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GDP data dominates the week ahead

A huge month ahead on the market begins now..
Last week saw the Pound lose ground across the board after comments made by BoE Governor Bailey (not for the first time). "Caution" on future interest rate hikes was the word that got traders nervous and dampened the appetite for Sterling, who are also planning for the possible outcomes to the Budget next week. 

This week though sees the release of UK GDP data for January with the forecast expecting to show the UK is still managing to thwart a technical recession. Anything less and GBP will be in trouble, but any surprise upside should see a nice bump in value. 

Other factors are at play this week too which will create volatility. US jobs data will directly impact what the Fed does with interest rates this month, the EU's own GDP data is important and any stimulus news from the Chinese Government will impact the stock market and therefore the Pound. 

The single currency did begin last week as expected (poorly) with no EU data available to aid in any type of recovery from the previous week' losses. However, that all changed on Wednesday after the above comments from Mr Bailey and Chinese data.

The numbers last week showed that China is making a comeback after the zero-covid policy u-turn recently. Manufacturing activity (the key driver for GDP) expanded at its fastest pace in a decade, which is significant news for its major trade partner the EU.

Over the weekend China announced a 5% target for growth this year. A disappointing figure for some economists, but a sustainable play rather than an expansionary one could lead to stimulus being provided by the Government, which could aid the Euro. As could the inbound GDP data, so an interesting situation on what to do if € exchanges are in the pipeline. 

The China news is bad news as far as the USD is concerned. A positive global sentiment means investors do not need to hold the safe-haven currency, which is why we have seen a bump in stocks today. However, the main drivers this week for the US will come from the recent jobs data and comments made by Fed Chair Powell.

Non-Farm payrolls will be scrutinised as they aid in what the Fed can/can't or should/shouldn't do with interest rates. US inflation (as-well-as most others) is sticky and so it's likely interest rates will have to continue to rise which for now, is still helping USD strength. A push-back on the Dollar is expected this week overall.