London Session Overview
The EUR/USD pair is trading with subdued momentum just below the key resistance level of 1.0900 during the London session. Market sentiment is reflecting a cautious tone as investors brace for upcoming economic indicators, contributing to a lack of significant price movement.
S&P500 Futures and Risk-Appetite Recovery
S&P500 futures have shown modest gains in the European session, suggesting a slight recovery in market risk-appetite. This positive movement is mirrored by a stabilizing 10-year US Treasury yields. The US Dollar Index (DXY) is maintaining a tight range around 103.30 as investors await the release of United States Q4 Gross Domestic Product (GDP) data, scheduled for 13:30 GMT.
Anticipation of US GDP Data
Investors are anticipating a 2.0% expansion in the US economy for the fourth quarter, indicating a slowdown from the 4.9% growth rate in Q3 2023. If realized, this would be the lowest growth rate since 2Q2022. A slower growth rate is expected to temper consumer inflation expectations and potentially raise speculation about a Federal Reserve (Fed) interest rate cut in March.
Key Indicators Ahead
In addition to the US GDP data, market participants will closely monitor the release of the core Personal Consumption Expenditure (PCE) price index data for December, scheduled for Friday. These indicators are crucial in gauging inflationary pressures and influencing monetary policy expectations.
ECB Interest Rate Decision
On the Eurozone front, attention is turned to the interest rate decision from the European Central Bank (ECB), set to be announced at 13:15 GMT. The market consensus expects the ECB to maintain the main refinancing operations rate at 4.5%. Notably, ECB President Christine Lagarde’s recent comments indicate a potential reduction in interest rates starting late Summer. Lagarde expressed concern about inflation levels surpassing the ECB’s target.
Conclusion
As the EUR/USD pair hovers below 1.0900, market participants are navigating the currents of economic indicators, with a keen eye on US GDP data and the ECB’s interest rate decision. The delicate balance between global economic conditions and central bank policies is shaping the trading landscape in the London session.
