Monthly Currency Report – February 2024

Friday 15th February – As the week neared its end, the Pound (GBP) maintained a subdued position despite the UK’s retail sales data for the latest period surpassing expectations. Although there was a notable surge in sales growth, it failed to counter previous data releases that heightened speculation about a potential interest rate adjustment from the Bank of England (BoE).

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Initially showing strength on Friday, the Euro (EUR) was buoyed by cautious remarks from European Central Bank (ECB) executive board member Isabel Schnabel, advising against premature adjustments to the bank’s policy stance. However, later in the session, the Euro’s negative correlation with the US Dollar (USD) dampened demand for the EUR.

Ending the week positively, the US Dollar saw gains following the release of the latest US producer price index, with January’s figures surpassing expectations, indicating a more substantial rebound and maintaining pressure on US inflation.

Thursday 15th February

The Pound (GBP) experienced a decline after the UK’s fourth-quarter GDP growth rate contracted more than anticipated, confirming a recession in the British economy over the past year. With elevated interest rates and ongoing cost-of-living concerns contributing to the downturn, markets increased speculation about an impending rate cut from the Bank of England (BoE).

The European Commission revised down its forecasts for Eurozone growth and inflation for 2024, leading to subdued trading for the Euro (EUR) at the outset of the session. However, the EUR managed to recover later in the afternoon, benefiting from its negative correlation with a weakening US Dollar (USD).

On Thursday, the US Dollar weakened following disappointing US retail sales data, showing a larger-than-expected decline in domestic sales in January, contrary to forecasts. Additionally, a cautiously optimistic market sentiment reduced demand for the safe-haven ‘Greenback.’

Wednesday 14th February

There was a notable decline at the start of Wednesday’s session for the Pound, erasing gains from the previous day, following a miss in the UK’s consumer price index for the latest period, which held steady instead of rising as forecasted. Consequently, expectations rose for a Bank of England (BoE) interest rate cut as early as May.

The Euro (EUR) stumbled against its stronger counterparts on Wednesday, despite an unexpected surge in Eurozone industrial production in December. The downturn came amid a positive market sentiment, which dampened demand for the single currency.

The US Dollar (USD) edged lower, trimming some of its gains following Tuesday’s inflation data, as a preference for riskier assets weighed on the safe-haven currency. Additionally, a slight decrease in US Treasury yields exerted pressure on USD exchange rates.

Tuesday 13th February

Following stronger-than-expected British jobs data there was a surge in the Pound, with the UK unemployment rate unexpectedly declining in the three months to December, while wage growth moderated less than anticipated. This reduced speculation of an interest rate cut from the Bank of England (BoE), bolstering GBP.

Against weaker rivals, the Euro strengthened on Tuesday after Germany’s latest economic sentiment index surpassed expectations, reaching a one-year high. However, this did not prevent the single currency from losing ground against its stronger counterparts.

The US Dollar (USD) rallied in the afternoon following a hotter-than-expected US consumer price index. Headline inflation in the US eased less than forecast last month, while core inflation remained steady unexpectedly. This led to a decrease in market expectations for a rate cut by the Federal Reserve from 16% to 8.5%.

Monday 12th February

The Pound (GBP) faced challenges during Monday’s session due to a lack of UK economic data, leaving the currency vulnerable to losses. Additionally, sentiment towards Sterling may have been dampened by a new analysis from Goldman Sachs, which highlighted ‘a significant long-run output cost of Brexit.’

The Euro (EUR) encountered selling pressure on Monday following dovish comments from European Central Bank (ECB) policymaker Fabio Panetta. Panetta’s remarks suggested that the time for interest rate cuts is approaching rapidly, fueling expectations of an impending shift in the ECB’s monetary policy stance.

The US Dollar (USD) remained subdued on Monday as investors were hesitant to adjust their positions ahead of the upcoming US inflation data. Nonetheless, the USD managed to strengthen against some weaker rivals following recent hawkish statements from Federal Reserve officials.

Friday 9th February

The Pound (GBP) hesitated towards the end of the previous week, responding to divergent remarks from Bank of England (BoE) policymaker Jonathan Haskel. While Haskel defended his vote for an interest rate hike during the BoE’s January meeting, citing persistent inflation, he also admitted to a finely balanced decision, dampening the Pound’s momentum.

On Friday, the Euro (EUR) remained subdued following the release of Germany’s final consumer price index for January. The CPI confirmed a decrease in inflation to its lowest level since June 2021, igniting speculation about potential interest rate cuts by the European Central Bank (ECB).

The US Dollar (USD) softened on Friday after a minor downward revision in recent US inflation data for December. This modest inflation adjustment led to slight increases in bets for Federal Reserve rate cuts, exerting downward pressure on the USD.

Thursday 8th February

The Pound (GBP) exhibited mixed performance on Thursday, advancing against riskier currencies but faltering elsewhere amid a gloomy market sentiment. Hawkish remarks from Bank of England (BoE) policymaker Catherine Mann provided some support to the Pound, highlighting persistent inflationary pressures and potential further upside shocks.

Thursday saw the Euro (EUR) trading cautiously as a lack of significant Eurozone economic data subdued the common currency. Nevertheless, the Euro, considered a safer option, managed to strengthen against its riskier counterparts amidst market apprehension.

The safe-haven US Dollar (USD) gained traction on Thursday after reports revealed a deeper deflation in China, unsettling market sentiment. Additionally, lower-than-expected US jobless claims in the afternoon further reinforced the USD, reinforcing expectations for delayed Federal Reserve interest rate cuts.

Wednesday 7th February

The Pound (GBP) saw some uplift on Wednesday following comments from Bank of England (BoE) Deputy Governor Sarah Breeden. Emphasising persistent high inflation, Breeden hinted at a distance to go before declaring victory, suggesting that interest rate cuts are not imminent.

On Wednesday, the Euro (EUR) remained subdued following disappointing data showing a larger-than-expected contraction in German industrial production in December. Despite this, the Euro managed to hold its own against certain riskier currencies amidst a souring market sentiment.

The US Dollar (USD) experienced muted movement on Wednesday amid an uncertain market atmosphere and minimal US economic data. With US Treasury yields stabilising, the ‘Greenback’ faced limited fluctuations.

Tuesday 6th February

Tuesday saw some bargain-hunting activity for the Pound (GBP) as investors seized opportunities amid recent declines. Moreover, an optimistic market sentiment provided some support to the increasingly risk-sensitive GBP.

The Euro (EUR) weakened on Wednesday, despite impressive German factory orders data for December, which exceeded expectations. This selling bias was reinforced by a decline in Eurozone retail sales during the same period.

The US Dollar (USD) remained mostly stable on Tuesday amidst a positive market sentiment that diminished demand for the safe-haven ‘Greenback’. However, ongoing speculation surrounding Federal Reserve interest rate cuts following hawkish remarks from Chair Jerome Powell kept the USD buoyed.

Monday 5th February

On Monday, the Pound (GBP) faltered, despite a revision upwards in the UK’s final services PMI. While the services sector showed accelerated activity, signs of easing inflation weighed on GBP as markets speculated about potential Bank of England (BoE) interest rate cuts.

The Euro (EUR) exhibited muted movement on Monday, slipping against stronger counterparts and maintaining a sideways trajectory elsewhere. This followed lacklustre German trade data and a slowdown in Eurozone producer prices, sparking speculation about potential ECB rate cuts.

Monday saw the US Dollar (USD) continuing its recent uptrend, supported by hawkish comments from Federal Reserve Chair Jerome Powell over the weekend. Additionally, a better-than-expected ISM services PMI in the afternoon further bolstered the USD’s attractiveness, leading to reduced expectations of Federal Reserve interest rate cuts this year.

Friday 2nd February

The Pound (GBP) traded aimlessly, lacking a clear direction due to the absence of UK economic data. The currency’s trajectory was shaped by market sentiment, with GBP rising against riskier peers while losing ground elsewhere as risk appetite diminished.Closing out the week, the safer Euro (EUR) saw gains against its weaker counterparts amid a bearish market mood. However, the single currency faced pressure from its strong negative correlation with the US Dollar (USD).

A robust non-farm payrolls report on Friday catapulted the US Dollar higher, indicating a robust American labour market. With an impressive addition of 353,000 jobs in January, markets adjusted their expectations on a March rate cut from the Federal Reserve, giving a significant boost to USD.

Thursday 1st February

Shifting to Thursday, the Pound (GBP) experienced notable volatility in response to the Bank of England’s (BoE) interest rate decision. Although the rates remained unchanged, GBP initially climbed due to two rate-setters voting for a hike. However, dovish comments from Governor Andrew Bailey reversed the gains.

The Euro (EUR) found success against some peers on Thursday, despite a modest cooldown in Eurozone inflation. Support came from the bloc’s record-low unemployment rate in December, and European Central Bank (ECB) President Christine Lagarde’s resistance to rate cut speculations.

The US Dollar (USD) opened the session cautiously on the front foot on Thursday, but later faced profit-taking after hitting multi-week highs. Weaker US jobs data in the afternoon added pressure, resulting in an overall decline for the ‘Greenback’.

Wednesday 31st January

Moving to Wednesday, the Pound (GBP) wavered without a clear direction, influenced by a lack of UK economic data and a mixed market mood. The shifting tone impacted the increasingly risk-sensitive Pound.

The Euro (EUR) faced mixed movement on Wednesday, initially finding success despite slumping German retail sales in December. However, a larger-than-forecast cooldown in German inflation in the second half of the session led to a trimming of gains.

The US Dollar (USD) slumped on Wednesday following a sharper-than-forecast slowdown in hiring according to ADP employment figures. However, it rallied later in the day after the Federal Reserve firmly pushed back on expectations of a March rate cut.

Tuesday 30th January

On Tuesday, the Pound (GBP) faced selling pressure as new data revealed a cooling in UK shop inflation. The International Monetary Fund (IMF) downgraded the UK’s 2025 growth forecast and advised against expected tax cuts, further impacting GBP.

The Euro (EUR) rallied on Tuesday after Eurozone GDP data showed the bloc avoided a recession in the fourth quarter of 2023. The unexpected rise in year-on-year GDP figures provided additional support.

The US Dollar (USD) ticked higher on Tuesday, despite a cautiously upbeat market mood. Stronger-than-expected US jobs data and a rise in US Treasury bond yields contributed to the ‘Greenback’s’ resilience.

Monday 29th January

On Monday, the Pound (GBP) slipped with no supporting economic data, leaving it vulnerable to losses against stronger peers.

The Euro (EUR) plunged to a six-month low against the Pound on Monday following dovish commentary from European Central Bank (ECB) policymakers. The prospect of an interest rate cut signalled a bearish outlook.

The safe-haven US Dollar (USD) initially weakened on Monday amid cautious optimism and a drop in US Treasury yields. However, it later recovered some losses as risk appetite waned.

Currency Ranges for the month:

GBP/USD: Low:  High:

GBP/EUR: Low:  High:

EUR/USD: Low:   High:

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