The week ended with more USD selling and retail sales in January falling unexpectedly by 0.8%, year-on-year. Markets recalibrated interest rate forecasts to align with pre-Wednesday CPI figures. We’re back to a 60% chance of a second rate cut this year, now anticipated to come in September, three months earlier than originally forecast.
Both GBPUSD and EURUSD continued their advances for two weeks in a row.
*Daily move - against G10 rates at 7:30am, 17.02.25
** Indicative rates - interbank rates at 7:30am, 17.02.25
The UK is back in focus this week with the release of job numbers on Tuesday, CPI on Wednesday and retail sales on Friday. In light of recent comments from members of the Bank of England (BoE), the biggest risk comes from the job numbers, which could be a hindrance for GBP. CPI (as highlighted by the BoE) is expected to come in higher, which will support GBP, but it's worth noting that since the BoE's meeting a few weeks ago, markets have reduced the number of expected rate cuts this year. Therefore this pick up in CPI could be priced in. Last week's GDP numbers highlighted a lack of household spending during the final quarter of the year; if this pattern persisted into January we could be set for some disappointing numbers this Friday.
The FOMC minutes on Wednesday will be the key US data point for this week.
It seems continued talks of a potential ceasefire in the Russia/Ukraine conflict should keep USD soft due to increased risk appetite. US and Russian officials are set to meet in Saudi Arabia this week.
A potential hindrance for the EUR will be the run up to the German elections this weekend, should there be a delay in forming a coalition.
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