Daily Market Update

Euro falls on dove talk, Buck steadies 

January 29, 2024

This week is starting with some steady equities ahead of an important data-filled week.

Overview

More importantly, central bank policy will take center stage with the Fed’s meeting and announcement Wednesday, while the Bank of England tells its story on Thursday. While the Fed is not expected to change its mind or tone, establishing a timeline for cuts elsewhere will be crucial for potential dollar-strengthening.

China headlines last week featured news of a more determined People’s Bank of China in aiding the economy and providing more robust stimulus. This week, we shall see if data related to manufacturing and the Purchasing Managers Index will attest to the need for financial alleviation or if things are perhaps in better shape than economists think.

Ultimately, on Friday, we will see the U.S. Employment Situation and review where all the action has taken us. We believe that the high volatility will make for an exciting week that could prove imperative for short-term buoyancy for Buck. If the Fed sounds no alarms, there is no reason for the dollar to lose ground, especially as the geopolitical picture only makes the USD a more attractive safe haven. It has recovered 2.3% of its value thus far in January.

What to Watch Today…

  • Euro-zone CPI, Friday
  • US Nonfarm Payrolls, Friday 8:30 AM
  • Monex USA Online is always open.

View Economic Calendar

 

EUR  ⇓

The Euro is slipping after a weekend of revealing dovishness from European Central Bank members. One key policy decisionmaker, Francois Villeroy de Galhau, wrote and explained his thoughts on the need for the ECB to turn more accommodative. He explained in an interview that cuts are certainly coming, just not specifics on when they shall start. The development naturally increased the chances of interest rates dropping by April to 77.0%. In light of policymakers’ thinking, the shared currency may quickly lose the value it witnessed during the closing moths of 2023.

GBP ⇓

Sterling has not been moving as aggressively as others, but is due to be vulnerable ahead of Thursday. Bank of England members have not been fueling speculation over cuts unlike other regions, especially as some of the more pain-driven outlooks for the economy have not materialized. The chances for cuts from the BOE are just under 14.0% by Mach and stand at 40.0% for May.

 

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