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January 2024 Update On Foreign Exchange Markets

foreign exchange markets

RegencyFX give their monthly update on developments in the foreign exchange markets. Despite ongoing global uncertainties, January 2024 saw relative stability in the foreign exchange market compared to past months. However, key trends and drivers emerged, shaping currency movements throughout the month. Here’s a breakdown:

Central Bank Actions:

Major central banks played a crucial role in shaping the foreign currency market in January 2024. The US Federal Reserve maintained a dovish stance, favouring accommodative monetary policies to support economic recovery, which resulted in a perceived weakness of the US dollar against a basket of currencies. Similarly, the European Central Bank (ECB) expressed concerns about economic growth and deflationary pressures, signalling a likelihood of extending stimulus programmes and impacting the euro’s performance. The Bank of England holds interest rates at 5.25% for the fourth time in a row. The bank’s committee voted 6-3 in favour of holding the rate.

Key Currency Movements:

  • USD: Strengthened against most major currencies except the EUR, ending the month slightly higher.
  • EUR: Demonstrated surprising resilience, remaining almost flat against the USD.
  • JPY: Weakened significantly against major currencies, with USD/JPY closing around 134.
  • GBP: Lost ground against the USD but gained slightly against the EUR, reflecting UK’s economic challenges.
  • Emerging Markets: Currencies remained mixed, with some like INR showing stability due to central bank intervention, while others like TRY faced depreciation concerns.
  • US Dollar Rebound: After a period of weakness, the USD strengthened throughout January, fuelled by:
    • Hawkish comments from Federal Reserve officials suggesting no near-term rate cuts.
    • Strong US jobs data exceeding expectations.
  • Eurozone Concerns: The Euro (EUR) weakened on concerns about a potential recession in the bloc, reflected in lower-than-expected PMI figures.
  • Japanese Yen Weakness: The Yen (JPY) depreciated due to the Bank of Japan’s ultra-accommodative monetary policy with negative interest rates.
  • British Pound (GBP) Fluctuations: The GBP saw mixed fortunes, initially gaining on positive holiday spending data but later facing headwinds from broader market sentiment.

Specific Events:

  • Early January: The USD initially dipped on dovish Fed sentiment, but hawkish remarks by John Williams triggered a surge.
  • Mid-January: The Eurozone PMI data fuelled EUR sell-off, while strong US jobs report propelled the USD further.
  • Late January: The Federal Reserve meeting minutes softened USD, but later recovered on positive US data.

Currency ranges in January

GBP/EUR

High: 1.1701 on January 29, 2024.

Low: 1.1520 on January 2, 2024.

GBP/USD

High: 1.2780 on January 12, 2024.

Low: 1.2609 on January 17, 2024.

GBP/AUD

High: 1.9314 on January 31, 2024.

Low: 1.8610 on January 2, 2024.

EUR/USD

High: 1.0985 on January 11, 2024.

Low: 1.0805 on January 31, 2024.

If you have any questions about international payments or would like a free, no-obligation quote, the team at Regency FX would love to hear from you.