26/07/2024
Written by: Ian Morley
Summary
Friday witnessed subdued market activity with decreased volatility and upward movement in equity markets. The GBP sustained losses due to disappointing retail sales figures, while the USD concluded the week on a positive note.
Our Analysis
This week’s significant developments are anticipated to kick off on Wednesday with the release of initial PMI numbers across the UK, EU, and US. The focus is on assessing whether the recent uptick in economic activity will persist, alleviating concerns of a recession.
Thursday will feature the latest ECB meeting, where no change in interest rates is expected. However, attention will be on the Bank’s emphasis on economic data, providing insights into when the first rate cut might occur—current market expectations point to a cut in April. US Q4 GDP numbers are projected to reveal a slowdown from 4.9% to 2%. On Friday, the core PCE inflation number will play a crucial role in either supporting or reversing the probability of a March rate cut.
The week begins with the USD showing marginal weakness, influenced by increased risk appetite and record highs in US stock markets on Friday. A relatively quiet start is anticipated, with FX rates likely to consolidate around current levels before the release of PMI numbers on Wednesday.
Chart Analysis
The USD recorded its third consecutive weekly gain as markets adjusted expectations for fewer rate cuts in the coming year. This trend may persist if this week’s PMI and GDP numbers show improved economic performance, along with a higher print on the core PCE inflation figures.