Market Insight 31-01-2024

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  • Market Insight 31-01-2024

Summary

The currency markets showed limited movement yesterday as anticipation built ahead of the upcoming US interest rate meeting. The euro briefly declined following Q4 GDP data, revealing a narrow escape from technical recession for the EU with “growth at 0.0%.” The US dollar initially strengthened on robust job opening data but retraced gains as investors speculated on the Federal Open Market Committee’s (FOMC) meeting outcomes tonight. Sterling remained on the sidelines with no significant economic releases, as traders look to the Bank of England’s rate-setting meeting for guidance.

The International Monetary Fund (IMF) released growth projections highlighting the growing disparity between the US and EU economies. US GDP was revised up to 2.1% from 1.5%, while EU GDP was downgraded from 0.9% to 0.5%.

Morning data revealed an unexpected rise in UK house prices, with the Nationwide house price index showing a 0.7% increase in January, compared to December’s 0.0%.

Speeches:

· USD: Fed Chair Powell Рpress conference

Our Analysis:

Currency markets remain influenced by interest rate cut expectations, with traders pricing in more easing than projected by central banks. The upcoming US interest rate setting meeting is expected to keep rates unchanged, but market participants will closely watch the Fed’s monetary policy guidance, setting the tone for the March meeting. The probability of a rate cut at this meeting is 2%, increasing to 45% in March and reaching 100% for May. Fed Chair Powell is anticipated to adopt a less hawkish stance, emphasizing the significance of forthcoming data.