Today's insight: All as expected in the North Americas | Euro braced for GDP and ECB

All as expected in the North Americas

The two North American central banks did entirely as expected when they met yesterday.?Firstly, the Bank of Canada reduced their base rate by 25 basis points to 3.0%. As mentioned yesterday, that is their lowest rate since September 2022. Whether there will be further rate cuts is a decision that seems to hang on whether the US does carry through with its plans to implement trade tariffs on Canadian goods. Such a move is likely to put pressure on the Bank of Canada to further reduce borrowing costs. The rate cut that was announced yesterday was so widely expected that the Canadian dollar barely twitched and the GBP/CAD rate is still trading around CAD 1.7960 this morning.

Wednesday's other tier-one event was the interest rate decision from the US Federal Reserve. Just like the Bank of Canada, The Fed did exactly as we expected and left their base rate on hold at 4.5%. Once again, the move - or lack thereof - was so widely forecast at the US dollar fluttered but did not fly in either direction. The impression given by Fed chairman, Jerome Powell was one of inaction and, to some degree, one avoiding the direct question of when the Fed would move next and in which direction. It seems no one in the market is expecting any movement in their next meeting in March and, judging by the trading volumes, there is a lot of ambiguity over whether the May meeting will bring a rate cut. This afternoon's data includes U.S. economic growth figures for the fourth quarter of 2024. A slowdown from three-point 1% in Q3 to a softer 2.6% in Q4 is expected. Any variation from that will obviously shift the USD and may change perceptions on the Fed's next move. For now, the GBP/USD rate is range bound in the mid $1.24 area and the EUR/USD??rate is also treading water in the low $1.04 area.

Euro braced for GDP and ECB

Thursday's data is dominated by eurozone events. Not only will we see the preliminary gross domestic product figures for the fourth quarter of 2024 but we also get an interest rate decision from the European Central Bank. As for the GDP numbers, the markets are forecasting just 0.1% growth in the three months to December bringing the annual economic growth level up to 1.0%. That is only a smidgen higher than the 0.9% we saw in the year to September and we are likely to see zero growth when the German data is released. Such soft economic activity in Germany, the largest economy in the EEA bloc and in the eurozone as a whole will be on the minds of the European Central Bank when they meet today. The most likely outcome of their meeting is a 25 basis point reduction in their base rate to a deposit rate of ?2.75%, the lowest rate since early 2023. The euro starts the morning trading at EUR 1.1950 against the pound and at USD 1.0420.

Today's Major Economic Releases

06:30 EUR Gross Domestic Product (QoQ)?(Q4)?Prel??

07:00 EUR Gross Domestic Product (QoQ)?(Q4)?Prel??

07:00 EUR Gross Domestic Product (YoY)?(Q4)?Prel??

07:00 EUR Gross Domestic Product w.d.a (YoY)?(Q4)?Prel??

08:00 EUR Harmonized Index of Consumer Prices (YoY)?(Jan)?Prel??

10:00 EUR Business Climate?(Jan)?

10:00 EUR Consumer Confidence?(Jan)?

10:00 EUR Economic Sentiment Indicator?(Jan)?

10:00 EUR Gross Domestic Product s.a. (QoQ)?(Q4)?Prel??

10:00 EUR Gross Domestic Product s.a. (YoY)?(Q4)?Prel??

10:00 EUR Unemployment Rate?(Dec)?

13:15 EUR ECB Main Refinancing Operations Rate?

13:15 EUR ECB Monetary Policy Statement?

13:15 EUR ECB Rate On Deposit Facility?

13:30 USD Initial Jobless Claims?(Jan 24)?

13:45 EUR ECB Press Conference?

15:00 USD Pending Home Sales (MoM)?(Dec)?

21:00 NZD ANZ – Roy Morgan Consumer Confidence?(Jan)?

23:30 JPY Tokyo Consumer Price Index (YoY)?(Jan)?

23:30 JPY Tokyo CPI ex Food, Energy (YoY)?(Jan)?

23:30 JPY Tokyo CPI ex Fresh Food (YoY)?(Jan)?

23:30 JPY Unemployment Rate?(Dec)?

23:50 JPY Large Retailer Sales?(Dec)?

23:50 JPY Retail Trade (YoY)?(Dec)?

23:50 JPY Retail Trade s.a (MoM)?(Dec)?

Interbank Exchange Rates