Clarity Markets

Under the leadership of new Governor Sanjay Malhotra, the Reserve Bank of India (RBI) has reduced its intervention in the currency market, leading to increased volatility for the rupee. The currency has declined about 3% in 2024 and an additional 2% year-to-date. A Reuters poll indicates that the rupee is expected to trade at approximately 87.23 per dollar by the end of February and weaken to 87.63 over the next six months. The RBI faces the challenge of managing a weakening currency amid a slowing economy, with potential interest rate cuts on the horizon.  

BOE Decision – GBP Traders Beware! The Bank of England (Thursday) could shake up GBP pairs. No rate change expected, but will Bailey hint at cuts later this year? GBP/USD and EUR/GBP traders should prepare for a reaction. Tighten stops and watch the headlines! #BOE #GBP

In response to a sluggish economy, the Bank of England has cut interest rates from 4.75% to 4.5%. The Monetary Policy Committee voted 7-2 in favor of the reduction, with two members advocating for a larger cut. The Bank has also revised its 2025 growth forecast downward from 1.5% to 0.75% and cautions that inflation could reach 3.7% by autumn, nearly double the government’s target. Governor Andrew Bailey indicated that additional rate cuts might be necessary to bolster economic activity.  

ECB Rate Decision – Euro at a Crossroads The European Central Bank (ECB) met on Thursday, and markets are watching for any rate cut hints. EUR/USD is hovering near key support—will Lagarde’s tone push it lower, or will bulls take control? Eyes on the press conference! #EURUSD #ECB

The U.S. dollar has been on a significant upward trajectory since late September, appreciating over 7% against major currencies. This strength has brought the euro to nearly $1.01, edging closer to parity—a level last seen in November 2022. Factors such as higher U.S. bond yields, strong economic growth, and bullish trading positions have contributed to this trend. A recent Reuters poll shows that nearly one-third of currency strategists now anticipate the euro falling to or below parity against the dollar. 

The FOMC rate decision (Wednesday) and U.S. Non-Farm Payrolls (NFP) (Friday) will be the key drivers for USD pairs this week. Will the Fed signal a policy shift? Will job data support a stronger dollar? Stay tuned for potential volatility! #ForexTrading #USD