Market Report - 29/01/2024
Markets await central bank rate decisions ; GBPEUR to challenge 18 month high?
We have another busy week with the economic calendar providing lots of events of note and lots of opportunities for volatility.
Whilst Monday doesn’t have lots to offer, on Tuesday, GDP figures across Europe are released from 6:30am onwards; Data from France, Italy, Germany, Switzerland, Spain and the European Union are all due for release. Alongside the GDP data, we also have the Consumer confidence index from the EU providing some opportunity for EUR volatility. Across the pond in the US, the Conference Board Consumer Confidence Survey is released in the afternoon. The previous 3 readings have shown growth in confidence across households in the US and we are expecting another tomorrow, with a forecast of 115 (previous reading 110.7).
On Wednesday House price data is released here in the UK; this could prove to be an interesting time whereby the interest rate cycle is shifting, and we could soon see a change in this data piece. Later in the afternoon we have ADP National Employment Report coming out of the US which is a good precursor to the Nonfarm Payroll data (out on Friday). We also have a handful of releases across European countries with more Consumer Price Index and employment data releases. Wednesday evening we have a huge event in the US as the Federal Reserve release their statement on their interest rate decision. The consensus generally is that no change is expected and rates will hold at 5.25% - 5.50%. Goldman Sachs have been tipping a cut in March for some time now and lots of economists suggesting there could be as many as 5 cuts in 2024.
Thursday sees PMI data releases out of both Europe and the UK, and later in the afternoon we have unemployment claims out of the US. Early estimates suggest that UK businesses growth increased well above the 50 score threshold, meaning we could have reached a seven month high. This is taken from the “flash” estimate this morning provided by S&P so cannot guarantee 100% accuracy but is typically a very strong indicator. In the afternoon, we also have PMI data from the US alongside unemployment claims.
Moving onto the main event for the week at midday on Thursday; we have the eagerly anticipated Bank of England interest rate decisions. The recent rise above the 1.17 on GBP/EUR has followed a double combination of last Wednesday's stronger than expected UK PMI print and Thursday's 'dovish' European Central Bank guidance, which resulted in broad-based Euro weakness.
There is every possibility that GBP/EUR slips below 1.17 in the lead-up to Thursday's Bank of England decision amidst an abundance of caution amongst investors fearing another failure at resistance. However, should the Bank of England successfully repeat the message that UK interest rates are to stay higher for longer, the pair could finally break higher to levels last seen in 2022 above 1.1775
Lastly, on Friday 2nd of Feb we have a very US data driven day, with average earnings, non-farm payrolls, unemployment rate, consumer sentiment survey out of the university of Michigan and factory orders. Should you have any upcoming USD requirements, it may be an idea to utilise market orders in anticipation of the outlandish volatility expected after these data releases.