EURUSD
- EUR/USD has recorded losses for the second consecutive day, trading near 1.0810 during the Asian session on Friday. This downward movement is indicative of ongoing pressure on the euro against the US dollar.
- The pair faced downward pressure following the release of Gross Domestic Product (GDP) data from the United States (US). Economic indicators from the US, especially those related to economic growth, can significantly influence the strength of the US dollar and impact EUR/USD.
- The European Central Bank (ECB) matched the broad consensus by leaving its policy rates unchanged. The decision is in line with market expectations. ECB Chair Christine Lagarde's comments emphasizing data-dependency and reiterating previous statements on potential rate changes in the summer contributed to market sentiment.
- Germany's Business Climate, as tracked by the IFO institute, eased to 85.2 for the current month from 86.3. This contrasts somewhat with recent upbeat surprises from Purchasing Managers' Index (PMI) data in the region. The IFO Business Climate is a key indicator of economic sentiment in Germany.
- Looking forward, the focus will be on the publication of inflation gauged by the Personal Consumption Expenditures (PCE) Price Index. If there's a soft surprise in Friday’s PCE data, it could strengthen probabilities against a rate reduction in March, potentially maintaining upside pressure on the US dollar in the short term.
| SMA (20) | Slightly Falling |
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| RSI (14) | Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: The recent losses in EUR/USD can be attributed to multiple factors, including US GDP data, ECB policy decisions, and economic indicators from Germany. The upcoming PCE inflation data will be closely watched for its potential impact on market expectations regarding future interest rate movements.
GBPUSD
- The GBP/USD pair is struggling to gain meaningful traction on Friday, trading in a narrow range just below the 1.2700 mark. This suggests a lack of strong upward momentum for the British pound against the US dollar.
- Private sector PMI data from the UK indicated that economic activity continued to expand at an accelerating pace in early January. The surprising strength in growth for the month, exceeding forecasts, may have implications for the Bank of England's (BoE) monetary policy decisions, particularly concerning the timing of interest rate cuts.
- Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, notes that the strength in growth, coupled with supply disruptions in the Red Sea that are reigniting inflation in the manufacturing sector, may deter the BoE from cutting interest rates as soon as expected by many.
- Later today, PMI data from the US painted a similar picture of economic strength. The S&P Global Composite PMI rose to 52.3 from 50.9 in December. This positive economic data from the US supported the US dollar (USD) and acted as a limiting factor for the upside movement of GBP/USD.
- Traders are expected to pay close attention to the upcoming December Core Personal Consumption Expenditures (PCE) reports. If the data remains strong, it could influence Fed funds future pricing, potentially converging towards the Federal Open Market Committee's (FOMC) projections for a more moderate stance, with fewer expected rate cuts this year.
| SMA (20) | Neutral | |
| RSI (14) | Neutral |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: GBP/USD faces challenges in gaining significant upward momentum, with factors such as UK PMI data strength, supply disruptions impacting the BoE's decision, positive US economic indicators, and anticipation of the December Core PCE reports influencing market dynamics.
GOLD
- Gold prices have attracted buyers for the second consecutive day, and one of the contributing factors is the decline in US bond yields. As bond yields decrease, the opportunity cost of holding non-yielding assets like gold diminishes, making gold more attractive to investors.
- The US reported that the economy grew at an annualized pace of 3.3% in the three months to December, according to the Bureau of Economic Analysis (BEA) Gross Domestic Product (GDP) preliminary estimate.
- Additionally, December Durable Goods Orders were unchanged, and Initial Jobless Claims for the week ended January 19 increased to 214K compared to the expected 200K. These mixed economic indicators might be contributing to the appeal of gold as a safe-haven asset.
- Recent data from key US fundamentals underscore the view of a resilient economy. This economic resilience is seen as a factor motivating the Federal Reserve to push back a potential interest rate cut, with May being identified as a more likely timeframe compared to the previously anticipated March.
- According to CME Group’s FedWatch Tool, the probability of a rate cut in May now surpasses 51%, a significant increase from nearly 12% a month ago. This shift in market expectations may influence gold prices as traders reassess the interest rate environment.
Closing statement: Gold prices are gaining support from declining US bond yields, mixed US economic data, and the evolving outlook on Federal Reserve interest rate decisions. The increased probability of a rate cut in May, as indicated by the FedWatch Tool, adds to the complex dynamics influencing gold in the current market environment.
CRUDE OIL
- West Texas Intermediate (WTI) oil prices are pausing a two-day winning streak but are anticipated to conclude the week on a positive note, trading near $77.00 per barrel during the Asian session on Friday. The positive momentum in Crude oil prices has been notable, suggesting a favorable week for oil.
- Crude oil prices received a positive boost, partly attributed to better-than-expected GDP Annualized (Q4) data released from the United States on Thursday. Positive economic indicators, such as GDP growth, can imply increased demand for oil, supporting prices.
- The strength in Crude oil prices is linked to speculation surrounding the People's Bank of China (PBoC) considering a Medium-term Lending Facility (MLF) rate cut.
- Additionally, geopolitical tensions in the Middle East contribute to the support of oil prices. Geopolitical factors often introduce an element of uncertainty, influencing oil prices.
- The upward movement in the WTI oil price is further supported by a decrease in US crude oil stockpiles. According to the Energy Information Administration (EIA), the Crude Oil Stocks Change showed a significant decrease compared to the prior week's drop. A reduction in stockpiles can be interpreted as a sign of increased demand or improved market conditions.
| SMA (20) | Neutral | ||
| RSI (14) | Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: The positive momentum in WTI oil prices this week is influenced by better-than-expected US economic data, speculation on central bank actions, geopolitical tensions, and a decrease in US crude oil stockpiles. These factors collectively contribute to the positive outlook for Crude oil prices.
DAX
- On Thursday, German business sentiment unexpectedly dipped in January. The IFO Business Climate Index fell from 86.3 to 85.2, contrary to economists' forecasts of an increase to 86.7. This unexpected decline in business sentiment might raise concerns about economic conditions in Germany, a key factor for the DAX.
- In the same session, the European Central Bank (ECB) left interest rates at 4.50%, in line with market expectations. However, ECB President Lagarde's comments poured cold water over market bets on a Q1 ECB rate cut. Central bank decisions and comments from key figures often have a significant impact on stock markets.
- Later on Thursday, the DAX experienced late gains, influenced by US Q4 GDP numbers. The US economy expanded by 3.3% quarter-on-quarter in Q4, showing resilience. Economic indicators from major economies, especially the US, can affect global stock markets, including the DAX.
- The GfK Consumer Climate Indicator for Germany unexpectedly fell to -29.7 heading into February 2024 from a revised -25.4 in January. Consumer sentiment is a crucial aspect of economic health, and a decline in the indicator may impact consumer-related sectors in the DAX.
- Beyond the economic calendar, corporate earnings also need consideration. Sartorius AG is on the calendar to release earnings results. Earnings reports from major companies can influence investor sentiment and impact stock indices.
| SMA (20) | Neutral | ||
| RSI (14) | Rising |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: In summary, the DAX faced challenges with a dip in German business sentiment, ECB monetary policy decisions, and fluctuations influenced by economic indicators and corporate earnings. Late gains were observed with positive cues from the US Q4 GDP numbers.