In the Eurozone, inflation data is anticipated to decline this week, while retail sales continue to lag behind those of the UK. However, the euro experienced a recovery last week attributed to robust wage growth data for Q4, as commented by Central Bank officials. Market observers are closely monitoring softer inflation figures, which could potentially weaken the EUR rally.
On the other hand, the British Pound (Cable) appears to be trading within a range, currently fluctuating between 1.2570 and 1.270. Interest rate expectations in both the UK and US remain unchanged, with the Bank of England (BoE) and Federal Reserve maintaining high rates. Despite this, Cable has seen a rebound fueled by better-than-expected data and the BoE’s cautious approach to rate cuts.
In my assessment, Cable is poised to outperform the Euro in the short term. US Treasury yields have also receded from multi-month highs, with the market fully factoring in the Federal Reserve’s transition to a gradual easing trajectory.
