So far in 2024, currency markets, like financial markets in general, have taken a 180-degree shift. The frenetic bond rise in the final weeks of 2023 came to a halt and reversed, as markets reduced expectations of Federal Reserve interest rate decreases in 2024. Markets obediently followed interest rate leads: risk assets and commodities declined, while the dollar rose against every major currency with the notable exception of the Mexican peso, which improved on its spectacular 2023 performance to end up higher against all other major currencies.

This week’s attention is centred on the most critical data for global markets: the monthly CPI inflation print in the United States, which is due out on Wednesday. Markets expect more moderation in the YoY core data, and any upside surprise will make it difficult for the Fed to ease in March, contributing to the recent dollar gain. The monthly GDP report from the United Kingdom, as well as a series of speeches by Federal Reserve and ECB officials, will finish off the week, as trade volumes resume after the holiday week.


Sterling was the only G10 currency to match the dollar’s gain last week, finishing higher versus all other G10 currencies. The Pound’s outperformance is due to two factors: demand resilience, as indicated by the data, and the Bank of England’s relative hawkishness, which results in the highest interest rates in the G10 and a comparatively slow timeline for cuts in 2024. This week’s attention will be on November GDP, which economists predict to rebound strongly after a loss in October.


The tug-of-war between the ECB’s perceived hawkishness and the Eurozone’s weak economic performance persists. December’s inflation figures were mixed. The headline index recovered after energy subsidies were eliminated, but the more significant core index continued to fall and is currently solidly below the ECB repo rate. There isn’t much economic data to report this week. The focus will be on talks by ECB officials, particularly chief economist Lane, who is expected to provide clarity on the ECB’s perspective of recent Eurozone economic weakness and its implications for monetary policy.


A mixed payroll December report provided some contradicting signals: consistent job creation and good wage increases in the establishment survey were contrasted with a significant reduction in labour force participation in the home survey. Overall, the US labour market is at full employment, although symptoms of slowing are emerging. All of this will be overshadowed by the important December CPI inflation report on Wednesday. A two-thirds possibility of a March cut, as presently priced in markets, appears to be too high, and this week’s inflation data will go a long way towards settling the question.

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