Hello and Happy New Year to you all! I hope your Christmas was more restful than mine—with two teething toddlers, there wasn’t much room for relaxation! That said, I’m back at my desk and excited to kick off the new year.
Sterling’s Early-Year Sell-Off
The first week of 2025 began with a Sterling sell-off on January 2nd. Interestingly, this has happened consistently over the past seven years. However, history suggests that this doesn’t necessarily signal a challenging year ahead for Sterling. Last week’s market activity occurred under relatively low liquidity conditions. As liquidity improves this week, we expect exchange rates to stabilize and return to more predictable patterns.
Economic Data Releases to Watch
This week brings a full schedule of economic data releases, offering plenty of opportunities for market volatility. If you’re trading, it’s essential to stay informed about these key events:
Monday:
- PMI data releases from the UK, EU, Canada, and the U.S. are on the agenda. Expectations are for strong PMI readings across the board. As such, these releases are unlikely to drive significant rate movements unless there are unexpected surprises. Positive outcomes seem to be largely priced into the markets already.
Tuesday:
- Flash European inflation data and EU unemployment figures will take center stage. Inflation is anticipated to remain steady at 2.7%, while unemployment is projected to edge up to 6.4%, which would be negative for the Euro. However, these releases are unlikely to trigger major market shifts.
Wednesday:
- The morning brings several EU data points, including consumer confidence, economic sentiment, industrial sentiment, and PPI figures. Any downside surprises could push EUR/USD lower and GBPEUR higher. Later in the day, the U.S. Federal Open Market Committee (FOMC) minutes will provide insights into the Federal Reserve’s stance on interest rates and their outlook for the year ahead.
Friday:
- The week concludes with the first Non-Farm Payroll (NFP) report of 2025. Employment trends have played a significant role in the U.S. economy, and this year is expected to follow suit. The forecast is for a modest increase of 150,000 jobs. A stronger-than-expected figure would likely bolster the Dollar and risk assets, while a weaker result could weigh on both.
Final Thoughts
As markets return to normal liquidity levels, this week offers several opportunities for traders to capitalize on economic data releases. Whether you’re trading Sterling, the Euro, or the Dollar, staying on top of these key events will be critical to navigating the markets effectively.
Feel free to reach out if you’d like to discuss how these developments could impact your currency requirements. Let’s make 2025 a successful year for your international payments and hedging strategies!