The final full week of 2024 has arrived, bringing with it significant developments in both the U.S. and U.K. interest rates and a host of other critical economic data. True to form, it has been a week of volatility in the financial markets.
The week began on Monday with the release of PMI services and manufacturing data from the Eurozone, the U.K., and the U.S. A consistent theme emerged across the board: services PMI exceeded forecasts, while manufacturing continued to struggle. Notably, only France reported services data below the key 50-point threshold, indicating contraction. Manufacturing, however, remains a persistent weak spot, particularly in the Eurozone, and Monday’s data reflected this ongoing challenge.
On Tuesday morning, the U.K. released its Claimant Count Change figures, which exceeded expectations. While the forecast anticipated a modest increase of 0.3k, the actual figure came in at 28.2k, a result that briefly bolstered the Pound against both the Euro and the U.S. dollar. The Pound’s momentum was further supported by weaker-than-expected Core Retail Sales data from the U.S., which matched the previous reading of 0.2% instead of the forecasted 0.4%.
However, these gains were short-lived. On Wednesday evening, the Federal Reserve announced its highly anticipated interest rate decision, opting for a 25-basis-point cut. While this move was widely expected, a hawkish speech from Fed Chair Jerome Powell, who emphasized a slower pace of future rate cuts and raised concerns about inflation’s potential resurgence, led to a significant strengthening of the U.S. dollar.
The Bank of England followed on Thursday, with expectations that it would hold interest rates steady. While a rate hold was confirmed, comments from Governor Andrew Bailey painted a grim picture of the U.K. economy. Bailey’s statement that the U.K. economy has “come to a halt” sent the Pound tumbling against both the U.S. dollar and the Euro. This sentiment was further reinforced by disappointing retail sales figures released Friday morning, which aligned with the economic stagnation described by Bailey.
With the holiday season approaching, next week’s calendar is dominated by Christmas bank holidays, leaving little room for significant market-moving events. After the volatility of recent months, market participants can likely expect a week of consolidation as 2024 comes to a close.
This week’s events underscore the intricate interplay of global economic data, central bank decisions, and market sentiment—a fitting end to a turbulent year in financial markets.
