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9th January - Weekly FX Update

Top Currency Pairs Monday 9th January 04:00 UTC GBP/USD: 1.21218 (Last Week: 1.2073) EUR/USD: 1.06671 (Last Week: 1.06709) GBP/EUR: 1.13637 (Last Week: 1.1314) Market News

Pound Sterling It is set to be a tough start to 2023 for the UK economy, with Friday seeing the release of November's GDP figures which will have been affected by a cost of living crisis, record inflation and other factors such as falling house prices and strikes across the public sector. The most recent Bank of England meetings have been full of negative predictions for the immediate future of the UK economy with the cost of borrowing becoming very expensive for businesses. Disposable household income has also been affected as mortgage payments are rising for millions living in Britain. Despite the poor outlook, the Pound enjoyed a sharp increase against the USD on Friday as data released from the US ISM Services PMI fell short of the 55.0 prediction for December coming in at 49.6 instead.

Euro There is renewed hope that any oncoming recession in Europe will be less severe than originally feared with positive news coming from Germany this morning as data released shows an increase in industrial production. Later in the week, the same information will be made available for the Eurozone and early predictions forecast a small rise in industrial production which will further add to the Euro's recent resurgence. Germany will also publish data on Friday, estimating growth of GDP annually in what could be a strong finish to the week for the Euro. European exporters were given welcome news over the weekend as China announced that its strict border controls implemented to tackle COVID-19 are to be dropped. This in turn should see an increase in economic activity from China who are an important market for European traders.

U.S. Dollar The US consumer price index for December is due out this Thursday along with other inflation and corporate earning figures released during the course of what is otherwise a very quiet week for data releases in the US. Inflation data for December should indicate how big an increase the next Federal Reserve rate hike ends up being. Information obtained from corporate earning figures will give important clues to the overall health of the economy in the US as Thursday's consumer price index is predicted to show core inflation has risen by 5.7% from the year previous. All of this information will be used to inform investors who will already be looking for signs that the Federal Reserve is at the end of its most aggressive tightening cycle since the 80's.

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