Home Daily Commentaries Markets to watch US inflation data closely

Markets to watch US inflation data closely

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.

| Tuesday 27 February, 2024

Daily Currency Update

In Europe today the head of the ECB, Christine Lagarde, said "Our restrictive monetary policy stance, the ensuing strong decline in headline inflation and firmly anchored longer-term inflation expectations act as a safeguard against a sustained wage-price spiral." In essence, Lagarde said that there are signs of growth bottoming out and some forward-looking indicators point to growth later this year.

The pound took advantage today of broad Dollar weakness and gained for the first time since early January. Economists and markets are watching closely for signs of upcoming changes in the UK budget which is due on the 6th of March.

US new home sales rose 1.5% month on month in January this year vs a print of 7.2% in December. Fourth quarter US GDP is expected to come in at 3.3% and growth at these levels has been consistently underpinning the Dollar.

Key Movers

In Europe, markets will watch closely as data may show a divergence between the economic outlooks in Europe and the US. If so, we could see a decoupling of interest rate expectations with the ECB and Bank of England reducing rates first. The Euro and Sterling have remained strong over the last week, but this could shift dramatically if Fed rate cut expectations are pared back after economic data due for release this week.

Similarly in the UK, the Pound may come under pressure if the aforementioned decoupling begins. While the UK looks to have narrowly avoided recession markets are still nervous and this most likely will place a cap on the Pound's gains.

Data in the US is moderating but remains strong. The Atlanta Fed is predicting GDP growth of 2.9% in Q1 this year and although a touch slower this growth is far and above the US's G7 counterparts. Later this week see the release of the ISM manufacturing survey, the University of Michigan consumer sentiment, and most importantly long and short-term inflation data.

Expected Ranges

  • GBP/USD: - ▲
  • GBP/EUR: - ▲
  • GBP/AUD: - ▲
  • EUR/USD: - ▲

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.