Quiet Monday but bankers await

The Chinese and some other Asian markets reopened this morning after a week-long celebration of the commencement of the year of the dragon. The first thing they appeared to do was sell the US dollar. The GBP/USD rate is back up to $1.2620, having been 3/4 of a cent below that in the middle of last week. The euro–US dollar rate is also a little higher at $1.0785; a level it appears incapable of breaking above. It isn’t an entirely US dollar-based story though. The pound is a tad stronger against the euro after Friday’s strong UK retail sales numbers. GBP/EUR is pushing up to €1.17 in the interbank market. However, we are likely to see a pause through Monday because the US and Canadian markets are closed for public holidays, which means the afternoon session will be very limited in volume. The week ahead is more about central bankers than hard data.

RBA meeting minutes tonight

Overnight tonight we will see the release of the minutes from the last meeting of the Reserve Bank of Australia. As you will know, they kept their base rate on hold at 4.35% but they are under pressure to loosen the reins on borrowing due to mixed Australian economic data and the fears of crippling any tenuous signs of growth. Weakness in the US dollar in the last 24 hours has allowed the Australian dollar to gain a little strength. That is not what the RBA needs to see because it damages exports and adds to the pressure they are already under. The GBP/AUD rate is down to AUD 1.9285 this morning after having been up at AUD 1.9525 last week.

US rate cuts coming but how many, how soon and how fast!

Although we will see very little US data this week, we will get the minutes from the last Federal Reserve Open Market Committee meeting on Wednesday. Like the RBA, the Fed kept their base rate on hold when they met but we have heard from two members of the Open Market Committee who expect either two or three interest rate cuts during the 2024 calendar year. How those were discussed and the likely timing may be revealed in these minutes, which is why they will be closely followed and the dollar is likely to be volatile on Wednesday.