EUR: Investors are closely tracking the Eurozone’s economic landscape, where recent data suggests a challenging environment. Despite the European Central Bank’s attempts to resist aggressive rate cuts, the pushback seems ineffective. With weak activity data and softer January inflation figures anticipated, the GDP data, particularly a potential -0.1% QoQ drop, could confirm a mild technical recession in the Eurozone. Amidst this, two-year EUR swap rates have fallen by 15bp, and external factors like a French farmers’ blockade in Paris and concerns over the Mercosur trade deal contribute to a less favorable investment climate.

GBP: Pound Sterling faces a narrow trading range as investors await critical decisions from the Bank of England (BoE) and the Federal Reserve. Both central banks are expected to maintain unchanged interest rates, but the BoE’s guidance on the rate outlook holds significance. Balancing domestic and international economic conditions, the BoE’s decision may impact labor markets and demand. A cautious market mood, fueled by Middle East tensions and the Fed’s impending monetary policy announcement, heightens anticipation. Investors are particularly eager to see if the Fed signals a rate cut in the upcoming months after a prolonged period of rate tightening.

USD: U.S. asset markets experienced a late boost with the U.S. Treasury forecasting a $55bn improvement in its first-quarter net borrowing requirement. This positive development sets the stage for the US Quarterly Refunding announcement. The news prompted a rally in Treasuries, contributing to new highs for U.S. tech stocks. Alphabet, Microsoft, and AMD’s fourth-quarter earnings announcements are also anticipated. The lower borrowing requirement serves as a reminder of the interconnected growth, tax receipts, and deficits cycle. In contrast, the Eurozone is expected to release soft fourth-quarter GDP figures. Looking ahead, the dollar is anticipated to maintain gains against European currencies. The U.S. calendar includes the Conference Board’s consumer confidence index and JOLTS job opening data for December, with a focus on any unexpected shifts in the latter, which some Fed officials view as a key gauge of slack in the U.S. labor market.