![\"\"](\"\/wp-content\/uploads\/2025\/02\/image-29.png\")
<\/figure>\n\n\n\nGBP \u2013 Zooming on UK\u2019s Q4 GDP rates<\/h2>\n\n\n\n
Yesterday\u2019s BoE rate cut was a market mover for pound pairs, as it drove the pound notably lower across the board. The bank as was widely expected cut rates by 25 basis points lowering rates to 4.5%. The bank cited progress in reducing inflationary pressures allowing the bank to cut interest rates again. The bank expressed a predisposition towards further easing yet avoided committing to any particular rate cutting path, signaling a \u201cgradual and careful approach\u201d. Yet what impressed us, was the vote count as all nine members of the Monetary Policy Committee (MPC) were in favor of a rate cut. The dissents were regarding the extent of the rate cut as two policymakers, Swati Dhingra and Catherine Mann favoured a double rate cut. Overall, we expect the bank\u2019s intentions to weigh on the pound on a monetary policy level.<\/p>\n\n\n\n
The name of the game in the UK economy seems to shifting increasingly towards growth, hence we highlight in the coming week the release of the preliminary GDP rate for Q4 on Thursday. The rates for Q3 were at stagnation levels quarter on quarter and should the rates retreat further entering negative levels and implying a shrinking of the UK economy in the last quarter the release could weigh on the pound. On the flip side a possible acceleration of the rates could provide substantial support for the pound as it would provide a breather from the ghost of a recession for the UK economy.<\/p>\n\n\n\n
Analyst\u2019s opinion (GBP)<\/p>\n\n\n\n
\u201cWe expect BoE\u2019s decision to continue weighing on the pound on a fundamental level, as the monetary policy outlook expectations may diverge further if compared with the Fed\u2019s. Some support for the pound could be achieved should the UK GDP rates for Q4 accelerate easing market worries\u201d<\/p>\n\n\n\n JPY is about to end the week in the greens as it strengthened across the board. The main driver of JPY\u2019s strengthening may have been market expectations for BoJ\u2019s monetary policy intentions. Comments by BoJ board member Naoki Tamura, stating that BoJ must raise rates to at least 1%, a statement deemed as hawkish as market consensus currently, is for the bank to raise rates to 0.75% by the end of the year, as per JPY OIS. Overall, we see the case for BoJ\u2019s intentions to be possibly the key factor behind JPY\u2019s direction and if the market\u2019s expectations for the bank to hike rates at a faster pace than initially expected, are enhanced, we may see JPY getting further support over the coming days.<\/p>\n\n\n\n On a fundamental level, we note JPY\u2019s safe haven qualities as a possible market mover. Should we see market worries about a possible trade war easing further we may see JPY losing some ground and vice versa. Also we note the easing of carry trade with the Yen on the short side as interest rate differentials between the Fed and BoJ tend to narrow, given the market\u2019s expectations for a more hawkish BoJ. Yet should that impression be reversed we may see JPY getting under pressure again.<\/p>\n\n\n\n Lastly on a macroeconomic level, despite macros not being usually major movers for JPY, we note the acceleration of the earnings growth rates, which tended to enhance the market\u2019s expectations for BoJ to be more hawkish last Wednesday. For the coming week we note the release of the current account balance for December on Monday and the PPI rates for January on Thursday as possible points of interest for the Japanese economy.<\/p>\n\n\n\n Analyst\u2019s opinion (JPY)<\/p>\n\n\n\n \u201cMonetary policy and BoJ\u2019s intentions continued to be key in regards to the Yen\u2019s direction in the past week. Should market expectations for the bank\u2019s rate hike path intensify over the coming week, we may see JPY getting some support. Also the possible effects from JPY\u2019s safe haven qualities and the carry trade should not be underestimated.\u201d<\/p>\n\n\n\n On a monetary level, we note ECB\u2019s intentions to cut rates further and Trump\u2019s intentions to impose tariffs on Euro Zone products could act as an accelerator for the bank\u2019s rate cutting path. For the time being the market seems to expect the bank to deliver another three rate cuts in its following consecutive meetings until June. Overall any signals by the bank verifying or even enhancing the market\u2019s expectations could weigh on the EUR. On the flip side inflation in the Zone may not be easing as planned by the bank which could force it to ease on its rate cutting path and such a scenario to provide support for the common currency.<\/p>\n\n\n\n On a macroeconomic level, we note in the coming week the release of Germany\u2019s final HICP rate for January and expect it to verify that the rate remained unchanged if compared to the December rate at 2.8% yy. Such a reading could provide some support for the EUR, yet the name of the game in the Euro Zone is growth and hence we highlight the release of the revised GDP rate for Q4, which is expected to remain at stagnation levels, and if so or if it even shows a contraction, we may see the common currency retreating as the worries for a possible recession in the Euro Zone could intensify.<\/p>\n\n\n\n On a fundamental level, we note the survival of the French government at a no confidence vote and the subsequent approval of the budget, yet the news provided little certainty for the political outlook of the France and the Zone as a whole. The uncertainty deepens given that Germany is facing an election near the end of the month and the overall situation tends to weigh on the EUR. Also we highlight the intentions of US President Trump to impose tariffs on European products imported in the US. Diplomatic efforts are being made by the EU to avert a possible US-EU trade war and potential positive results could provide asymmetric support for the EUR, yet we have little hope for such a scenario to materialise. Thus we expect the issue to weigh on the common currency as long as the threats are maintained.<\/p>\n\n\n\n Analyst\u2019s opinion (EUR)<\/p>\n\n\n\n \u201cIn the coming week, we may see the release of Euro Zones\u2019 revised GDP rates gaining some interest other than that, we expect fundamentals to lead the common currency. Both the monetary policy outlook and the fundamental circumstances surrounding the common currency tend to weaken it at the current stage\u201d<\/p>\n\n\n\n On a monetary level, we note that RBA\u2019s interest rate decision on the 18th of February is nearing and market interest is heightening on whether the bank will be cutting rates or remaining on hold. The easing of inflationary pressures for Q4 24, tended to intensify market expectations for the bank to ease its restrictive monetary policy in the February meeting and currently AUD OIS imply a probability of 84% for the bank to deliver a 25 basis points rate cut. On the other hand, we still have some doubts about RBA cutting rates. Should we see any signals enhancing the possibility of a rate cut in the bank\u2019s next meeting we may see the Aussie losing ground and vice versa.<\/p>\n\n\n\n On a fundamental level, we highlight the easing of market worries for a possible trade war between the US and China, or at least pricing in the imposition of additional US tariffs on imports of Chinese products and the Chinese retaliatory measures. The easing of market worries may allow the Aussie on a fundamental level to take a breather, given the close Sino-Australian economic ties. It\u2019s characteristic how the Aussie was supported against the USD after the tariffs were imposed by the US government. Overall the issue tends to be dominating the course of the Aussie and should we see frictions in the US-Sino relationships intensifying we may see them weighing on the AUD. Also any signs of a possible deterioration of the Chinese economy could weigh on AUD and to that end we would note the release of Chinas\u2019 inflation measures for January tomorrow. Any deflationary signals would not be good news for CNH and AUD and<\/p>\n\n\n\n On a macroeconomic level the calendar for Aussie traders is expected to be rather light in the coming week, yet we do note the release of NAB\u2019s business indicators for January and Februarys\u2019 consumer confidence as possible points of interest. A possible improvement of the situation on the ground for the Australian economy as well as an improvement of its outlook could provide some support for AUD. The same applies should consumer adopt a more optimistic outlook.<\/p>\n\n\n\n Analyst\u2019s opinion (AUD)<\/p>\n\n\n\n \u201cWe expect fundamentals to lead the Aussie in the coming week, especially any news from China and its relationships with the US. On a monetary level, should market expectations for RBA to cut rates on the 18th of February intensify, we may see the Aussie retreating\u201d<\/p>\n\n\n\n On a fundamental leve, Loonie traders were relieved on Monday as the US postponed applying tariffs on US imports from Canada for thirty days. Yet Trump\u2019s threat seems to continue to hang over the Loonie like an axe and any indication that the US may proceed and apply the tariffs tend to weigh on the CAD and vice versa. Despite the postponement, the issue as such tended to undermine investor\u2019s confidence on the outlook of the Canadian economy increasing uncertainty. We also note the drop of oil prices could be another factor that may weigh on the Loonie, given Canada\u2019s status as a major oil producing ecnonomy. WTI prices have reached levels not seen since the end of last year and should they continue falling, we may see them having a bearish effect on the Loonie as well.<\/p>\n\n\n\n One monetary level we note the market\u2019s dovish expectations for BoC\u2019s intentions. Currently CAD OIS imply that the marekt expects the bank to continue cutting rzates in tis next meeting and proceed with anoyther two rate cuts until the end of the year. It\u2019s characteristic that reuters reported that Bank of Canada Governor, Tiff Macklem, stated yesterday that a policy shift in the U.S. was causing uncertainty and President Donald Trump’s tariff threats were already impacting businesses and households. We see the case for the bank to remain dovish and should the markets\u2019 expectations for a dovish BoC intensify over the coming week, we may see the Loonie being on the retreat. Please note that Canada\u2019s employment data for January are still to be released as these lines are written depending on the actual rates and figures, it could alter the Loonies\u2019 direction as a looser employment market may also deepen the dovishness of BoC and weigh on the Loonie and vice versa.<\/p>\n\n\n\n On a macroeconomic level, we note the reversal of Canada\u2019s November trade deficit into a surplus in December, in a sing of increased wealth entering the Canadian economy despite the drop of oil prices over the past month. In the coming week we have light calendar regarding financial data to be released and expect fundamentals to be leading the way for the Loonie.<\/p>\n\n\n\n Analyst\u2019s opinion (CAD)<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2025\/02\/image-30.png\")
<\/figure>\n\n\n\nJPY \u2013 Monetary policy to guide the Yen<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/02\/image-31.png\")
<\/figure>\n\n\n\nEUR \u2013 The name of the game in the Euro Zone is growth<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/02\/image-32.png\")
<\/figure>\n\n\n\nAUD \u2013 Fundamentals to lead the Aussie<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/02\/image-33.png\")
<\/figure>\n\n\n\nCAD \u2013 Trump\u2019s tariff threats hanging over the Loonie like an axe<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/02\/image-34.png\")
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