Currency markets remained rangebound yesterday ahead of this evening’s US interest rate meeting. The euro dipped briefly following the latest GDP data for Q4 last year, which showed the bloc narrowly avoided a technical recession with “growth at 0.0%". The US dollar initially rose on strong job opening data, but then gave back gains as markets ponder tonight’s FOMC meeting. With no economic data releases, sterling was largely a bystander as traders look to tomorrow’s Bank of England rate setting meeting for further direction.
The IMF released their latest growth projections, which continued to illustrate the growth divergence between the US and the EU. US GDP has been revised up to 2.1% from 1.5%, whereas EU GDP was downgraded from 0.9% to 0.5%.
Data out this morning showed a surprising jump in UK house prices, with the latest Nationwide house price index rising 0.7% in January versus a reading of 0.0% in December.
*Daily move - against G10 rates at 7:30am, 31.01.24
** Indicative rates - interbank rates at 7:30am, 31.01.24
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Currency markets continue to take their cue from interest rate cut projections, with traders continuing to aggressively price in considerably more easing than Central Bank projections.
This evening’s US interest rate setting meeting will once again likely see rates left on hold, but market participants will take their cue from the Fed’s monetary policy guidance which will set the tone for the next meeting in March. Currently the odds of a rate cut at this meeting sit at 2%, whereas March pricing is at 45% and 100% for May. Fed Chair Powell is expected to be less hawkish than previous meetings, stressing the importance of upcoming data.
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