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Markets Stocks are displaying signs of recovery after a challenging start to the year. The S&P 500 and Nasdaq Composite are notably in positive territory, with investors springing to life, driven by the resurgence of large technology stocks. The 10-year yields spent most of the day trading below 4%, contributing to the positive sentiment. While the week was expected to start quietly, traders quickly regained confidence, especially ahead of Thursday’s release of the US Consumer Price Index (CPI). If current cooling estimates hold, the month-on-month increase is anticipated to be 0.3%, marking the slowest pace of annual core price growth since May 2021. This is expected to be perceived positively for risk markets, reinforcing the optimism for market-based rate cuts. A clean read from Friday’s data was not readily ascertainable for a consensus “group think,” with some flying blind while others saw a crystal clear soft landing path; hence, markets were clearly unclear to start the week. Nonetheless, it would be reasonable to argue that the overall evidence from Friday’s data tends to lean more towards signalling economic deceleration in a Goldilocks type of way. With growth and inflation remaining subdued, the emerging picture suggests a Federal Reserve that is… Read More »Emerging picture: Federal Reserve on the path to normalisation

European markets head lower after mixed US jobs report. Inflation dominates in the week ahead. Fourth quarter earnings season kicks off this week. Equity markets have continued to struggle as we kick off another week afresh, with European and Asian stocks heading lower once again. Friday’s US jobs report brought fresh concerns over the likeliness of the Fed to cut rate in March as markets have been widely anticipating, with a hot payrolls figure coming alongside a higher wage growth reading. However, the breakdown highlighted that much of that job growth came from those taking on part-time work, with full time jobs moving sharply lower. With a sharp decline in the ISM services PMI, job growth propped up by part-time roles, and a higher unemployment rate, we have seen markets return to the view that March will see the Fed commence their easing cycle. This week brings a major focus on inflation, with tonight’s Tokyo CPI figure kicking off a period that also sees Australian, US, and Chinese consumer prices reported. Coming at a time where markets remain under pressure over fears that we may see the Federal Reserve push back over the current trajectory expected by markets, the ability… Read More »Inflation dominates in the week ahead

XAU/USD Current price: 2,029.70 A better market mood undermined demand for the US Dollar in the American session. Investors await a United States inflation update and lift bets on a March rate cut. XAU/USD sees a limited bullish potential, has room to pierce the $2,000 mark. The US Dollar came under selling pressure during American trading hours, helping XAU/USD trim a good part of its early losses. The bright metal trades around $2,030 a troy ounce after falling to $2,016.61, its lowest since mid-December. Financial markets recovered their optimism with Wall Street’s opening, as investors resumed betting the Federal Reserve (Fed) would cut rates as soon as March. Furthermore, a report from Bank of America indicates its analysts believe the central bank may begin tapering the massive Treasury holdings by the same time. Government bond yields retreated, with the 10-year Treasury note currently yielding 3.97%, down 6 basis points (bps). The 2-year note offers 4.31%, down 7 bps. Stocks, in the meantime, trade mixed. Most United States (US) indexes stand in the green, but the Dow Jones Industrial Average is down 35 bps or 0.09%. Market participants await a US inflation update. The country will release the December Consumer Price… Read More »Gold Price Forecast: XAU/USD lower lows open doors for a slide sub-$2,000

EUR/USD Current price: 1.0945 The focus this week will be on the United States Consumer Price Index. Mixed European data fell short of spurring directional movements. EUR/USD is technically neutral around 1.0940, bulls need to reconquer 1.1000. The EUR/USD pair trades uneventfully around its daily opening, trading in the 1.0940 price zone ahead of Wall Street’s opening. The pair struggles for direction, confined to familiar levels since last Wednesday. Speculative interest assessed the previous week’s United States (US) employment-related figures, which generally stronger than anticipated. The numbers spurred doubts about when the Federal Reserve (Fed) could proceed with the first rate cut, but in the end, investors maintained bets on a March cut, limiting US Dollar gains. This week, the focus will be on inflation, as the United States will publish the  December Consumer Price Index, foreseen at 3.2% YoY, above the previous 3.1%. The core annual reading, however, is expected at 3.8%, easing from 4% in November. The macroeconomic calendar has been quite busy during European trading hours, as Germany reported the November Trade Balance, which posted a seasonally adjusted surplus of €20.4 billion, beating expectations. Additionally, Factory Orders increased a modest 0.3% in the same month, below the… Read More »EUR/USD Forecast: Wait-and-see mode ahead of critical inflation data

EUR/USD fluctuates near 1.0950 to start the new week. A negative shift in risk mood could make it difficult for EUR/USD to gain traction. 1.0920 aligns as a key support in the near term. EUR/USD managed to erase its daily losses after dipping below 1.0900 on Friday but closed the first week of 2024 in negative territory. The pair’s near-term technical outlook fails to provide a directional clue in the near term and investors are likely to pay close attention to risk perception in the absence of high-tier macroeconomic data releases. Mixed macroeconomic data releases from the US caused EUR/USD to fluctuate wildly in the American session on Friday. After losing nearly 50 pips and dropping below 1.0900 with the immediate reaction to the December jobs report, the pair made a sharp U-turn and advanced to the 1.1000 area. Nonfarm Payrolls in the US rose by 216,000 in December. Although this reading came in better than the market expectation for an increase of 170,000, downward revisions to November and October prints caused the US Dollar (USD) rally to remain short-lived. Additionally, the Unemployment Rate held steady at 3.7% even as the Labor Force Participation Rate declined to 62.5% in December… Read More »EUR/USD Forecast: Bulls are likely to remain hesitant unless Euro stabilizes above 1.1000

Gold price meets with a fresh supply after Friday’s post-NFP two-way volatile price swings. Diminishing odds for a more aggressive Fed policy easing exert pressure on the XAU/USD. A softer risk tone could help limit losses ahead of the US consumer inflation on Thursday. Gold price (XAU/USD) comes under some renewed selling pressure on the first day of a new week and drifts back closer to over a two-week low touched in the aftermath of the better-than-expected US monthly jobs data on Friday. The popularly known NFP report showed that the US economy added 216K new jobs in December as against the 170K anticipated and the previous month’s downwardly revised reading of 173K. Additional details showed that the Unemployment Rate remained unchanged at 3.7% and the annual wage inflation, as measured by the change in the Average Hourly Earnings, climbed to 4.1% from 3.9% in November. The data points to a still-resilient US labor market and gives the Federal Reserve (Fed) more headroom to keep rates higher for longer, which remains supportive of elevated US Treasury bond yields and is seen undermining the non-yielding yellow metal. That said, the Institute for Supply Management (ISM) reported that business activity in the… Read More »Gold Price Forecast: XAU/USD could test 50-day SMA support ahead of US CPI on Thursday

US CPI inflation is the next big test for the US Dollar. Yen traders turn to Tokyo CPIs and wages for BoJ exit hints. China’s inflation and trade numbers to impact broader sentiment. UK monthly GDP on tap amid recession fears. Will the US CPIs corroborate the market’s implied Fed rate path? The US dollar staged a decent recovery during the first week of the year, with market participants scaling back some basis points worth of rate reductions expected by December, although the total number of rate cuts anticipated by investors is still way larger than the amount of rate cuts indicated by the Fed’s December dot plot. At that gathering, the median dot for 2024 was revised down to 4.6% from 5.1% and Fed Chair Jerome Powell appeared more dovish than anticipated at the press conference following the decision. He said that rate increases are not the base case anymore and that the question now is “when will it become appropriate to begin dialing back?” With that in mind, at some point last week, investors were nearly fully convinced that a 25bps cut will be delivered in March and that interest rates should be lowered by 160bps by December.… Read More »Week ahead – Market spotlight turns to US CPI inflation

From FX weekly, USD/JPY completed target at middle 143.00’s from the open at 140.97. Highs traded to 143.88. USD/JPY’s range trades from 144.03 to 143.53. Next week shorts target 142.54 then 142.04. JPY cross pairs all trade above most vital levels and holds USD/JPY downside progress. Overbought NZD/JPY and AUD/JPY will lead the way lower next week. GBP/JPY shorts must break 181.96 to target easily 182.29 then 180.67. EUR/JPY break 157.45 targets low 156.00’s and CAD/JPY 107.48 targets middle 106.00’s. EUR/USD massive supports are located at 1.0897, 1.0892 and 1.0874. If the past is prologue to EUR/USD’s traditional trends from 1998 -2015 and 2014 to 2023 then EUR/USD achieves its significant low in January and trends higher for the year. EUR/USD dropped 146 pips for January. EUR/USD ranges from 1.0897 and 1.0892 to 1.1061. The 5 year average is located at 1.1158. We’re long for next week to target 1.1022. GBP/USD 2 big lines above 1.2785 and the 5 year average at 1.2832. The 5 year average is safe and won’t break next week. Overbought begins at 1.2736. GBP/USD ranges from 1.2585 and 1.2597 to 1.2785. AUD/USD trades from 0.6781 to 0.6652. Above 0.6781 trades overbought while 0.6652 s expected… Read More »FX next week: 14 currencies, levels and ranges

European inflation was higher than anticipated in December, according to preliminary estimates. The United States employment sector remains tighter than what the Fed wishes. EUR/USD battles to resume its bullish trend, increasing chances of a bearish breakout. The US Dollar kick-started the year on a strong footing, appreciating against most major rivals. The EUR/USD pair fell to 1.0876, further retreating from its late December peak of 1.1139, and heads into the weekend trading at around 1.0980. Financial markets returned from the winter holidays and are looking for fresh direction. Speculative interest took some profits out of the table after thin trading helped EUR/USD reach a multi-month high. But investors also chose to reduce bets on upcoming rate cuts after macroeconomic figures confirmed the economic contraction extended into December 2023, while inflation in the Eurozone remained elevated at the end of the year. Concerning macroeconomic developments On the one hand, S&P Global released the final estimates of its December Producer Manager Indexes (PMIs), which showed manufacturing and services output remained below 50 – the line that separates contraction from expansion- in the European Union (EU) and the United States (US). The latter published the official ISM PMIs, with the manufacturing index… Read More »EUR/USD Weekly Forecast: US Dollar firmer ahead of key inflation figure

GBP/USD started 2024 on a positive note. Auspicious results from the UK docket reinforced the upside bias in spot. The key 200-week SMA continues to cap the upside. Price action around the Pound Sterling (GBP) was highly influenced by the US Dollar (USD) dynamics in the first week of the new trading year, while market participants continued to shrug off the holiday mood. GBP/USD navigated choppy waters initially, although it made a U-turn and the pair managed to advance in the subsequent sessions, largely surpassing the 1.2700 barrier on Friday. Despite Friday’s post-NFP knee-jerk reaction, the Cable and the rest of the risk-associated assets grabbed fresh oxygen and extended the positive streak for the fourth week in a row in response to the sudden change of heart around the Greenback. This was accompanied by a U-turn in US yields and increasing speculation of interest rate cuts as soon as in March. The week that was: GBP/USD now looks to revisit 1.2800 and beyond The weekly recovery in the quid followed firm prints from both Manufacturing and Services PMIs in the UK for the month of December, which somehow managed to offset the bullish momentum in the US Dollar that was… Read More »GBP/USD Weekly Forecast: Pound Sterling kicks-off new year on the front foot