected that they will hold the rate at 5.25% for the third time.