Pound (GBP) weakens on poor retail sales data
The pound (GBP) ended last week on the back foot as underwhelming UK retail sales figures added to concerns about the UK’s economic prospects.
Data for December showed retail sales growth contracted by -0.3%, falling short of expectations for a 0.4% expansion.
Looking ahead, a lack of notable UK economic releases early this week may see the pound struggle for direction.
Euro (EUR) dented by expectations of ECB rate cuts
The euro (EUR) traded without clear direction on Friday, supported by risk-off sentiment but weighed down by speculation regarding European Central Bank (ECB) rate cuts.
Expectations that the ECB will enact multiple rate cuts were fuelled by the minutes from its latest meeting, which revealed discussions over a potential 50bps cut.
Later today, the release of Germany’s producer price index could influence EUR movement, with the single currency likely to rise if the data shows an uptick in manufacturing inflation.
US dollar (USD) falters on dovish Fed remarks
The US dollar (USD) initially firmed on Friday, buoyed by safe-haven flows as markets grew increasingly jittery ahead of Donald Trump’s return to office.
However, the USD lost ground later in the session after Federal Reserve official Christopher Waller hinted at a possible March interest rate cut.
This week, investors will closely monitor Trump’s early policy moves during his second term, which could inject further volatility into currency markets.
Canadian dollar (CAD) gains despite weaker oil prices
The Canadian dollar (CAD) edged higher on Friday, as its positive correlation with the US dollar helped offset the impact of declining oil prices.
Attention will now turn to the Bank of Canada’s (BoC) business outlook survey, due later today. A broadly optimistic tone from Canadian firms could lend fresh support to the ‘loonie’.
Australian dollar (AUD) steady ahead of Trump’s return
The Australian dollar (AUD) traded sideways in Monday’s Asian session, with investors adopting a cautious stance ahead of Trump’s inauguration.
New Zealand dollar (NZD) subdued in nervous trade
The New Zealand dollar (NZD) also struggled to find direction, as market caution kept the risk-sensitive ‘kiwi’ on the back foot.
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