Earlier this morning, headline Inflation in The Euro-Zone came in closer to the 2% target that the European Central Bank aim for. Inflation across the 20 countries slowed from 2.1% but crucially matched economist’s expectations. Even when excluding food and fuel prices, Inflation still grew slower than initial forecasts. Only rising by 2.3% as opposed to the expected 2.4% growth in November.
In usual circumstances, we would see bets ramped up for further interest rate cuts, but The European Central Bank seem reluctant to cut rates further with markets currently forecasting no changes to the rates through 2026.
Later this afternoon we turn our attention to The U.S with it’s ADP Employment release for December. The report is expected to show a timely turn around in hiring figures, with an expected 47,000 jobs created last month which would be a markedly improvement against the 32,000 job losses just one month prior. In terms of market impacts, if both ADP and Non-Farm Payrolls on Friday show a lack of strength in the labour market, it shouldn’t come as a surprise if we start to see ramped up speculation surrounding further interest rates throughout 2026. This could dampen the US Dollar, especially when you consider many Central Banks are nearing the end of their rate-cutting cycle. Nevertheless, the next few days will be key for US Dollar movement against the major currency pairs.
GBP/EUR 1.1536 GBP/USD 1.3400 GBP/AED 4.9575
GBP/AUD 2.0022 GBP/CHF 1.0740 GBP/CAD 1.8628
GBP/NZD 2.3302 EUR/USD 1.1677 GBP/ZAR 22.1843