Market Report : 04.12.2023

Published: 04/12/2023 By ECAP

The British Pound enters the new trading session with the benefit of two solid consecutive weekly advances against the Euro, which confers a degree of momentum in a calendar-light week. The strong moves comes after interest rate expectations in the UK and Eurozone diverged meaningfully over the recent days. Ultimately, in the UK, markets are paring expectations for the quantum of rate cuts due to be delivered in 2024; in the Eurozone, these rate cut bets are growing.

The Euro has been on the back foot of late and struggling to gain momentum since the release of Eurozone inflation data. However, ECB policymaker Francois Villeroy de Galhau said last week that the ECB was not ready to consider lowering borrowing costs now but would consider it later in 2024. That being said, the recent slowdown in inflation brings the ECB's 2% inflation target back into clear focus for the first time since the summer of 2021, potentially signalling an adjustment in monetary policy.

The U.S. Dollar struggled to regain some footing this morning as markets took stock of cautious remarks from Federal Reserve Chair Jerome Powell. In fact, Powell said on Friday it was clear that U.S. monetary policy was slowing the economy as expected, with the benchmark overnight interest rate "well into restrictive territory." Looking forward, investors await a key employment report later in the week that could influence the outlook for U.S. interest rates.

Data supplied by GC Partners