Things to know on quiet data week ahead

Consolidation period expected on the market thanks to no major economic data releases..

GBP

£-€ has risen for 6 consecutive weeks now and gained nearly 2% during that time. Meaning a £100,000 exchanged into Euros has achieved €2,000 more compared to just 6-weeks ago. It's a very favourable time indeed for both SPOT and forward pricing with current levels around the best time since August 2022.

The more volatile £-$ has seen stability over the last 2-months with only a 2% swing seen in that time. Cable has gained 3% since the beginning of November, which represents nearly $4,000 more on a £100,000 exchanged in the time-frame.

Last week, the BoE voted to keep interest rates on hold for the 4th consecutive week (which was expected). The surprising news was that 2 MPC members voted for a rate hike, which in our view is madness. 1 member did vote for a rate cut (as expected) with the other 6 voting to keep things as they are.

What it means is money markets have incorrectly priced in when the BoE will cut interest rates. 'Higher for longer' has been mentioned by all major central banks, but it looks like it's going to be much longer than most are predicting. This is good news for GBP, not so much for consumers.

EUR
The Euro is down heavily versus the Dollar in the last month and has been continuously losing value against the Pound of late. No big comeback is expected this week due to no major data being released and therefore a lack of market volatility. However, more often than not, this is where the single currency can recover at least some ground, so consider this if you have exchanges that involve the € in the pipeline.

USD
"More good data is needed" was the statement from Fed Chair Powell last week in terms of when he can expect to cut interest rates in the US. Powell sees 'danger' in cutting rates too soon and so once again the forecasts from economists and data houses have it wrong in when interest rates will be cut.

The Dollar has gained on the back of the comments as money markets had priced in a March rate cut (bad news for USD). The Dollar has gained over 1% in the last month versus the Pound, but is still overall favourable.

By Dan Waterman on February 05, 2024