Focus today firmly on US data releases
Thursday 26 January, 2023
Daily Currency UpdateAll eyes will be on the US data releases today, as disappointing US GDP figures could open the door to further losses. The US dollar is close to an eight-month low against its peers, as a gloomy US corporate earnings season stoked recession fears and traders stayed on guard ahead of several central bank meetings next week. With the Federal Reserve no longer leading the charge on interest rate hikes and US economic trends set to worsen, there is now the belief that the US dollar will enter a period of depreciation against most foreign currencies. The Fed’s policy-setting committee will begin a two-day meeting next week, and markets have priced in a 25-basis-point interest rate hike, a step down from the central bank’s 50 bps and 75 bps increases seen last year.
Key MoversBusiness surveys from around the world on Tuesday saw eurozone economic activity expanding again for the first time since June – helped by an unusually warm winter that’s seen more than a halving of sky-high natural gas prices over the past six weeks. Although Britain saw the same easing of wholesale energy prices, UK industry – by stark contrast – continued to contract this month. In fact, it shrank at its fastest pace in two years, with everything from inflation and rising interest rates to worker shortages, serial labour strikes, and mounting Brexit damage being blamed. The pound suffered its most significant one-day drop against the euro on Tuesday in over a month. Markets expect policymakers at the Bank of England and European Central Bank, which will also meet next week, to deliver 50 bps rate hikes. The ECB is most likely to remain more aggressive with its policy.
- GBP/USD: 1.2355 - 1.2415 ▲
- GBP/EUR: 1.1325 - 1.1385 ▲
- EUR/USD: 1.0885 - 1.0945 ▲