Daily Currency Update
GBP/USD continues to trade around the 1.27 level this morning buoyed by a better-than-expected Services PMI which was released on Friday morning. The reading of 52.7 beat the forecast of 51.0 with the report's authors expecting the UK economy to avoid contraction. Chris Williamson Chief Business Economist at S&P Global Market Intelligence stated, “The UK economy continues to dodge recession, with growth picking up some momentum at the end of the year to suggest that GDP stagnated over the fourth quarter as a whole." Looking ahead this week's big data will be Wednesday's UK CPI print which is expected to moderate to 4.3% from 4.6%. Friday sees the latest Retail Sales number from the UK with a rebound predicted in November after October's fall. GBP/EUR is towards the higher end of its recent range just above 1.16.
Key Movers
PMI data released on Friday from Europe wasn't as encouraging as the UK with every major metric coming in under the 50 level that divides expansion and contraction. One slightly encouraging sign is that the German Manufacturing PMI which garners the most attention climbed again, up to 43.1 from last month's 42.6. Although still way in contractionary territory it appears the powerhouse of the Eurozone economy is slowly recovering however it looks like Q4 will see another negative growth print. Despite this gloomy outlook EUR/USD remains above 1.09 as markets tentatively begin to price in rate cuts from the US Federal Reserve. It appears that the Fed's battle against inflation is won and markets expect it to start reducing borrowing costs as early as March 2024. It’s a relatively quiet week from the US (and the Eurozone) as people start to wind down for Christmas. Friday sees Personal Consumption Expenditure figures from the US (another gauge of inflation) that the Fed follows closely. If we get an undershoot followed by a rate cut in March, it's looking likely we could see a real detriment to the dollar.
Expected Ranges
- GBP/USD: 1.2660 - 1.2800 ▲
- GBP/EUR: 1.1575 - 1.1700 ▲
- GBP/AUD: 1.8800 - 1.8940 ▼
- EUR/USD: 1.0875 - 1.1000 ▼