Daily Currency Update
GBP/USD has slipped back under 1.27 this morning as the effects of Friday's woeful UK Retail Sales figures continue to weigh on the pound. December's drop of -3.2% compared to November was the worst print since December 2022's reading and illustrates how the UK economy is likely teetering on recession. Concerns over the Eurozone's health and US Federal Reserve policymakers pushing back on the idea that interest rate cuts will commence in March are also helping the dollar regain some of the ground it has lost over the past few weeks. There is little data of note from the UK until Wednesday when we will get the monthly Manufacturing and Services PMI readings with the latter being the one that may garner the the most attention. Last month's Services PMI beat estimates and was also revised higher to 53.4 comfortably in expansionary territory. GBP/USD is currently at 1.2695 with GBP/EUR continuing to trade around the 1.1650 level.
Key Movers
US data continues to surprise to the upside with Friday's latest University of Michigan Consumer Sentiment survey overshooting by some distance at 78.8 when 69.8 was expected. The survey's 13% uptick meant it hit its highest level since July 2021 and this combined with a strong December jobs report and very low weekly Unemployment Claims on Thursday paints a picture of an economy that is showing ongoing resilience and has ridden out the Federal Reserve’s aggressive interest rate hiking cycle surprisingly well. This week's main event is the latest interest rate decision from the European Central Bank on Thursday with no change in borrowing costs all but guaranteed. ECB President, Christine Lagarde commented last week at the World Economic Forum in Davos that she didn't expect the bank to start cutting rates until summer which took the markets off-guard given many had expected March or April to be when the policy would begin to be loosened. Given these remarks,, there could be extra focus on Lagarde's press conference scheduled an hour after the decision has been published. EUR/USD trades at 1.0895
Expected Ranges
- GBP/USD: 1.2630 - 1.2765 ▼
- GBP/EUR: 1.1600 - 1.1700 ▼
- GBP/AUD: 1.9200 - 1.9345 ▲
- EUR/USD: 1.0845 - 1.0955 ▼