Key Headline:

·       UK Economy Teeters on the Edge of Contraction

·       Will More Rate Cuts Follow in the UK?

Recap

GBP's early gains faltered into the afternoon, with the currency ending lower after dovish comments from Bank of England (BoE) member Alan Taylor. He suggested the BoE should consider preemptively cutting interest rates to avoid a hard landing for the economy.

Following the lower CPI figures earlier, market expectations for two rate cuts by the BoE this year strengthened, but Taylor's remarks have led markets to price in a 28% chance of a third cut this year.

US CPI also came in lower than expected in the afternoon, sparking an initial sell-off in the USD, although losses were partly recovered by the end of the day.

Geopolitical risks eased with Israel and Hamas agreeing to a ceasefire, ending over 15 months of conflict in the Middle East.

Today’s Rates

Today's Interbank Rates at 09:57 am against GBP movement.

GBP>EUR – 1.1857

GBP>USD – 1.2205

EUR>GBP – 0.8432

EUR>USD – 1.0291

GBP>CAD – 1.7539

GBP>AUD – 1.9640

GBP>SEK – 13.620

GBP>AED – 4.4822

GBP>HKD – 9.5076

GBP>ZAR – 23.010

GBP>CHF – 1.1120

GBP>PLN – 5.0573

Today’s Key Takeaways

·       UK GDP data for November showed a modest rebound of 0.1%, falling short of the expected 0.2% growth. This suggests that the economy may have stagnated in the final quarter of 2024.

·       CPI numbers In light of the lower CPI numbers from yesterday and dovish comments from BoE's Alan Taylor, the likelihood of a 25bps rate cut in February is increasing. As a result, GBP is slightly lower at the start of the day.

·       US retail sales This afternoon, attention will turn to US retail sales and jobless claims. There could be a notable increase in sales as consumers take advantage of lower prices before potential price hikes, should Trump follow through with his proposed tariffs. Additionally, the Senate confirmation hearing for Scott Bessant, Trump's nominee for US Treasury Secretary, will be in focus. He is likely to face questions about tariffs, the fiscal agenda, and the value of the dollar.

16th January 2025

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