Central bank meetings key for the markets this week.

• USD: Fed meeting Wednesday will have markets looking for further clues on rate cuts.
• GBP: UK inflation data key Tuesday ahead of Bank of England interest rate decision Thursday.
• EUR: Inflation figures out from the EU today, with the expectation there will be no change.
• Market Sentiment: Markets expecting both interest rate for the Fed and Bank of England to be held at current levels.

USD: The Fed is set to update its economic forecasts this week. While the December dot plot projected a median estimate of 3 cuts this year, the strength in inflation may potentially reduce this to 2 cuts, potentially bolstering the US dollar. On the other hand, if the plots indicate 3 or more cuts, it could lead to a decline in the dollar, and a sharp rally in the GBP/USD pair. The Fed will keep interest rates unchanged and will likely reflect on the recent ‘stickiness’ in U.S. inflation and robust data prints. How the Fed sounds on the need to keep rates steady will be of interest and could pose upside risks to the Dollar.

GBP: The Bank of England meeting is scheduled for Thursday, following the Federal Reserve meeting the day before. The outcome of the Fed meeting could significantly influence the GBP/USD exchange rate, potentially overshadowing the impact of the BoE meeting. Additionally, key PMI data from both sides of the Atlantic, along with UK CPI and retail sales figures, will be crucial considerations as far as cable is concerned.

EUR: Thursday sees the release of Eurozone retail sales where markets expect a reading of 50.5 for services, confirming the sector is back in growth. However, manufacturing is expected at 47 and the composite at 49.7. The Euro has benefited from a run of better-than-expected readings of late, which suggests any undershoot in the figures would trigger the kind of disappointment that would prompt a decent EUR selloff. Today we have harmonized index of consumer prices which are all expected to see no change from the previous print, any deviation could see movement for the EUR as data is being closely monitored by the ECB.

Economic Calendar