Daily Currency Update

USD - US Dollar

After Wednesday's dovish Fed stance, four European rate meetings followed. Norway unexpectedly hiked rates, while the Eurozone and UK resisted aggressive easing. The Swiss National Bank declared victory over inflation, boosting local currencies like EUR/USD to 1.10. This shift aids global risk assets, as lower US rates could stimulate global capital flow and buoy underperforming currencies. The focus now is on when the Fed might cut rates. With strong US retail sales and jobless claims, more than the anticipated 150bp rate cuts in 2024 seems unlikely. Upcoming US industrial data for December and the flash PMI readings will further guide market expectations.

CAD - Canadian Dollar

The recent dovish-leaning FOMC meeting has heightened interest in Governor Macklem's forthcoming address for potential shifts in policy. Anticipated Canadian CPI figures next week are expected to show a decrease in headline inflation to under 3%. Yet, ongoing core inflation and robust wage growth may result in the BoC delaying rate cuts compared to the US. This week's compression in US/Canada spreads has been advantageous for the CAD against the USD. While Canada is set to publish data on Housing Starts, Wholesale Sales, and International Securities Transactions at 8.30ET, market attention is primarily on Macklem's remarks, scheduled for 12.25ET, and the subsequent press conference at 14.00ET. Observe USD/CAD trends.

EUR - Euro

EUR/USD rose above 1.10, boosted by ECB President Lagarde's remarks against rate cuts. While this surge to 1.10 seems excessive, it's a positive sign. However, further rise above 1.10 seems unlikely. The focus now shifts to today's French, German, and eurozone PMIs. Recent weak PMIs have affected the euro, and though stable readings are expected, they're still in contraction territory. EUR/USD is likely to stay around 1.10 towards year-end. December's typical dollar weakness and thin year-end markets could influence trends.

GBP - British Pound

The Bank of England (BoE) most notably countered dovish projections in recent central bank meetings, with their statement providing no support for such expectations in 2024. Today's focus is on the flash UK PMIs for December. The significant services index, staying above 50, could support the pound if it approaches 51. For GBP/USD, the 1.2820/2850 range is a key resistance, with a potential unexpected rise to 1.30 as a holiday surprise.