We start the week with markets in consolidation mode with EURUSD hovering around 1.09 as we await the ECB policy meeting in the next few days. Wednesday sees the release of the euro area composite PMI, where investors will be looking to see if the economy has continued to avoid a hard landing. Markets believe that the economy will gradually gather momentum n 2024, however growth remains impacted by the ECB’s sharp rise in interest rates. The German Ifo service is out on Thursday and will be closely watched after the larger than expected rise in the ZEW expectations survey. The ECB is expected to key rates unchanged at the first meeting of 2024 on Thursday, with the focus on Christine Lagarde’s press conference – especially any comments on the timing of rate cuts. Central bankers have been pushing back on early rate cuts, expressing caution, with markets now expecting the first cut from the ECB in June.
Fed speakers head into the blackout period ahead of the January policy meeting, with recent comments suggesting that policymakers are in no rush to cut rates. We have little data on the US docket at the start of the week, with Thursday’s fourth quarter reading of GDP the first key release. Markets expect that real GDP grew 1.8% in Q4, down from the previous 4.9%. Friday sees the release of Personal Income and spending data, the Fed’s preferred inflation gauge and should provide some encouraging inflation news for the central bank.
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