US Dollar, Sterling & Euro Navigate Economic Data Swells.

USD: The Slip After the Surge

The U.S. dollar, as gauged by the DXY index, stumbled on Monday following a robust week, with Treasury yields pulling back ahead of key economic data releases, notably the U.S. CPI survey on Thursday. Traders keen on the Federal Reserve’s data-driven strategy eye the December inflation report for insights into future monetary policy. Despite a strong jobs report, there’s caution as downward revisions in past NFP prints hint at a potential lower final figure. All eyes are on consumer prices, with the core measure expected to dip below 4% for the first time since May 2021.

GBP: Sterling’s Dance Amid Economic Murmurs

UK GDP data for November looms, with a forecast leaning towards pessimism. While non-negative growth is a European wish, just avoiding contraction might not fuel the pound’s bullish run. Experts suggest room for the Pound to appreciate against the Euro, driven by flexible Bank of England rate expectations. Positive gains in the Pound to Euro exchange rate have followed the economy’s return to growth in December, challenging earlier expectations of imminent rate cuts. A ‘hawkish’ shift in expectations now supports Sterling.

EUR: Germany’s Industrial Woes and Euro’s Chart Tug-of-War

Germany’s industrial activity continued its decline in November, registering a 0.7% MoM drop, deeper than the expected 0.2%. Annual figures show a 4.8% fall, accentuating concerns. The EUR/USD pair retraces near 1.0950 support as the USD aims for recovery. Analysts observe a potential downward shift, citing indicators like the MACD line diverging below the signal line. While the RSI suggests upward momentum, traders remain cautious, awaiting confirmation before making their moves in the EUR/USD pair.