Key Headlines:

• The Bank of England’s dovish tone triggered a significant drop in GBP.
• USD stays resilient as attention shifts to the release of core PCE data.

Recap

Welcome back! USD extended its rally into 2025, pushing GBPUSD to its lowest point since May 2024 and EURUSD near parity, hitting levels not seen since November 2022. After a brief dip on Friday morning, the USD regained strength, supported by unexpectedly strong manufacturing PMI data for the second month in a row. Meanwhile, GBP started the year on a weak note as markets assess the challenges facing the UK economy, with some stabilisation seen on Friday.

Today’s Rates

Today's Interbank Rates at 09:47 am against GBP movement.

GBP>EUR – 1.2050

GBP>USD – 1.2476

EUR>GBP – 0.8297

EUR>USD – 1.0351

GBP>CAD – 1.7936

GBP>AUD – 1.9975

GBP>SEK – 13.809

GBP>AED – 4.5817

GBP>HKD – 9.6990

GBP>ZAR – 23.303

GBP>CHF – 1.1304

GBP>PLN – 5.1380

Today’s Key Takeaways

Focus on European Inflation Data:

• German and French CPI figures, along with EU-wide inflation numbers, are expected to show an uptick today due to base effects from fuel prices.
• However, the overall disinflation trend is expected to persist, leaving markets largely unchanged in their pricing of 100bps worth of ECB rate cuts for 2025.

Key US Job Data Ahead:

• This week includes multiple US employment indicators, culminating in Friday's nonfarm payroll report.
• Markets anticipate 153,000 new jobs added in December, with unemployment steady at 4.2%.
• Current pricing suggests only 43bps of Fed rate cuts for 2025, and as long as job data holds steady, USD strength is expected to persist.

USD Market Dynamics:

• As traders return post-holidays, the USD is easing slightly, reflecting renewed liquidity flows.
• Any USD correction is likely to be temporary, supported by a hawkish Fed narrative and anticipation of Donald Trump's inauguration.

06th January 2025

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