26/07/2024
Written by: Ian Morley
Summary
Recent developments suggest a shift in the anticipated rate cuts by central banks, influenced by statements from central bank officials and economic indicators. Notably, Fed Waller, ECB Knot, and Lagarde expressed caution about rate cuts, leading to a reassessment in money markets. GBP and USD both benefited, with the latter likely to gain further if the trend of reduced rate cut expectations continues.
Additionally, recent victories for Donald Trump in the Iowa caucuses are linked to USD gains and EUR weakness. Trump’s policies, such as withdrawing aid for Ukraine and imposing tariffs, impact currency perceptions. While early, these events are worth considering for future analysis.
Current Market Overview
As of 7:30 am on January 18, 2024, G10 rates experienced fluctuations, and interbank rates remained indicative. The market appears more stable today after recent volatility. The risk-off sentiment witnessed on Wednesday eased in the New York session, leading to equity recovery and a pullback in USD gains.
Today’s Outlook
The day is expected to be relatively quiet, with only US jobless claims and a speech by Fed Bostic on the agenda. The FX market is likely to stay within established ranges. GBP remains favoured, especially against the EUR, and positive retail sales numbers for December could further boost GBP. However, GBPUSD is expected to maintain its recent trading range amid uncertainty in the broader USD trend.
Chart Analysis
The reduction in expected rate cuts by the Fed and BoE has contributed to USD gains. Despite this, the rate cut differentials between the UK and US remain constant, suggesting that GBPUSD may stay within its 2 cents trading range in the near to medium-term.