Magna Financial Market Report –January 17th 2025
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• Waller’s statements strengthen expectations for rate cuts
• UK retail sales highlight ongoing struggles in the UK economy
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RECAP
The US dollar saw a broad decline yesterday after Fed member Waller
expressed support for potential interest rate cuts in the first half of 2025, provided inflation continues to ease. He mentioned that the Fed could begin reducing rates as early as March 2025.
Despite a mixed retail sales report in the afternoon, which had little impact on the dollar, markets are currently pricing in approximately 44bps worth of cuts. Waller also suggested that, depending on the data, the Fed might implement 3 to 4 rate
cuts this year.
In a separate development, Bank of Japan officials indicated that, barring any major market disruptions tied to a potential Donald Trump presidency, they are likely to raise interest rates in their meeting next week.
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OUR SUMMARY
UK retail sales for December came in weaker than anticipated, with even November’s figures revised downward. This reinforces the narrative of a slowing economy, further dampening already fragile investor sentiment.
The GBP has weakened across the board, as markets now expect more aggressive rate cuts, raising the probability of three cuts this year. Before Wednesday’s CPI data, market expectations were for 27 basis points in cuts; that figure has now risen to 68 basis points.
The USD remains steady this morning, despite dovish remarks from Fed’s Waller last night, as markets adopt a cautious stance ahead of President Trump’s inauguration on Monday. European CPI data for December is final and is unlikely to have a significant impact on FX markets today.
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HOW WE CAN HELP
Our team of currency experts are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer specialised guidance on the best options available to you. Get in touch with Osman Hanif today on +44 (0) 20 3371 9200 or email osman@magnafinancial.com.
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