Market Report : 31.01.2024

Published: 31/01/2024 By ECAP

The British Pound held its ground as investors await tomorrow’s crucial Bank of England meeting. Market participants anticipate the BoE to hold rates steady at 5.25%. Moreover, while the central bank may soften its message about the prospect of future cuts, investors expect no rate cuts in the upcoming months. This, in turn, might act as a headwind and lift the British Pound.

The Euro remained on the defensive this morning as market participants await French and German inflation figures as well as German Retail Sales. Slowdowns there would foreshadow the same in Eurozone numbers due on Thursday and reinforce market expectations that European policymakers could start rate cuts as soon as April. According to a Reuters analysis, investors have priced in nearly 60% odds of first rate cuts in April.

The U.S. Dollar gained 2.2% against a basket of major currencies this month as markets dialled back expectations on the speed and scale of rate cuts in the face of strong U.S. economic data and pushback from central bankers. Looking forward, the Fed is expected to hold interest rates steady tomorrow, but flag cuts are coming. For now, markets price a roughly 43% chance of a Fed rate cut in March, down from 73% at the start of the year.

Data supplied by GC Partners