Market Report : 05.12.2023

Published: 05/12/2023 By ECAP

The British Pound rallied against a basket of currencies last month and now finds itself particularly well supported against the Euro, given recent expectations that the Bank of England will cut interest rates after the European Central Bank. Ultimately, the call is a reminder that the timing and scale of central bank interest rate cuts in 2024 is a fundamental driver of the exchange rate landscape.

The Euro continues to take a hit as downbeat economic data pointed to a potential recession in the final quarter of the year. In fact, recent data showed that French industrial production fell 0.3% on the month in October, and the eurozone composite PMI for November is expected to show that economic activity in the region remains firmly in contraction territory.

The U.S. Dollar mustered some strength and retraced part of its recent losses in anticipation of key nonfarm payrolls data this Friday. Nevertheless, markets remain uncertain over when the bank will begin easing policy in, with Fed Funds futures prices showing that investors see a nearly 50% chance that the Fed will trim rates by 25-basis points in March 2024.

Data supplied by GC Partners