Home Daily Commentaries Markets await important US inflation data

Markets await important US inflation data

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Monday 26 February, 2024

Daily Currency Update

The Eurozone narrowly dodged a recession last year despite inflation reducing people's real incomes and high interest rates dampening demand. Eurozone GDP only rose by a mere 0.5% in 2023 which pales in comparison to the US which grew at 3.1%. The German economy has been the real laggard caused by a slowdown in global trade, most notably in China, that has severely affected the German export-led economy.

The UK's economic outlook has brightened considerably with markets expecting economic growth of 0.2-0.3% in the first quarter of this year. Bank of England policymakers' vernacular has shifted toward the possibility of rate cuts sooner rather than later. Swati Dhingra, a monetary policy committee member, said that delaying interest rate cuts may not be wise.

The US economy remains resilient despite a sharp slowdown in global trade. Additionally, the labor market is robust with jobless claims falling and market expectations for the Federal Reserve's interest rate cuts this year have dimmed considerably. This could allow the Dollar to remain firm against in counterparts.

 

Key Movers

The market will keenly watch German consumer confidence data due for release this Tuesday with the wider Eurozone releasing economic sentiment data on Wednesday. German retail sales are also due this Thursday and will be watched closely for further signs of a slowing German economy.

In the UK chatter has picked up considerably with markets expecting the first rate cut by the Bank of England this Summer. Despite this Sterling remains firm on foot of better-than-expected economic data. Governor Andrew Bailey said the committee expects inflation to fall to their 2% target shortly before rising again.

In the US PCE data (Personal Consumption Expenditure ) is due for release this week and as it is the Federal Reserve's preferred inflation measure it will be closely watched. Markets have also reduced interest rate cut expectations by the Federal Reserve which will lend support for the Dollar as we move into Spring.

Expected Ranges

  • GBP/USD: 1.2625 - 1.2725 ▲
  • GBP/EUR: 1.1650 - 11750 ▲
  • GBP/AUD: 1.9300 - 1.9400 ▲
  • EUR/USD: 1.0775 - 1.0875 ▼

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.