Pound Sterling (GBP)

The British Pound initially weakened after November’s UK inflation figures aligned with expectations, as the Consumer Price Index rose to 2.6%. Persistent high services inflation continues to be a concern, keeping core inflation elevated. However, market participants foresee cautious policy decisions from the Bank of England, with no immediate rate cuts on the horizon. Overall, the Pound is expected to maintain its strength against European and commodity-linked currencies.

Euro (EUR)

The Euro declined as the Eurozone economy showed signs of contraction in December, with the Composite PMI falling to 49.5, signalling a slowdown. Economic activity shrank amid declining new orders and the fastest acceleration in job cuts seen in four years. These factors, coupled with reduced business optimism and rising costs, added pressure on the Euro, underscoring the challenges facing the Eurozone as it approaches 2025.

U.S. Dollar (USD)

The U.S. Dollar held close to three-week highs as investors turned their attention to upcoming Federal Reserve announcements on interest rates. Although a 25-basis-point rate cut is anticipated, the Fed’s outlook is expected to remain hawkish, supported by persistent inflation and a robust labor market. Strong retail sales data also bolstered the Dollar in yesterday’s trading session.