The lack of any meaningful economic data over the past few days has kept currency markets on the sidelines, with many investors focusing on equity markets during US earnings season. However, recent Fed rhetoric continues with more central bank officials suggesting yesterday that they do not see an imminent need to cut interest rates. Recent remarks dovetail in with the message delivered by Chairman Jerome Powell, who last week emphasized that the Fed is not set to kick off interest rate cuts until policymakers are sure that inflation is heading towards the central bank’s 2% target. With the March policy meeting just six weeks away, a cut then seems unlikely with investors now looking to the May 1st or Jun 12th announcement for the first of probably three cuts of 25bp this year.
The US dollar and yields both dipped yesterday helping EURUSD rally a touch from its recent lows, however the pair remains below the key 1.08 level. Once again, we have limited data on the docket today, with just this afternoon’s weekly jobless claims from the US to look forward to. EURUSD has now bounced off 1.0725 three times, so that level remains key support, and needs to break to signal a fresh move lower.
GBPUSD also caught a bid yesterday but remains within the recent 1.26-1.28 range which has held for some time. Cable continues to be influenced by the greenback and Fed policy, although the pair may come into its own next week as we look forward to a plethora of UK data including the key inflation report for January.
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