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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, EUR, Fed, GBP, Inflation, Rate Cuts, Sterling, UK, Uncategorised
• February 20, 2024
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Last week delivered a blow to the Pound following GDP figures which showed the UK entered a recession last quarter- This wasn’t really news to us however now it has been made official we saw an effect to the exchange rates- both GBPEUR and GBPUSD fell after enjoying a month and a half of gains. The reality of the last quarter’s GDP is that demand had slowed down a lot, but from what we have seen this quarter demand has picked up and the UK should be out of this recession this quarter, this news itself is enough to give investors confidence in the Pound. By Friday we saw positive retail sales numbers for the UK which also backed this case, so as long as we see positive UK numbers through these next few months we should see the UK climb out of the recession relatively quickly.

This week is relatively quiet for data- the first important release is the FOMC minutes on Wednesday, where markets will be looking for any clues on when the Fed is expecting to cut rates- right now we are not expecting any cuts until later this year and I don’t expect this guidance to change, but either way the FOMC minutes can generally be quite a volatile release so if you are trading the US Dollar this is something to keep in mind.

On Thursday we have flash PMI data out of Europe, the UK and the U.S- as flash PMI’s are just estimated they don’t always have an effect on the market, however if we see any readings below the 50 level for any of the releases then we could see that economies currency weaken- generally speaking flash PMI’s are usually a good indicator for demand in an economy and will paint a good picture for all three of these economies for next month.