Sterling stable ahead of US inflation and UK growth data

Following a positive start to 2024, sterling remains at a stable level against its key counterparts the euro and US dollar. GBPEUR is 1.3% off the 6-month high and 2% higher than the 6-month low. Cable (GBPUSD) rates are 3% lower than the 6-month high but almost 5.5% above the 6-month low.

On a 6-monthly basis, now is positive time to be securing euros and dollars from pounds. There is a potential for sterling weakness as we progress into the New Year.

Forecast data collated by Lumon, suggests a clear downside bias for GBPEUR with the probability of the rate dropping below 1.1550, greater than the probability of it rising above 1.1750. Deutsche Bank are calling it as low as 1.1364 in 3 months’ time.

Cable forecasts are slightly more positive. It is more likely that cable will rise above 1.285 than drop below 1.2550, however, some banks are calling rates lower. Deutsche Bank and Dankse bank have suggested 1.2353 and 1.25 respectively.

Market data today

Economic data is light on the ground, but we will hear BoE Governor Andrew Bailey this afternoon and Fed member John C. Williams later this evening. Any comments on inflation and future interest rates could cause market movement.

Rest of the week

US CPI data released tomorrow morning could be a big moving event. There is an expectation that the Fed will start cutting interest rates ahead of the ECB and BoE. A higher-than-expected inflation reading could delay plans for interest rate cuts, leading a stronger dollar. A lower reading could accelerate plans and weaken the greenbacks footing.

Monthly GDP (growth) data from the UK is expected for show a rise in activity from -0.3% to 0.2%. A surprise negative GDP reading could spell bad news for sterling. Last month’s quarterly GDP confirmed a negative quarter of growth. A second quarter of negative growth would put the UK in a technical recession.

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