Sterling begins 2025 down versus other G10 currencies due to economic concerns..
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| UK wholesale gas prices have surged to their highest point since January 2023 and pose fresh headwinds to both the economy & GBP in the months ahead.
Gas prices rose steadily throughout 2024 after coming down the previous year, however with a much colder than expected start to winter in Europe, gas reserves have been drawn-down and a spike in gas prices have followed.
Not helping matters, Ukraine stopped transferring Russian gas to Eastern Europe since January 1st when the existing deal expired. Meaning the UK (and EU) will have to compete with Asia for supplies of Liquified Natural Gas (LNG), which will keep prices elevated.
UK energy bills are already 50% higher than pre-covid levels and because the UK has virtually no gas reserves, nor a large storage capacity, it leaves the UK vulnerable to market price movement.
UK borrowing costs have reached their highest levels since the financial crisis and investors are growing nervous for the economic outlook in 2025 for the UK.
A lack of confidence in financial markets is a big issue for an economy and its currency and with a record-breaking tax raid incoming, future foreign investment into the country is a real concern.
Businesses will be forced to either (or all) put up prices, cut back on investment or let staff go come April and this creates a problem for the Bank of England when it comes to interest rates.
Inflation is expected to rise slightly, but so is unemployment levels and so the BoE may look to hold rates close to current levels for the first half of this year at least (Sterling positive).
For now, GBP v EUR remains at one of the best times since April 2022, whilst GBP v USD tussles with an 8-month low.
Please note - A round-up on 2024 for Sterling and 2025 predictions will be released on our website next week.
EUR Many of our customers across the pond will be happy to hear that the Euro fell to its lowest level in 2-years last week versus the US Dollar. All indicators are suggesting the exchange rate is on course to test parity in the months ahead.
Europe faces the same (if not worse than the UK) gas price issues, a stumbling economy, lower interest rates and political instability. A powerful concoction of nothing good for the Euro.
USD The Dollar lost 1% across the board this morning on news that Donald Trump is rowing back on universal tariffs. An unverified Washington Post report has cited that Donald Trump is considering imposing tariffs on only critical imports from all countries.
Trump campaigned for 10%-20% on everything imported into the US and higher for goods from China. So this would be a significant change of stance and was the main reason for the USD's out-performance towards the end of 2024.
However, this afternoon Trump declared 'fake news' and the Dollar rebounded by 0.5%. Proof of the ever powerful 'buy the rumour, sell the fact' and how much volatility we will see once again with Donald Trump as President.
The US offers almost daily important economic releases this week, so expect the volatility to continue.
Please check out the main events of the week below..
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Expected mid-market ranges for January 6th 2025 | | |
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Upcoming Data | Monday 6th January 2025 | N/A
| Tuesday 7th January 2025 | 07:45 EU - French core inflation & headline inflation rate 10:00 EU - Italian core inflation & headline inflation rate 10:00 EU - Euro-Zone core inflation, headline inflation rate & unemployment rate 13:30 US - Trade balance 15:00 US - Non-Manufacturing PMI & Job openings
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Wednesday 8th January 2025 | 07:00 EU - German factory orders & retail sales 07:45 EU - French balance of trade 10:00 EU - Euro-Zone consumer confidence & PPI 10:05 UK - BoE deputy Governor Woods speech 13:30 US - Non-farm employment change & intial/continuing jobless claims 19:00 US - FOMC meeting 20:00 US - Consumer credit
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| Thursday 9th January 2025 | 07:00 EU - German trade balance & industrial production 09:00 EU - German inflation rate 10:00 EU - Euro-Zone retail sales 21:30 US - Fed's balance sheet |
| Friday 10th January 2025 | 07:45 EU - French consumer spending & industrial production 08:00 EU - Spanish industrial production 09:00 EU - Italian retail sales 13:30 US - Average earnings, non-farm payrolls & unemployment rate
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