China's economy is making headlines as its fourth quarter 2024 GDP surged by 5.4% year-on-year, marking the fastest growth since the second quarter of 2023. This impressive economic performance contrasts with the challenges faced by other major economies. Meanwhile, the United States' economic landscape is influenced by a favorable base effect from 2Q23, while mid-tier US data is eagerly anticipated. The US Dollar's strength is negatively impacting the GBP/USD pair, with the GBP/USD recovery capped near 1.2200. Additionally, the European Central Bank's expectations of further rate cuts are weighing down the Euro, causing EUR/USD to stay defensive near 1.0300.
China's remarkable GDP growth is the highest for 2024 and is considered a significant achievement in fulfilling its growth target. Francesco Pesole emphasized the significance of this growth:
"This was also a much more impressive reading given that 2Q23 benefited heavily from a favourable base effect. The fourth quarter growth level was a significant beat and moving the full-year growth back to 5.0% will put to rest any potential debate on whether or not a lower growth level would have been sufficient to fulfil the 'around 5%' growth target." – Francesco Pesole
In the United States, tax cuts and speculation about the Federal Reserve's future actions linger in the background. The trading environment is further influenced by Donald Trump's return to the White House, adding complexity to market dynamics. As the US Dollar finds its footing amid a cautiously optimistic market mood, its demand continues to exert pressure on the GBP/USD exchange rate.
The United Kingdom experienced an unexpected decline in retail sales in December, contributing to the cautious sentiment surrounding the Pound Sterling. Despite being off its lows, GBP/USD's recovery remains limited, demonstrating the challenges faced by the UK economy.
Across the Atlantic, the Euro struggles as market participants anticipate further rate cuts by the European Central Bank. This expectation has dragged the Euro down, keeping EUR/USD defensive in the current market climate.
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