3rd January 2024 Gentium FX - Daily FX Report

Markets Remain Cautious

GBP: The British Pound faced a challenging start to the new year due to increasing concerns about a potential economic recession and the vulnerability of the manufacturing sector in the United Kingdom. These factors have dampened Sterling's appeal. Consequently, the bleak economic outlook may compel policymakers at the Bank of England (BoE) to reassess their strategy of maintaining higher interest rates for an extended period.

EUR: The Euro is encountering difficulty in gaining support, primarily due to recent data revealing that the Eurozone's manufacturing sector remained in a state of contraction at the close of 2023. The sector experienced a persistent decline in manufacturing output, coupled with ongoing job losses in factories for the seventh consecutive month. Investors are now eagerly awaiting Germany's preliminary Harmonized Index of Consumer Prices for December as a crucial indicator for insights into inflation within the Eurozone.

USD: The U.S. Dollar stabilised following a significant overnight recovery, driven by market speculation about additional signals from the Federal Reserve. Investors were re-evaluating their expectations of an early interest rate cut, as the Fed had indicated in December that it would start reducing rates in 2024. However, the timing of this move remained uncertain, with limited guidance provided by the Federal Reserve.