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16th January - Weekly FX Update

Top Currency Pairs Monday 16th January 04:00 UTC GBP/USD: 1.22690 (Last Week: 1.21218) EUR/USD: 1.08600 (Last Week: 1.06671) GBP/EUR: 1.12974 (Last Week: 1.13637)

Market News

Pound Sterling On what is seen an unlucky day by many, Friday 13th produced some welcome data releases from the ONS, as the British economy showed it had grown by 0.1% in November. This came despite a prediction the UK economy would actually contract by 0.2%. In fact unless the UK economy shrinks by 0.4% in December, the economy could avoid a technical recession for the time being. This week analysts and investors will be looking into UK employment data for November released on Tuesday and UK CPI data released Wednesday. Today also sees Bank of England Governor, Andrew Bailey meet with the UK Parliament's Treasury Select Committee at 15.00 GMT where he'll be questioned about the banks financial stability report. Recent positive news should help the Bank of England remain in a Hawkish mood relative to their counterparts in the Federal reserve, which may support the British Pound short-term.

Euro Data released this morning showed some promising news as German wholesale prices fell 1.6% in the month of December. There is also some important data releases tomorrow coming out of Germany in the form of the ZEW survey of economic sentiment for January which is a survey that works by taking the expert opinions of 350 analysts, financial professionals and other experts to form an overall picture of the economic sentiment for a period. Early predictions show an improvement of -15.5 from -23.5 in December. The Euro and European equities have seen the benefits of this positive sentiment. This week important inflation data will be made available from the Eurozone and the return of the World Economic Forum will take place in the Swiss ski resort of Davos for the first time in three years. ECB President Christine Lagarde and German Chancellor Olaf Scholz set to attend.

U.S. Dollar Last weeks CPI data showed inflation fell for the first time in more than two and a half years in December. This boosts the notion that inflation is set to start contracting and the aggressive rate hike cycle employed by the Federal Reserve is nearing its end with hopes that rates will not rise to previously predicted levels. This week US retail sales data is to be released with November's reading fresh in the memory. After a posting of the largest decline in 11 months, any repeat in Decembers reading would further add weight to the expectation that the Federal Reserve will ease off on its rate hikes to avoid any negative effects on the US economy.

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