GBP Slips, EUR Eyes Growth, USD Awaits Key Policy Moves
The British Pound has faced notable pressure, recently hitting a five-month low against the Euro. This decline is tied to weak economic data, including a 0.3% drop in December retail sales and a slowdown in core consumer price growth. Market sentiment is also being shaped by expectations of multiple interest rate cuts from the Bank of England this year. Policymakers are signalling up to 62 basis points of reductions, compared to the previously anticipated 40 basis points. This week, the focus is on UK labour market and wage data, with critical insights expected to emerge.
The Eurozone’s outlook is improving, buoyed by encouraging signs of recovery led by Germany. The HCOB Eurozone Composite PMI has risen to 49.5 in December 2024, a notable improvement from November’s 48.3, indicating a slower contraction in business activity. Additional optimism comes from Germany's export conditions, showing gradual stabilisation. These trends suggest potential for further growth, which could strengthen the Euro and provide opportunities for businesses engaging in international trade.
The U.S. Dollar continues to capture market attention as participants anticipate key policy announcements. These include potential tariff adjustments and other fiscal measures that could introduce volatility. The Dollar’s direction will largely hinge on these developments, presenting both challenges and opportunities for businesses managing USD-denominated transactions. This week’s retail sales data and industrial production figures will be critical in gauging the Dollar’s trajectory.
Key Data Releases This Week:
UK: Labour Market and Wage Data
Eurozone: Eurozone Composite PMI
US: Retail Sales Data, Initial Jobless Claims, and Industrial Production Report
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