Hawkish comments from ECB policymakers boost Euro

The Euro has reached as far as $1.0903, breaking the recent peak of $1.08875, and opening the way for a spike top from last April at $1.0936. European Central Bank (ECB) governing council member Klaas Knot said that interest rates would rise by 50 basis points in both February and March and continue climbing in the months after. Knot is considered a hawk among policymakers, and the comment was taken as pushback against recent reports that the ECB would scale back to quarter-point moves from March.

The dollar weakens against a basket of currencies

The dollar was weaker against a basket of currencies at 101.740 and just a whisker from its recent eight-month trough of 101.510. The focus on interest rates will make the Bank of Canada's meeting on Wednesday of some note, with markets leaning toward another quarter-point hike to 4.5%, but that to be the end of the tightening cycle there.

Fed's interest rate moves contrast with ECB's

In contrast, futures have priced out almost any chance the Fed could move by 50 basis points next month and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current 4.25% to 4.50%. Investors also have around 50 basis points of U.S. rate cuts priced in for the second half of the year, reflecting softer data on inflation, consumer spending and housing.

Eurozone outpacing the U.S. in growth and inflation

Flash surveys on January manufacturing are forecast to show more improvement in Europe, in part thanks to falling energy costs, than in the United States. "The U.S. has lost its global growth leadership position if most recent PMI surveys are to be believed. Additionally, U.S. inflation is seen falling further and faster than the Fed's own projections. Under this scenario, the USD has the scope to fall much further this year.

Oil prices edge lower as traders await economic cues

Oil prices edged lower from a recent rally on Monday, as traders awaited more cues on an economic recovery in China and a potential U.S. recession, although Asian trading volumes were slim amid a slew of market holidays in the region. China and other major Asian markets were closed for the Lunar New Year holiday, which is expected to keep volumes slim for the remainder of the week.

Gold Glitters at Nine-Month High as Markets Eye U.S. Economic Outlook

Gold prices rose slightly on Monday, trading close to a nine-month high as markets eagerly await more U.S. data this week to gauge whether the world's largest economy is on the brink of a potential recession in 2023. Trading volumes in metal markets were also relatively smaller at the beginning of the week, as market holidays in several Asian countries, most notably China, for the Lunar New Year kept market activity at bay. Chinese markets will be closed for the remainder of the week.

Focus this week is squarely on U.S. fourth-quarter GDP data, due on Thursday. Growth is expected to have slowed in the fourth quarter from the third, as the effects of tighter monetary policy begin to be felt by the economy. Investors are eager to see if this slowdown will lead to a potential recession in the coming months.