As we can see below in the GBP vs G10, markets were pretty quiet, although there were signs during the day of USD weakness with GBPUSD in particular attempting to push through Thursday's high. There were comments from ECB President Lagarde and fellow member Muller, stating that they would like to see Q1 wage data before deciding to move on interest rates. Earlier in the day the ECB’s 1-year CPI expectations were raised marginally to 3.3% from 3.2%.
*Daily move - against G10 rates at 7:30am, 26.02.24
** Indicative rates - interbank rates at 7:30am, 26.02.24
Quiet start to the week until we get second revisions on Q4 GDP from the US on Wednesday. As we mentioned last week, markets have been euphoric since the Nvidia earnings, and there is potential for an uptick in the revisions to continue the good vibrations in the markets. Risk-on mood in the markets should keep GBP well supported.
The main event will likely be the core PCE inflation numbers, which are expected to come in higher following on from recent inflation numbers in the US, and will likely cement Fed member calls that rate cuts should be delayed.
GBPEUR could get a boost higher should Friday's EU inflation numbers add to calls for an earlier rate cut by the ECB than the BoE. Markets expect core inflation to ease further to 2.9%.
The buoyancy and feel-good vibes in the market can perhaps be illustrated by the recent correlation between treasury yields and equity performance. Both yields and equities have been steadily climbing this year, and illustrates the confidence in the global economy at the, moment. The demand for higher risk saw USD have its first negative week of 2024 ahead of the Fed's preferred measure of inflation and revised GDP numbers for Q4 this week.
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