Central banks and data releases dominate trading week

Daily Currency Update

The British Pound remains under pressure, trading defensively as markets fully price in a high probability of an interest rate cut from the Bank of England later this week. This follows recent weak UK GDP data, which has narrowed the Pound’s interest rate advantage over the Euro and other major currencies.

The US Dollar is expected to trade in choppy conditions. Mixed economic signals—slowing job growth alongside persistent inflation—have prompted recent rate cuts from the Federal Reserve. Traders are now preparing for a wave of delayed US economic data that could reshape expectations for future Fed policy.

This week’s key driver for the USD will be the release of a raft of long-delayed economic reports following the previous government shutdown. These releases, including updated labour market and inflation data, will provide greater clarity on the health of the US economy and help determine whether the Fed will need to extend its rate-cutting cycle into 2026.

The Australian Dollar is trading cautiously after coming under pressure from weaker domestic data and lower commodity prices. Attention remains on external factors, particularly the economic outlook for China, Australia’s largest trading partner. The Reserve Bank of Australia has indicated that upcoming quarterly CPI data, due in January, will be pivotal for its February policy decision, leaving the AUD largely driven by global risk sentiment and commodity price movements in the near term.