Sterling holds ground as BOE Governor reinforces rate cut speculation

The governor of the Bank of England has suggested that he doesn't think the market speculation over two or three interest rate cuts in 2024 is unreasonable. The voting pattern at the last Bank of England meeting shows the two most hawkish members of the Monetary Policy Committee have moved away from that hawkishness to vote for the base rate to be held at 5.25% but their stance hadn't shifted sufficiently to vote for an interest rate cut. So, although we now have confirmation that the cost of borrowing is due to fall in the UK, maybe as soon as May, traders seem pretty happy to support the pound. The?GBP/USD?rate is level at $1.2650 and the?GBP/EUR?rate is at the lower end of its recent range at €1.1660. We don't have any UK data out today but we have seen mixed data from the eurozone, which the markets are still processing at the moment.

Mixed eurozone data leaves the euro in the doldrums

In a joint economic outlook, German research institutions including Ifo, DIW and IfW have cut their forecast for German growth from 1.3% to just 0.1% in 2024. However, they are also forecasting inflation to fall to 2.30% in the year, which would give the European Central Bank cause to look at rate cuts, even if they aren’t already doing so. After dipping overnight, the?GBP/EUR?exchange rate has bounced back to €1.1660 and the?EUR/USD?rate is relatively stable at around $1.0850. We are not expecting any further heavyweight data from the eurozone today and the US diary is also fairly light, with only a consumer confidence index and durable goods orders to put ripples on the water. As a result, it's likely the US dollar-related markets will be relatively calm.

Todays Major Economic Releases

USD - 13:00 -?Housing Price Index (MoM)(Jan)?

EUR - 19:00 -?ECB's Lane speech?

Interbank Exchange Rates