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It's been a positive period for USD, but will that extend to a second week?
At the end of a week where geopolitics dominated, economics was back in the spotlight on Friday with US non-farm payrolls. This is the most widely trusted measure of the US labour market and while it said that hiring was quieter, the numbers were not viewed as disastrous.
This dampened expectations of another interest rate cut from the Federal Reserve at its next meeting on 5 February, and the dollar built on the strength that had already been seen across the board. On that subject, there are reports this morning that the US government – or at least that part of it that president Trump controls – is going to press charges against the Fed’s chair Jerome Powell for, as they say, misleading Congress over some building repairs. No-one really believes this is anything other than pressure to cut interest rates sooner, potentially by removing him.
So, GBP/USD starts the week 1% down and EUR/USD about two thirds of a cent down compared to last Monday.
For the coming week, UK data comes back into the frame with retail sales inflation tomorrow and GDP on Thursday. The government will be desperate to see some growth on Thursday, although the analysts are not predicting any.
As part of the search for growth the government hopes to do a “reset deal” with the European Union. The first phase would be a veterinary, or sanitary and phytosanitary (SPS), agreement to remove most Brexit red tape faced by agrifood exporters and potentially increase UK food and drink exports by more than 20%. However, Nigel Farage, leader of the Reform party currently leading the polls says he will tear up any agreement if he wins power.
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GBP: Can sterling hold onto its gains?
Having gained sharply at the start of the week following the US intervention in Venezuela – against almost all currencies – sterling settled down over the course of the week. However, it remains close to a four-month high against the euro and US dollar. The data highlight of the week will be GDP on Thursday.
GBP/USD past year
EUR: Single currency in retreat
After a pretty negative week for the single currency it has lost some 1-2% against major pairs including the pound and US dollar. The background is a depressing economic mood. It’s a quiet period for data but, with the geopolitical environment right now, economic news isn’t necessarily the most influential factor.
GBP/EUR past year
USD: Where next for the dollar?
The currency markets don’t know quite where to turn in the new reality of the ‘Donroe Doctine’. Is the US threatening neighbours a risk or an opportunity? So, while there were gains they were quite modest for USD last week overall. Following a mixed result for non-farm payrolls on Friday we have inflation coming up tomorrow.
USD/GBP past year
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