top of page
Original on Transparent.png
  • LinkedIn

Foreign Exchange Analysis ~ 20 January 2025

Audere Research

GB Pound

What happened last week?

Following Cable dropping to the lowest level since November 2023 on the 13th, Sterling spent last week benefitting from a respite. The softer than expected print in headline, core and services CPI provided gilt market traders more confidence in near term BoE rate cuts (whilst this would ordinarily be seen as a sterling negative it acted as support for the pound).

 

What to watch for in the short-term?

While this week’s economic data is unlikely to provide markets with enough ammunition to push GBPUSD lower, any Trump surprises could cause volatility for Sterling.


What about the coming months?

Markets are pricing c.60bp of rate cuts in 2025 now (from 40bp pre inflation print). Furthermore, markets have largely discounted January’s gilt volatility as a non-systemic sovereign bond risk, with demand at some of the recent gilt auctions three times oversubscribed. Whilst the news has supported the pound, weaker rate expectations should at some point begin to weigh on the Pound.

 

Calendar

Tuesday 7am | Unemployment data


US Dollar

What happened last week?

Markets keenly awaited CPI data last week with a hot print expected to confirm the ‘sticky’ narrative and raise the likelihood of a no rate cut 2025. The data however caused a muted response from markets with CPI coming in line with consensus (2.9% Vs 2.7% in November) and Core CPI coming just cooler than expectations.


What to watch for in the short-term?

Dollar traders spent the latter half of last week looking ahead to today’s inauguration with USD volatility expected to start on Tuesday following any initial executive decisions taking place on America’s trading holiday (Martin Luther King Day).


What about the coming months?

The downside risk for the dollar is that markets have already priced in significant policy changes in Trumps first few weeks. In betting markets, China, Mexico and Canada are all expected to receive tariffs in the first week alongside a possible national energy emergency.


Calendar

Monday 5pm | Presidential Inauguration


Euro

What happened last week?

Last weeks European inflation data came broadly in line with expectations (both harmonised data and the key individual member states). Consequently, markets continue to price in c.100bp of cuts this year.


What to watch for in the short-term?

A relatively quiet week ahead for European data. ECB member speeches in Davos could provide some insight into how the Central Bank is perceiving the risks associated with America post Trump inauguration

 

What about the coming months?

For EUR/USD the outlook is bearish – numerous cuts priced for Europe, less cuts priced for America, and the expected macroeconomic implications of tariffs on European goods all point to Euro depreciation. For GBP/EUR the outlook is less one sided



Call +44 (0) 203 884 992 to discuss further with an advisor.

Recent Posts

See All

Comments


bottom of page