UK GDP data could lift the pound at the end of the week, as forecasters expect it to show that the British economy rebounded in November.
Before then, the latest US consumer price index is in the spotlight. Will an uptick in headline inflation see the US dollar gain ground?
Pound
After stumbling on the first day of trade of 2024, the pound eventually managed to march higher against most of its peers last week. Robust consumer spending data and a far stronger-than-expected services PMI boosted GBP.
A lack of UK data could leave Sterling rudderless through much of this week’s session, until the latest British GDP data is published on Friday. Could an expected rebound in the UK economy in November boost the pound?
Euro
The euro traded in a mixed capacity last week. While rising inflation lifted the single currency, its negative correlation with a stronger US dollar created headwinds for EUR.
The focus this week shifts to speeches from some European Central Bank (ECB) policymakers. If they continue to push back on interest rate cut expectations then the common currency could strengthen.
US dollar
The safe-haven US dollar strengthened last week amid an anxious start to 2024. However, dovish Federal Reserve meeting minutes and a weaker services PMI capped USD’s gains.
An ongoing downbeat market mood could continue to support the ‘greenback’ this week amid escalating tensions in the Middle East. In terms of data, the US consumer price index takes centre stage on Thursday. If inflation rose in December, as expected, the US dollar could climb.
Australian dollar
Widespread risk aversion weighed on the Australian dollar last week, leading the currency to strike two-week lows against many of its peers.
The ‘Aussie’ could remain subdued this week if the gloomy mood continues. In addition, an expected cooldown in November’s CPI indicator could dampen Reserve Bank of Australia (RBA) rate hike bets and pile more pressure on AUD.
