- The pound posted gains against both the US dollar and euro yesterday after stronger than expected PMI data, pushing back on the timing of expected rate cuts from the BoE. The Composite Purchasing Managers’ Index rose in January to its highest level in seven months pushing GBPEUR above 1.17 and cable to test resistance at 1.2775. The solid data comes ahead of next week’s BoE policy meeting, where a pause is widely expected, with markets hotly debating the timing of the first interest rate cut of the year. Swaps tied to the central bank’s meetings now imply 95 basis points of cuts this year, compared to about 130 basis points last week and 150 basis points in December.
- EURUSD remains stubbornly mid-range, trading just below the psychological 1.09 area ahead of the first ECB policy meeting of 2024. The pair rallied yesterday after mixed euro area PMI data, pushing EURUSD to the top of its recent range at 1.0930 before running in to offers. Whilst officials at the ECB are fully expected to keep rates unchanged later today, markets will focus on President Christine Lagarde’s post meeting press conference for clues on the timing of the first policy shift of the year.
- Yesterday was all about PMIs, and US results published yesterday showed that business activity in January expanded the most in seven months – marking the twelfth consecutive month of expansion. Weekly initial claims, Durable Goods Orders and New Homes sales along with the key fourth quarter GDP numbers are all on the docket this afternoon.
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