Eurozone Inflation vs UK GDP: Market Implications
UK growth surprises, Eurozone inflation holds, and U.S. data takes focus today. The UK economy outperformed expectations, lifting the pound, while steady Eurozone inflation keeps ECB rate cut bets intact. In the U.S., inflation pressures remain in play, with jobless claims and PPI set to guide the Fed’s next steps.
We maintain a constructive stance on the pound amid resilient UK data. In contrast, we see limited upside for the euro as growth concerns persist. Gold extends gains on safe-haven demand, while oil stays under pressure, reflecting softer global demand signals.
Key Data Out Today
- Eurozone:
- Harmonized Index of Consumer Prices (YoY): 2.8% (Expected: 2.8%)
- United Kingdom:
- GDP (YoY, Preliminary): 1.4% (Expected: 1.1%)
- United States:
- Initial Jobless Claims (Feb 7): 215K (Previous: 219K)
- Producer Price Index (YoY, Jan): 3.2% (Expected: 3.3%)
- Producer Price Index ex Food & Energy (YoY, Jan): 3.3% (Expected: 3.5%)
Commodities
- Crude Oil (Brent): $74.45 (-0.96%) – Oil remains weak as demand concerns persist.
- Gold: $2912.62 (+0.23%) – Safe-haven demand drives gold higher.
- Copper: $4.6969 (-0.02%) – Industrial metals remain volatile due to supply constraints.
Currency Movements
EUR/USD – 1.04209 (+0.37%)
The euro strengthened following steady Eurozone inflation data. With the Harmonized Index of Consumer Pricesmeeting expectations at 2.8% YoY, investors see limited urgency for additional ECB rate cuts.
GBP/USD – 1.24948 (+0.40%)
The pound gained after UK GDP data exceeded expectations. The economy expanded 0.4% MoM, while manufacturing and industrial production also posted stronger-than-expected growth. This has slightly reduced expectations of near-term BoE rate cuts.
AUD/USD – 0.62737 (-0.09%)
The Australian dollar slipped as global risk sentiment softened. A weaker demand outlook for commodities and concerns over China’s economic slowdown have weighed on the currency.
NZD/USD – 0.56411 (-0.33%)
The New Zealand dollar declined as investors priced in the likelihood of slower growth. Weakening global demand and risk aversion are limiting upside movement.
USD/JPY – 154.317 (-0.06%)
The yen showed modest gains, reflecting cautious market sentiment. The recent decline in U.S. Treasury yields has supported the currency, while risk-off flows remain in play.
USD/CNY – 7.29619 (-0.20%)
The yuan firmed slightly after better-than-expected Chinese trade data. However, persistent concerns over China’s growth outlook continue to limit upside potential.
USD/CHF – 0.90906 (-0.50%)
The Swiss franc advanced as demand for safe-haven assets remained elevated. Market uncertainty around inflation and central bank policy is keeping CHF supported.
USD/CAD – 1.42810 (-0.17%)
The Canadian dollar held steady, supported by oil market stability. With crude oil prices stabilizing, CAD remains resilient despite broader USD strength.
USD/MXN – 20.5416 (+0.05%)
The peso showed limited movement as investors balanced risk appetite with external macroeconomic pressures. Markets are awaiting further U.S. inflation data for direction.
USD/INR – 86.8930 (-0.10%)
The rupee strengthened slightly on improved foreign capital inflows. However, inflation concerns in India continue to impact sentiment.
Market Outlook
- U.S. inflation remains in focus – PPI data suggests inflation remains sticky, impacting Fed policy expectations.
- Pound gains after strong UK data – The UK economy grew more than expected, supporting sterling.
- Gold extends rally – Demand for gold continues as investors hedge against inflation risks.
- Oil prices struggle – Brent crude remains weak due to global demand uncertainty.