Markets Report - 05 February 2024

A daily breakdown of the markets for the 5th February 2024, provided to you by Sterlex.

🇪🇺💶Euro fell in European trade on Monday against a basket of major rivals, sharpening losses for a second day against the dollar and plumbing a two-month trough amid mounting concerns about the rate gap between Europe and the US. EUR/USD fell 0.2% to 1.0767, the lowest since December 13, after losing 0.8% on Friday, the largest loss in a month following hot US labor data. Following the European Central Bank’s last meeting meeting, the odds of an April interest rate cut surged to 80%. Now markets expect the European Central Bank to start cutting interest rates sooner than the Fed.

🇬🇧💷The Pound Sterling (GBP) continues to face the wrath of dismal market sentiment in the European session on Monday. The UK Office for National Statistics (ONS) reported in its revised Q3 Gross Domestic Product (GDP) estimates that the economy contracted by 0.1%. The BoE is watching Britain's labour market closely as it considers whether inflation pressures in the economy have cooled enough for it to cut its benchmark interest rate from its highest level in nearly 16 years at 5.25%. Meanwhile, the scenario for Bank of England (BoE) policymakers is becoming extremely complicated due to deepening fears of a technical recession in the United Kingdom economy. The UK economy is expected to remain on the back foot as higher interest rates have deepened the cost-of-living crisis, forcing businesses to operate with lower capacity.Britain's unemployment rate was much lower late last year than previously thought, the Office for National Statistics said on Monday, citing re-weighted survey results that might add to the Bank of England's caution about cutting interest rates quickly.

🇺🇸 🏦The US Dollar (USD) continues to trade at stronger levels after regaining upward momentum at the end of last week. He said the Fed requires more confidence in achieving inflation targets before taking the step of cutting rates. However, the Fed will move much slower than markets expectations when it comes to rate cuts. Following Federal Reserve Governor Jerome Powell’s bullish remarks recently dismissing the possibility of a March rate cut, the odds of such a move tumbled to just 17.5%. Fed Chair Jerome Powell said the Fed will move cautiously about rate cuts. He once again added that he doesn’t expect the Fed to cut rates in March, given how strong the US economic performance has been so far. The odds of a May Fed interest rate also slipped from 60% to 57.5%. The world’s largest central bank said that policy tightening is likely to cause some pain to US economy.