Olivia

Summary It was a busy week for foreign central banks, with several offering their first monetary policy assessment of 2024. The Bank of Japan held monetary policy unchanged, but its announcement and updated economic forecasts kept it on track for an April rate hike, in our view. The Bank of Canada’s announcement was modestly dovish in tone, suggesting some risk that an initial rate cut could come earlier than our base case for monetary easing in June. The European Central Bank had offered hawkish guidance ahead of this week’s meeting, but its announcement was arguably more neutral in tone. Given downbeat economic trends and the ECB’s data dependence, our base case remains for an initial rate cut in April, although we acknowledge the risks are tilted toward a later move in June. Finally, the People’s Bank of China lowered its Reserve Requirement Ratio to provide long-term liquidity to the market. While that could offer some support to the economy, we still expect China’s GDP growth to be slower in 2024 than 2023. Foreign central banks kick off 2024 It was a busy week for foreign central banks, with several institutions making their first monetary policy announcements of this year, and… Read More »Foreign central banks take center stage

EUR/USD fluctuates near 1.0900 after failing to clear this level on Wednesday. ECB is widely expected to leave key rates unchanged. Investors will also pay close attention to US GDP data. EUR/USD gathered bullish momentum and advanced to the 1.0930 area on Wednesday. With the US Dollar (USD) staging a rebound later in the day, the pair erased a large portion of its daily gains and returned below 1.0900. Investors await the European Central Bank’s (ECB) policy announcements and high-tier data releases from the US. Although the Composite PMI from the Euro area showed that the business activity in the private sector continued to contract in early January, the Manufacturing PMI recovered unexpectedly and helped the Euro find demand. Moreover, the improving risk mood made it difficult for the USD to stay resilient against its rivals. Nevertheless, upbeat PMI readings from the US supported the USD and forced EUR/USD to turn south later in the American session.

Gold price ticks higher on Thursday amid subdued USD demand, albeit lacks follow-through. The upbeat market mood caps gains for the metal amid rising bets for a delayed Fed rate cut. Traders look to the US macro data dump for some impetus ahead of the US PCE on Friday. Gold price (XAU/USD) ekes out small gains on Thursday and reverses a part of the overnight heavy losses to the $2,011 area, or a multi-day low, though the uptick lacks bullish conviction. In the absence of any fresh fundamental trigger, subdued US Dollar (USD) price action is seen as a key factor lending some support to the commodity amid worries about escalating geopolitical tensions in the Middle East. Any meaningful appreciating move, however, still seems elusive in the wake of growing acceptance that the Federal Reserve (Fed) will not rush to cut interest rates. The expectations were reaffirmed by the better-than-expected US data on Wednesday, which showed that the economy kicked off 2024 on a stronger note. The S&P Global flash US Manufacturing PMI rebounded from 47.9 to a 15-month high of 50.3 in January and the gauge for the services sector climbed to 52.9, or the highest reading since last… Read More »Gold Price Forecast: XAU/USD awaits US Q4 GDP print before the next leg down

European markets saw a much more positive session yesterday, carrying over the momentum from a buoyant US market, but also getting a lift after China announced a 0.5% cut in the bank reserve requirement rate from 5th February. US markets finished the day mixed with the Dow finishing lower for the 2nd day in succession, while the S&P500 and Nasdaq 100 once again set new record highs, as well as record closes, although closing off the highs of the day as yields edged into positive territory. This divergence between the Dow and Russell 2000, both of which closed lower for the second day in succession, and the Nasdaq 100 and S&P500 might be a cause for concern, given how US market gains appear to be being driven by a small cohort of companies share prices. Today’s focus for European markets which are set to open slightly lower, is on the ECB and the press conference soon after with Christine Lagarde, where apart from questions on timelines about possible rate policy, Lagarde could face some questions a little closer to home amidst dissatisfaction over her leadership style from ECB staffers. When looking at the economic performance of the euro area, we’ve… Read More »ECB and US Q4 GDP in focus

Markets US stocks relinquished earlier gains as traders tempered their earnings-related enthusiasm when caution set in after Tesla profits fell amid declining demand for electric vehicles, compressing margins. Tesla reported Q4 earnings that fell short of Street estimates and provided a pessimistic full-year production outlook, causing a further decline in the stock and continuing the downward spiral for the electric vehicle (EV) maker that began at the beginning of the year. With stocks sliding from the summit, there is even more anticipation ahead of a plethora of US economic data, including Gross Domestic Product, as traders continue drawing and discarding cards on the timing of a potential interest rate cut by the Federal Reserve. A policy trajectory that now heavily relies on incoming data where various permutations could swing the pendulum of a March rate cut in either direction. Currently, the Goldilocks nature of sustained growth and receding inflation, with the prospect of 75 basis points cut and potentially more by the Federal Reserve, presents a favourable scenario for the equity market. Preliminary data for January revealed that business activity in the US private sector expanded fastest since June, according to the flash print on S&P Global’s composite gauge. The… Read More »Tesla fell short of street estimates, but investors are still basking in the Goldilocks afterglow

AUD/USD advances further north of 0.6600. The resumption of the risk-on trade underpins the Aussie dollar. Auspicious PMI prints also bolster the upside in the pair. Bulls seem to have returned and pushed AUD/USD back above the key 0.6600 barrier on Wednesday, adding to the decent gains observed in the previous session. All in all, spot seems to have put some distance from last week’s yearly lows around 0.6520 for the time being. This time, the renewed selling pressure around the greenback underpinned the upward bias in the Aussie dollar, while there was no news around China and its lagged economic bounce in post-pandemic life. The Chinese factor, in combination with the projected decision by the Reserve Bank of Australia (RBA) to maintain its current policy stance at its meeting in February, is still seen as limiting the upside potential of the pair in the next few weeks, allowing for extra retracements in the short-term horizon. The decline in inflation metrics observed in December, along with the continued moderation of the labour market (albeit still relatively tight), seems to have solidified the consensus among market participants that the RBA would keep its rates on hold, at least in February. Also… Read More »AUD/USD Forecast: There is a strong support around 0.6520

Outlook: The Bank of Canada meets today but no change is forecast. We also get the US flash purchasing managers indices, but tomorrow is the big day, with the ECB meeting and the US releasing Q1 GDP, which will contain data on consumption and thus on inflation. You’d think it would be a tidbit, but we think this nugget from Bloomberg shows the disparity between euro bulls and euro bears. So far the bulls Are winning despite data that would fell a lesser currency. If the US had data as bad as the eurozone and especially Germany, the dollar would be in the tank. This time the evidence comes from the equity side: “Not everyone is on board with the rally in stocks though. The Qube hedge fund is making a billion dollar bet against German stocks as a downturn in global demand slows Europe’s biggest economy. “The fund  has amassed a short bet of more than $1 billion against German companies after added to wagers against the likes of automaker Volkswagen over the last two weeks, and also disclosing a $131.8 million short against Deutsche Bank, according to data compiled by Bloomberg from regulatory filings. “The bets come even… Read More »Tomorrow is the big day: The ECB meeting and the US releasing Q1 GDP

XAU/USD Current price: 2,014.40 Stock markets extend the rally after solid earnings reports and upbeat US data. The Bank of Canada kept its monetary policy unchanged, as widely anticipated. XAU/USD turned bearish in the near term, aims to test the $2.000 mark. The US Dollar surged in the American session, driving XAU/USD down to $2,011.72, a fresh weekly low. Upbeat United States (US) data boosted the local currency. S&P Global published the preliminary estimate of the January Producer Manager Indexes (PMIs), which showed manufacturing output improved to 50.3, much better than the 47.9 previous and the highest reading in over a year. The Services PMI came in at 52.9, beating the expected 51 and above the previous 51.4. According to the official report, business activity grew at the “sharpest rate in seven months.” Meanwhile, the Bank of Canada (BoC) announced it left its key rate unchanged at 5% following the January policy. The statement was slightly more hawkish than anticipated, weighing down the odds for an April rate cut to around 40%. Still, stock markets maintain the positive tone, with Wall Street resuming its record rally on the back of better-than-anticipated earnings reports signaling economic health. XAU/USD short-term technical outlook… Read More »Gold Price Forecast: XAU/USD plunges with renewed US Dollar demand

EUR/USD Current price: 1.0895 Stock markets lead the way as earnings reports beat expectations, fueling risk appetite. Investors remain cautious ahead of first-tier events scheduled for Thursday. EUR/USD trades with a better tone, but buyers are unlikely to maintain the pressure. The EUR/USD pair flirts with the 1.0900 threshold ahead of Wall Street’s opening as a better market mood plays against the US Dollar. Still, the pair trades within familiar levels as significant events loom and speculative interest saves its fire for after clearer clues. The Euro advances despite tepid local data. “Business activity in the euro area fell at the slowest rate for six months in January,” according to the preliminary Producer Manager Index (PMI) survey conducted by the Hamburg Commercial Bank (HCOB), with the official report clarifying “downturns persists in both manufacturing and service sectors amid further falls in new business.” In Germany, the Manufacturing PMI printed at 45.4, while the services index posted at 47.6. For the Eurozone, the Services PMI came in at 48.4, worse than the previous 48.8, while the manufacturing index improved to 46.6 from 44.4 in December. Later in the day, S&P Global will publish the January United States (US) preliminary PMIs, with… Read More »EUR/USD Forecast: Optimism weighs on the US Dollar

EUR/USD Current price: 1.0895 Stock markets lead the way as earnings reports beat expectations, fueling risk appetite. Investors remain cautious ahead of first-tier events scheduled for Thursday. EUR/USD trades with a better tone, but buyers are unlikely to maintain the pressure. The EUR/USD pair flirts with the 1.0900 threshold ahead of Wall Street’s opening as a better market mood plays against the US Dollar. Still, the pair trades within familiar levels as significant events loom and speculative interest saves its fire for after clearer clues. The Euro advances despite tepid local data. “Business activity in the euro area fell at the slowest rate for six months in January,” according to the preliminary Producer Manager Index (PMI) survey conducted by the Hamburg Commercial Bank (HCOB), with the official report clarifying “downturns persists in both manufacturing and service sectors amid further falls in new business.” In Germany, the Manufacturing PMI printed at 45.4, while the services index posted at 47.6. For the Eurozone, the Services PMI came in at 48.4, worse than the previous 48.8, while the manufacturing index improved to 46.6 from 44.4 in December. Later in the day, S&P Global will publish the January United States (US) preliminary PMIs, with… Read More »EUR/USD Forecast: Optimism weighs on the US Dollar