Daily Global Analysis By zForex

[Z Forex]

Global Financial Markets React to Central Bank Signals and Economic Data

In early European trading, the U.S. dollar appreciated after the Federal Reserve indicated that a rate cut in March would likely be earlier. However, the Fed also expressed willingness to consider lowering rates later, depending on greater assurance that inflation will revert to its 2% target. Consequently, the likelihood of a March rate reduction, as implied by traders, has decreased from 59% before the Fed's announcement to 38%, a significant drop from the 89% expectation a month earlier.
The euro experienced a decline, reaching a seven-week drop against the dollar, ahead of the flash eurozone inflation data for January. This forthcoming data, anticipated to reveal further deceleration in both headline and core inflation from December, may apply additional pressure on the euro. Meanwhile, preliminary GDP figures for the fourth quarter indicated a marginal 0.1% year-over-year expansion in the eurozone's economy, with no growth compared to the preceding quarter. Although these figures surpassed initial forecasts, they remain disappointingly low.
The Bank of England (BoE) is anticipated to maintain its benchmark interest rate at 5.25% during its upcoming policy meeting, dubbed “Super Thursday” due to the simultaneous release of the Monetary Policy Report (MPR) and a press conference by Governor Andrew Bailey. The BoE is expected to continue its tight monetary policy, emphasizing the theme of “higher interest rates for longer” and defying anticipations of early rate cuts, especially in light of a surprising increase in December's annual inflation rate.
A recent hawkish shift by the Bank of Japan (BoJ) bolstered the yen, as did a decrease in U.S. Treasury bond yields, which narrowed the interest rate differential between the U.S. and Japan, further encouraging yen investors. The BoJ's January 2024 meeting summary suggested maintaining monetary easing while exploring options for exiting negative interest rates.
Geopolitical tensions in the Middle East and economic challenges in China may support gold prices, offering a safe haven during times of uncertainty. The ongoing decline in U.S. Treasury yields could also lessen losses for gold, which does not yield interest.
West Texas Intermediate (WTI) oil prices face constraints due to disappointing Chinese manufacturing data. The National Bureau of Statistics' (NBS) Manufacturing PMI for January remained below expectations, marking the fourth consecutive month of contraction in China's manufacturing sector, thereby applying downward pressure on WTI prices. The market awaits the Caixin Manufacturing PMI for January, hoping for insights into China's economic health, given its status as a major crude importer.

 

[Z Forex]

Dollar Dips Amid Tech Rally and Interest Rate Speculations

The dollar experienced a decline across the board on Friday, influenced by strong earnings from major technology companies on Wall Street, which spurred investor interest in higher-risk assets. Market participants were also looking forward to the release of U.S. employment data later in the day, keen to understand the potential timeline for the Federal Reserve to start reducing interest rates. The awaited nonfarm payrolls report, set for release on Friday, follows closely on the heels of the Fed's latest policy announcement, which saw interest rates held constant, aligning with expectations. However, Fed Chair Jerome Powell challenged the anticipation of rate reductions in March.
In January, the Eurozone's Harmonized Index of Consumer Prices (HICP) recorded a slight decrease to 2.8% year over year, down from 2.9% in December, matching market predictions. Additionally, core inflation in January decreased to 3.3% year over year from 3.4%, surpassing the market's expectation of 3.2%. These developments have led investors to believe that the European Central Bank (ECB) may decrease interest rates in April, contributing to the Euro's recent decline.
The Bank of England's (BoE) Monetary Policy Committee has decided to keep interest rates at a 15-year high of 5.25%. Governor Andrew Bailey stated that the BoE needs further proof that inflation is trending towards the 2% goal before considering a reduction in interest rates. Persistent inflation and wage growth within the UK economy could lead the BoE to maintain elevated rates for a longer period than the ECB.
The Japanese Yen gained support after the Bank of Japan expressed confidence last week in achieving its inflation target, suggesting an upcoming shift away from negative interest rates in its March or April meetings.
Gold prices stayed above $2,050 an ounce on Friday, heading for a near 2% increase for the week as both the dollar and Treasury yields dipped, fueled by robust expectations for a U.S. interest rate cut within the year. These expectations remained strong despite Federal Reserve Chair Jerome Powell stating that a March rate cut is "not the base case" and emphasizing the intent to maintain current rates until inflation consistently approaches the 2% target. The likelihood of a Fed rate cut in March has sharply decreased from over 70% a month ago to 38%.
Oil prices saw an uptick on Friday after OPEC+ opted to maintain its current oil production policy. Nonetheless, the benchmarks are anticipated to close the week lower, affected by unverified reports of a ceasefire between Israel and Hamas.

 

[Z Forex]

Dollar Strengthens and Global Economic Tensions Persist Amid Central Bank Reassessments

On Monday, the dollar reached its highest level against major currencies in eight weeks, as market participants revised their expectations for aggressive Federal Reserve rate cuts this year, prompted by the enduring strength of the U.S. economy. This reassessment followed a highly positive U.S. jobs report on Friday, which surpassed forecasts and supported Federal Reserve Chair Jerome Powell's recent assertion that a rate cut in March was improbable. Currently, the likelihood of the Fed reducing rates in March has decreased to less than 20%, down from nearly 50% the previous week, as indicated by the CME FedWatch tool.
European Central Bank (ECB) official Boris Vujcic emphasized on Sunday the necessity of monitoring wage-driven inflationary pressures before considering rate reductions. Meanwhile, economic indicators, such as the Purchasing Managers' Index (PMI) from various EU countries, showed stability, despite Germany facing recession risks and increasing pressure on the ECB to maintain higher interest rates for an extended period.
In the UK, the prospect of a technical recession complicates the decision-making for Bank of England (BoE) policymakers. The Office for National Statistics (ONS) revised its Q3 Gross Domestic Product (GDP) estimates, indicating a 0.1% contraction in the economy. The high-interest rate environment worsens the cost-of-living crisis, impacting business operations and economic stability.
The Bank of Japan (BoJ) has shown a hawkish shift, suggesting readiness to phase out substantial stimulus measures and increase short-term interest rates from negative levels. This stance supports the Japanese Yen (JPY), which also benefits from its status as a safe haven amid ongoing geopolitical tensions in the Middle East and concerns over China's economic slowdown.
Investors have adjusted their expectations for the Federal Reserve's rate cut strategy in light of the recent U.S. jobs report, contributing to rising U.S. Treasury bond yields. This has negatively affected gold, a non-yielding asset, though geopolitical tensions and economic uncertainties may limit further losses.
Oil prices experienced a slight increase on Monday, recovering from significant declines the previous week. This recovery followed the U.S.'s commitment to additional strikes against Iran-backed groups in the Middle East and drone attacks by Ukraine on a major refinery in southern Russia.

 

[Z Forex]

Global Economic Dynamics: Fed Policy, Geopolitical Tensions, and Market Movements

The US dollar has experienced fluctuations but remains near a three-month high, bolstered by growing expectations that the Federal Reserve may not implement aggressive rate cuts this year. Recent economic data underscored this view, with the US services sector showing a pickup in growth in January, thanks to an increase in new orders and a rebound in employment. This positive start to the year follows a surprisingly strong jobs report from the previous week, effectively supressing any expectations for early and significant rate reductions by the Fed. Fed Chair Jerome Powell and other policymakers have also expressed skepticism towards the idea of steep rate cuts in the near term.
In Europe, the Euro (EUR) saw downward pressure after the release of weaker Producer Price Index (PPI) data, signaling a disinflationary trend within the European Union (EU). This situation could lead the European Central Bank (ECB) to contemplate policy easing measures to counteract these trends.
In the United Kingdom, the latest S&P Global/CIPS Services PMI data for January provided support for the Pound Sterling, outperforming expectations with a reading of 54.3 against the forecasted 53.8. This improvement, attributed to a robust flood of new orders and strong hiring over the past six months, has buoyed optimism for potential rate cuts by the Bank of England (BoE), supporting a sharper recovery for the Pound. Despite these positive domestic indicators, the near-term outlook for risk-sensitive assets remains bearish due to broader economic uncertainties.
The Reserve Bank of Australia (RBA) held interest rates steady at a 12-year high of 4.35% in its February meeting, aligning with expectations. However, the RBA hinted at the possibility of further rate hikes to curb inflation, with investors and economists now anticipating any potential rate cuts to be delayed until at least the latter half of the year.
Geopolitical tensions, particularly in the Middle East and concerns over China's economic slowdown, have provided a degree of support for safe-haven assets like Gold. Ongoing conflicts and diplomatic efforts in the region, including the US's involvement in Yemen and Secretary of State Antony Blinken's visit to the Middle East, underscore the complex geopolitical landscape that could influence global markets.
Meanwhile, West Texas Intermediate (WTI) oil prices have risen, continuing gains from the previous session amid escalating tensions in the Middle East that pose risks to the region's oil supply.

 

[Z Forex]

EUR/USD Corrects Amid Dollar Retracement
The EUR/USD is undergoing a correction for the second consecutive day as the dollar retraces following a significant rally. This moderation is a typical market response as investors evaluate the Federal Reserve's potential timing for a rate cut. The current correction could be transient before the dollar potentially resumes its ascent. The next resistance level is anticipated at 1.0850.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1000	1.0900	1.0850	1.0750	1.0650	1.0500

GBP/USD Gains for Second Day Amid Weaker Dollar
The GBP/USD pair is capitalizing on a weaker dollar, achieving gains for the second day in a row. The current resistance level that the pair is testing is at 1.2600, with the subsequent resistance zone expected to be between 1.2750 and 1.2800.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.2930	1.2800	1.2600	1.2500	1.2300	1.2470

JPY/USD Uncertainty: Short-Term Bullish Trend Awaits Dollar’s Weakening
JPY/USD exhibits some uncertainty at the current level. While the short-term bullish trend appears robust, it requires additional weakening of the dollar to sustain its upward trajectory.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
152.00	150.00	148.35	146.50	144.80	144.00

Gold Range-Bound, Resistance at 2038, Support at 2006
Gold is persisting in its range-bound price movements, facing resistance at the 2038 levels and finding support at 2006. Gold may remain under pressure as the Dollar strengthens and yields rise. However, as long as the support at 2006 holds, gold is likely to avoid a bearish territory.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2070	2055-60	2038	2006	1975	1965

Oil Prices Go Up Amid Volatility & Geopolitical Tensions
Oil prices are experiencing modest gains within a volatile trading environment, as geopolitical tensions have intensified and waiting for today’s EIA data. The next support level for oil is identified at $70, with resistance anticipated around the $78 mark.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
84	81	78	70	68	65

 

[Z Forex]

EUR/USD Corrects Amid Dollar Retracement
The EUR/USD is undergoing a correction for the second consecutive day as the dollar retraces following a significant rally. This moderation is a typical market response as investors evaluate the Federal Reserve's potential timing for a rate cut. The current correction could be transient before the dollar potentially resumes its ascent. The next resistance level is anticipated at 1.0850.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1000	1.0900	1.0850	1.0750	1.0650	1.0500

GBP/USD Gains for Second Day Amid Weaker Dollar
The GBP/USD pair is capitalizing on a weaker dollar, achieving gains for the second day in a row. The current resistance level that the pair is testing is at 1.2600, with the subsequent resistance zone expected to be between 1.2750 and 1.2800.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.2930	1.2800	1.2600	1.2500	1.2300	1.2470

JPY/USD Uncertainty: Short-Term Bullish Trend Awaits Dollar’s Weakening
JPY/USD exhibits some uncertainty at the current level. While the short-term bullish trend appears robust, it requires additional weakening of the dollar to sustain its upward trajectory.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
152.00	150.00	148.35	146.50	144.80	144.00

Gold Range-Bound, Resistance at 2038, Support at 2006
Gold is persisting in its range-bound price movements, facing resistance at the 2038 levels and finding support at 2006. Gold may remain under pressure as the Dollar strengthens and yields rise. However, as long as the support at 2006 holds, gold is likely to avoid a bearish territory.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2070	2055-60	2038	2006	1975	1965

Oil Prices Go Up Amid Volatility & Geopolitical Tensions
Oil prices are experiencing modest gains within a volatile trading environment, as geopolitical tensions have intensified and waiting for today’s EIA data. The next support level for oil is identified at $70, with resistance anticipated around the $78 mark.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
84	81	78	70	68	65

 

[Z Forex]

Global Markets Navigate Central Bank Signals and Economic Indicators

The dollar faced downward pressure on Wednesday, continuing its retreat from a nearly three-month peak after a vigorous rally. This retreat followed strong U.S. labor data and Federal Reserve Chair Jerome Powell's hawkish comments, which dampened early rate cut expectations. Additionally, a pullback in U.S. Treasury yields after a well-received sale of new three-year notes also contributed to the dollar's softening.
Philadelphia Fed President Patrick Harker supported the Fed's recent decision to hold rates steady, suggesting that inflation is likely to decline further. However, Cleveland Fed President Loretta Mester indicated openness to reducing rates later in the year if economic projections hold, aligning with Powell's indication of potential rate cuts, possibly starting in May.
In Europe, Germany's industrial sector continued to struggle into December, as reported by Destatis. ECB policymaker Pablo Hernandez de Cos expressed confidence in inflation returning to the 2% target, suggesting an upcoming rate cut. However, his colleague Boris Vujcic advocated for patience to ensure wage costs do not translate into sustained inflation, a sentiment echoed by Isabel Schnabel, who called for caution against any rapid inflation resurgence.
In the UK, gentle remarks from BoE Chief Economist Huw Pill increased expectations of earlier rate cuts, especially as UK construction firms express optimism about recession risks diminishing due to easing price pressures. The pound capitalized on these improved economic prospects, despite the BoE's current stance on maintaining higher interest rates.
Meanwhile, in Japan, declining real wages and household spending—continuing for the 21st and tenth months, respectively—pose challenges for the Bank of Japan (BoJ) and weigh on the safe-haven yen, especially amid a generally positive equity market sentiment.
Globally, market consensus is shifting towards the Fed maintaining higher interest rates for an extended period, given the resilience of the U.S. economy. This outlook seems to be a headwind for gold, a non-yielding asset, which is also affected by a positive equity market sentiment and hopes for a de-escalation in Middle Eastern tensions.
The oil market received support from the American Petroleum Institute's (API) latest weekly report, which indicated a smaller-than-expected inventory build of 0.674 million barrels, compared to the forecasted 2.133 million barrels. Market anticipation now builds toward the upcoming U.S. Energy Information Administration (EIA) report for further direction in crude oil prices.

 

[Z Forex]

Global Markets in Focus: Navigating Currency Fluctuations, Central Bank Signals, and Geopolitical Tensions

The U.S. dollar remained steady on Thursday as investors processed remarks from Federal Reserve officials that were less dovish than anticipated, while also looking forward to upcoming U.S. economic data releases. Fed speakers highlighted various reasons for not rushing into policy easing in the near future. The focus for the coming week will be on the CPI data, which is expected to significantly influence market dynamics, with Fed members' comments remaining a key point of interest for the remainder of this week.
The Euro experienced fluctuations due to the dollar's recent adjustments, further pressured by disappointing economic data from Germany. Industrial production in Germany continued its downward trend, highlighting worsening economic conditions in the region's largest economy. Additionally, upcoming inflation data and today's Economic Bulletin from the ECB are anticipated to affect market sentiment and the outlook for the region, as markets pay close attention to ongoing comments from ECB members.
The British pound has been influenced by remarks from Bank of England (BoE) members, suggesting a cautious approach towards moving away from ultra-hawkish interest rates. Despite this, the transition to a more accommodative monetary policy is expected to take longer than in the U.S. or the Eurozone, largely due to distinct wage growth dynamics and persistently high inflation, which may necessitate keeping interest rates elevated to support the pound. Today's labor market data, indicating rising house prices, could further complicate the inflation outlook.
The offshore yuan remained stable despite significant data indicating China's consumer price index experienced its most substantial decline in over 14 years in January. However, month-on-month figures showed a slight increase. The yuan found support as China's stock market began to stabilize, buoyed by the appointment of a new securities regulatory head, despite the disappointing economic indicators.
Gold prices held steady as skepticism from U.S. Federal Reserve officials regarding the possibility of early interest rate cuts balanced the demand for gold as a safe haven, amid ongoing efforts to resolve the Gaza conflict despite Israel's rejection of a ceasefire proposal from Hamas.
Crude oil prices are on track to extend their gains for the fourth consecutive session. West Texas Intermediate (WTI) crude has found support amid escalating tensions in the Israel-Gaza conflict. Israeli Prime Minister Benjamin Netanyahu dismissed a ceasefire offer from Hamas, although U.S. Secretary of State Antony Blinken hinted at ongoing negotiations for a resolution. Furthermore, a Hamas delegation is expected to travel to Cairo for discussions with Egypt and Qatar to explore a ceasefire agreement.

 

[Z Forex]

Central Banks in Focus with Inflation Forecast, Economic Resilience, and Market Reactions

US Federal Reserve officials have indicated that while they are on track to address inflation, it is premature to consider lowering interest rates. Despite market expectations of a rate cut as early as May or June, the resilient strength of the economy suggests that higher rates may be maintained for an extended period, potentially supporting the dollar with current fundamentals.
The European Central Bank (ECB)'s Chief Economist, Philip Lane, observed that disinflation is progressing more rapidly than anticipated in the near term, yet achieving the 2% inflation target necessitates further progress. ECB Governing Council member Pierre Wunsch noted optimistic wage trends but deemed them insufficient to scale back restrictive measures, preferring to await additional data before reducing rates. Market attention is also focused on upcoming German Consumer Price Index (CPI) data for January and a speech by German Bundesbank President Nagel.
Bank of England (BoE) Governor Andrew Bailey recently affirmed that the economic trajectory aligns with maintaining the current bank interest rate. BoE Chief Economist Huw Pill hinted at a potential rate reduction this year if the economy successfully curtails inflation, though the current economic challenges and persistent inflation create an uncertain outlook for the British pound.
The yen reached a 10-week low, while the dollar advanced for the fourth consecutive week, influenced by reduced expectations for swift interest rate adjustments by both the Bank of Japan (BoJ) and the Federal Reserve. BOJ Governor Kazuo Ueda suggested the likelihood of continued easy monetary conditions even after ending negative interest rates, aligning with Deputy Governor Shinichi Uchida's view of unlikely rapid rate increases.
In the US, strong macroeconomic data and Federal Reserve officials' hawkish statements have led investors to reassess expectations for significant rate cuts this year, impacting gold prices and supporting the yield on the 10-year US government bond above 4.0%. The upcoming US consumer inflation data will provide further insights into the timing and magnitude of potential rate adjustments, influencing the direction of gold prices.
Oil prices remained stable, poised for weekly gains amidst ongoing tensions in the Middle East following Israel's rejection of a ceasefire offer from Hamas, with oil prices increasing by over 5% for the week.

 

[Z Forex]

Interest Rate Speculations and Geo-Political Tensions Fuel Uncertainties

The dollar is struggling to find solid ground amidst uncertainties regarding the Federal Reserve's (Fed) path on interest rate cuts. This situation is further compounded by a bullish sentiment in global equity markets, which diminishes the appeal of the traditionally safe-haven dollar. Recent data from the Bureau of Labor Statistics (BLS) indicates a 0.2% month-over-month increase in the Consumer Price Index (CPI), slightly below the preliminary report of 0.3%. The core CPI, however, held steady at 0.3%, signaling a disinflationary trend over the past year and encouraging expectations of a more dovish Federal Reserve monetary policy. The anticipation builds around the U.S. CPI report for January, due on Tuesday, which will refine predictions on whether the Fed will cut rates in March or May. With eight Fed officials, including the influential Governor Christopher Waller, scheduled to speak this week, the markets are braced for insights.
In Europe, German inflation cooled to a 3.1% year-over-year rate in January, down from 3.8% the previous month. ECB Governing Council member Fabio Panetta hinted on Saturday at the growing likelihood of an interest rate cut by the central bank, advocating for timely and gradual measures to mitigate financial market and economic volatility. This statement brings the prospect of an ECB rate cut nearer.
In the UK, the Pound Sterling has reached a new weekly high as markets anticipate a speech by Bank of England Governor Andrew Bailey. The focus is on the UK Average Earnings, especially after BoE Deputy Governor Sarah Breeden indicated that the persistence of high interest rates would depend on the evolution of price pressures and wage growth. Strong wage growth could demand maintaining high interest rates to curb inflation, which, paradoxically, could benefit the Pound Sterling by attracting more foreign capital due to higher interest rates. However, the currency is set to face volatility with a week full of significant data releases, including employment, inflation, GDP, and retail sales.
Asian markets were notably quiet on Monday, with several major centers including China, Japan, and Singapore closed for the holidays.
Gold prices remained unchanged on Monday, reflecting a holiday-induced lull in trading. Investors are keenly awaiting insights from numerous U.S. Federal Reserve officials amid a week rich with data releases, including CPI, retail sales, and the producer price index (PPI). Remarks from several Fed officials last week, including Chairman Jerome Powell, emphasized the need for more evidence of sustained inflation decline before considering rate cuts. Treasury yields and their impact on the market, especially following a recent rebound, are also in focus.
Oil prices dropped in early Asian trading on Monday following Israel's announcement of concluding a series of strikes in southern Gaza, slightly reducing supply concerns from the Middle East. Geopolitical risks, including the potential escalation of the Israel-Palestinian conflict and possible disruptions to Middle East oil supplies, had previously driven a 6% price increase last week. Concerns over logistics disruptions in the Red Sea continue to dominate investor considerations.

 

[Z Forex]

US Indices

Bullish Momentum Persists as US Stock Indices Extend Gains, Fueled by AI Mega-Caps
The major US stock indexes are on the upswing, posting gains for the fifth week in a row. The S&P 500 and Nasdaq Composite gained 1.4% and 2.3% respectively last week, with mega-cap stocks heavily invested in artificial intelligence providing a significant increase. This rise is further supported by the expectation of upcoming interest rate cuts and a positive corporate outlook.
With a favorable adjustment to inflation figures for the last quarter of 2023, the financial world is eagerly awaiting the release of the Consumer Price Index (CPI) for January. This data, expected on Tuesday, will be crucial in shaping the Federal Reserve's approach to easing monetary policy over the course of the year.
In addition, a number of other economic indicators will be released that will attract the attention of market participants. These include not only the U.S. Core CPI but also Retail Sales, Core Retail Sales, and a variety of indices and reports such as the Philadelphia Fed Manufacturing Index, Export and Import Price Indices , Initial Jobless Claims, and the NY Empire State Manufacturing Index. Additional reports on Industrial and Manufacturing Production, Business Inventories, and Crude Oil Inventories, as well as preliminary figures for Building Permits, Housing Starts, and both the Producer Price Index (PPI) and Core PPI, will be scrutinized. Furthermore, the preliminary Michigan Consumer Sentiment Index will offer insights into consumer attitudes, rounding out a comprehensive view of the economic landscape that will inform investment strategies and market expectations.
The Nasdaq, along with the SP500, is currently experiencing a bullish run and reaching new all-time highs. The momentum behind this trend is strong, with the next target for the Nasdaq being around 18000. However, tomorrow's US inflation rate announcement could have a significant impact on the market's pricing and sentiment, which may lead to either a new record high or a possible correction.
Crypto

Bitcoin Approaches Peak Since Early 2022, Signals Price Correction
Bitcoin's performance has seen a fluctuation, nearly reaching its peak since early 2022, signaling the potential for a price correction. The cryptocurrency slightly dropped below 1% in the last 24 hours to $48,000 after touching $48,800. This level is close to its mid-January high of $49,000, marking a significant recovery from the lows of $42,000 seen last week.
The recent surge in Bitcoin and the broader cryptocurrency market is attributed to the U.S. approval of Bitcoin spot exchange-traded funds (ETFs) and positive market sentiment, reflected in the performance of major stock indices like the Dow Jones and S&P 500. However, the substantial gains hint at the possibility of profit-taking among investors.
Bitcoin's price finished a strong weekly performance breaking 47000 and the strong trend indicates more bullish developments. The bullish momentum is strong and continuing to build. The next target is in the $51,000-$53,000 area.

 

[Z Forex]

Dollar Strengthens Amid Inflation Surprises and Anticipation of Central Bank Moves

The U.S. dollar traded in a tight range on Thursday, as market players tried to gauge when the Federal Reserve will likely begin cutting interest rates as Fed officials weighed in on Tuesday's inflation data. Also, the dollar is waiting for retail sales data and some other economic data that may impact it. Chicago Fed President Austan Goolsbee said on Wednesday the Fed's path will still be on track even if price increases run a bit hotter than expected in coming months, and the central bank should be wary of waiting too long before it cuts interest rates. Fed Vice Chair for Supervision Michael Barr said the Fed remained confident, but the January CPI numbers show the United States' path back to 2% inflation may be a bumpy one.
The euro is reflecting stagnant economic growth in the latest quarter, influenced by higher interest rates and a slowdown in demand. Yesterday's GDP data revealed that the European economy experienced no growth, meeting expectations for the fourth quarter. As markets await ECB President Lagarde's testimony before the European Parliament's Committee on Economic and Monetary Affairs, the ECB, grappling with a slowdown in inflation to 3% and economic contraction, may consider a cut earlier than expected.
The UK Office for National Statistics reported that the economy unexpectedly contracted by 0.3% in the final three months of 2023. This follows a 0.1% drop in GDP during the July-September period, meaning that the economy entered a technical recession. Against the backdrop of Wednesday's softer UK consumer inflation figures, the latest data reaffirms market bets that the Bank of England (BoE) will start cutting interest rates soon and continues to undermine the British Pound (GBP).
The Japanese Yen (JPY), on the other hand, draws support from speculations about a potential intervention by authorities to stem the recent decline in the domestic currency. Provisional data released this Thursday showed that Japan's GDP contracted by 0.4% during the October-December period, missing market expectations for a 1.4% growth by a huge margin. This comes on top of the previous quarter's slump of 3.3%, confirming a technical recession and raising uncertainty about the likely timing of when the BoJ will exit the negative interest rates policy.
Gold prices remain below $2,000. The US inflation data suggest the Federal Reserve will be cautious about rate cuts in 2024. Geopolitical tension in the Middle East could support gold. Traders await US Retail Sales data and speeches from Fed officials for further direction.
Oil prices fell on Thursday after a jump in U.S. crude inventories that exceeded expectations, raising concerns about demand in the world's largest economy and top oil consuming nation. The Energy Information Administration (EIA) said U.S. crude inventories jumped by 12 million barrels to 439.5 million barrels in the week to February 9, surpassing analysts' expectations in a Reuters poll for a 2.6 million-barrel rise.

 

[Z Forex]

Global Economic Update: Navigating Currency Pressures, Rate Speculations, and Commodity Market Dynamics

The dollar remains under pressure today, influenced by expectations of a rate cut by the Fed, as this week's FOMC meeting is closely watched for clearer indications on the timing of the initiation of rate cuts, with market expectations leaning towards June. Additionally, PMI data will serve as a key indicator of the health of economic developments, amid concerns that the current economic resilience might shift due to the continuous impact of high rates on the economic condition, as evidenced by last week's retail sales data. Inflation data last week was unexpectedly high, as indicated by CPI and PPI figures. Today's holiday will lead to reduced market volume.
The Bank of England (BoE) is anticipated to keep interest rates at their current levels for an extended period. Persistent price pressures in the UK economy, driven by stubborn service inflation, steady labor demand, and robust household spending, are expected to enable BoE policymakers to sustain a hawkish stance for a longer duration. The unexpectedly positive UK Retail Sales data from last week suggests that the impact of higher BoE interest rates on consumer spending is diminishing, indicating that the UK economy may emerge from the technical recession sooner than anticipated.
The yen has been fluctuating around the 150 level in recent days, prompting official comments on currency movements and keeping markets on high alert for possible intervention by Japanese authorities to stabilize the faltering currency. Ministry of Finance officials have "taken the first step onto the intervention escalation ladder" by warning against rapid movements and threatening action, even outside of their timezone.
Japan's low yields have made the yen an easy target for short-sellers and funding trades, with the widening interest rate gap between Japan and the United States contributing to the yen's persistent weakness.
Regarding gold, recent geopolitical developments, expected to prolong tensions, have led to a resurgence in safe-haven flows towards the yellow metal. The upcoming FOMC minutes are eagerly awaited for more insights into the Fed's policy outlook, with any hawkish stance from policymakers likely to reignite concerns that rates might be kept high for an extended period, potentially impacting gold prices negatively.
Oil prices are trading lower due to concerns over sluggish demand and diminishing hopes for imminent interest-rate cuts, following reports of higher producer prices in the U.S. Data from the U.S. Labor Department indicated that January's wholesale prices rose more than expected, signaling persistent inflation just days after the closely monitored consumer price index also exceeded forecasts. The prospect of prolonged high interest rates, coupled with an IEA report highlighting a significant slowdown in oil demand, is dampening market sentiment, despite escalating tensions in the Middle East, including Red Sea attacks and Israel's military actions in Gaza.

 

[Z Forex]

Global Markets Navigate Economic Indicators and Policy Expectations

The Dollar Index (DXY) remains neutral today, following a pause in trading by American investors yesterday in observance of US Presidents' Day, and as markets absorbed last Friday's Producer Price Index (PPI) data. With both headline and core PPI increasing, the US Dollar Index could experience further gains as the high inflation figures from January might prompt the Federal Reserve to maintain a cautious approach. Attention this week shifts to the Federal Open Market Committee (FOMC) minutes, alongside upcoming speeches from several Federal Reserve officials.
European Consumer Confidence for February is anticipated to improve to -15.6 from -16.1. Meanwhile, the Eurozone Composite PMI for February is expected to rise to 48.5 from 47.0, remaining in contraction territory (below 50.0) for the ninth consecutive month. This upcoming data will provide further insight into the economic health of the region.
Bank of England (BoE) Governor Andrew Bailey and other policymakers are scheduled to testify before the UK Parliament, offering inflation and interest rates guidance. Investors anticipate a continued hawkish stance from Bailey and his colleagues, given the ongoing challenges in achieving price stability sustainably. Robust wage growth, persistent inflation in the service sector, and strong household spending suggest that the BoE will wait and see before considering rate cuts, as inflation could remain high. Hawkish guidance from BoE policymakers could enhance the appeal of the Pound Sterling.
The yuan stabilized after initially dropping to its weakest level in three months early on Tuesday, following China's larger-than-expected reduction in a benchmark mortgage reference rate aimed at revitalizing the property market. This rate cut complements a series of measures introduced by Beijing over the past year to support the property sector, a critical component of China's GDP.
Gold prices are advancing in anticipation of the Fed minutes set to be released on Wednesday. The precious metal has consistently stayed above the $2,000 an ounce threshold this week, as investors seek indications of the future direction of US interest rates.
Oil prices are dipping due to concerns that a weakening demand outlook may outweigh fears of supply disruptions stemming from increasing tensions in the Middle East. Recent Houthi attacks in the Red Sea have impacted shipping, thereby supporting prices. However, demand concerns linger after last week's International Energy Agency (IEA) report and adjustments in US rate cut expectations, with the market looking for guidance from Wednesday's Fed minutes.

 

[Z Forex]

Global Markets in Flux: Dollar Dips, Gold Climbs Amid Awaited Fed Insights and Geopolitical Tensions

The dollar experienced a broad decline on Wednesday, influenced by a global dip in bond yields, while the market awaited the Federal Reserve's latest meeting minutes for additional insights into the central bank's rate direction. The anticipation is for the minutes to reveal a hawkish stance, given recent inflation data and the predominantly hawkish comments from Fed members, who see no room for an early rate cut without a more sustained trend in slowing inflation.
On the European front, PMIs expected on Thursday are likely to show some improvement but will probably still indicate contraction, reflecting the pan-European economy's struggle with sluggish growth. Specifically, Germany's HCOB Composite PMI for February is anticipated to rise slightly to 47.5 from January's 47.0, signaling ongoing economic challenges.
In the United Kingdom, Governor Bailey, along with other policymakers, recently testified before Parliament, acknowledging that market expectations of interest rate cuts within the year are not without merit. Bailey highlighted signs of economic recovery post-recession in late 2023 but suggested that rate cuts might occur before inflation falls below 2%, without specifying when.
Japan's recession introduces uncertainty regarding the Bank of Japan's (BoJ) timeline to move away from negative interest rates, a policy that has been weighing on the JPY. However, recent statements by Japanese officials and a cautious mood in global equity markets have provided some support to the yen as a safe-haven currency.
Gold prices have climbed for six consecutive sessions, inspired by the dollar's weakness and increased safe-haven purchases, partly in response to escalating tensions in the Middle East. This trend underscores gold's role as a refuge during times of geopolitical and economic uncertainty.
Meanwhile, WTI crude oil prices have slightly declined as traders lock in profits from the recent price surge. Nevertheless, ongoing geopolitical tensions in the Middle East are likely to limit any significant downside in oil prices, reflecting the complex interplay of market forces and global events.

 

[Z Forex]

Global Financial Markets: Navigating Uncertainty Amid Mixed Economic Signals and Central Bank Caution

On Friday, the dollar index demonstrated resilience, stabilizing near the 104 mark. This stabilization reflects market reactions to comments from Federal Reserve Governor Christopher Waller, who indicated that the central bank might delay interest rate cuts beyond market expectations. Waller's remarks underscored the importance of a cautious approach, suggesting a hold on rate adjustments to evaluate whether the spike in January's inflation was an anomaly.
In the United States, recent economic data highlighted a deceleration in private sector activity in February. The S&P Global PMI revealed a notable slowdown, particularly in the services sector, which grew less than anticipated, while manufacturing output showed signs of recovery. This mixed economic picture adds complexity to the Federal Reserve's policy decisions, balancing growth concerns with inflationary pressures.
The economic landscape in Europe continued to evolve, with the latest PMI data from the Eurozone and Germany presenting a mixed view. Despite a general disinflationary trend, there were signs of cautious optimism among European Central Bank (ECB) policymakers. The ECB's Monetary Policy Meeting Accounts revealed a consensus to maintain a cautious stance on easing monetary policy, highlighting the ongoing deliberations about the timing of potential rate cuts amidst fluctuating inflation dynamics.
In the United Kingdom, recent Purchasing Managers' Index (PMI) data for February painted a mixed economic picture. The manufacturing sector slightly underperformed against expectations, while the services sector remained robust, exceeding consensus forecasts. This divergence has fueled speculation regarding the Bank of England's (BoE) next moves, especially in light of Governor Andrew Bailey's comments on the UK's declining inflation and the potential for earlier rate cuts.
Japan's economic outlook is spoiled by uncertainties that could delay the Bank of Japan's (BoJ) planned departure from negative interest rates. These uncertainties, along with global shifts in monetary policy expectations, have implications for the Japanese Yen, which faces pressures from both domestic economic challenges and international market dynamics.
Amidst these global financial shifts, gold prices have remained strong, triggered by a combination of a softer dollar and consistent demand for safe-haven assets. This strength is indicative of the market's ongoing uncertainty regarding the Federal Reserve's interest rate trajectory, influenced by mixed signals from US economic data.
The crude oil market has seen its own share of volatility, with prices initially falling due to concerns over sustained high interest rates and demand uncertainties. However, prices later recovered, driven by renewed supply concerns amid escalating geopolitical tensions in the Middle East and reports of a lower increase in US crude inventories.
This detailed overview captures the nuanced dynamics within global financial markets, underscoring the delicate balance central banks must strike between fostering economic growth and controlling inflation, amidst evolving economic indicators and geopolitical uncertainties.

 

[Z Forex]

Nvidia's Q4 Earnings Surge on AI and Data Center Growth Leading US Market Rally

• Record-Breaking Performance: Nvidia's revenue soared to $22.1 billion, a 265% increase year-over-year, driven by its data center business which grew over 400%, highlighting the company's dominance in AI and accelerated computing.
• Market and Future Outlook: The company's stock rose approximately 16% following the earnings report, with Nvidia on the brink of a $2 trillion market valuation, supported by strong future sales projections and continued demand for its AI technologies despite regulatory challenges.

Nvidia Keeps Breaking Records
Nvidia's latest Q4 earnings report has sent ripples through the market, showcasing a financial performance that has exceeded analysts' expectations and underscored the company's dominance in the AI and data center sectors. With a reported revenue of $22.1 billion, Nvidia has not only beaten the forecasted $20.55 billion but also marked a year-over-year increase of 265%. The earnings per share (EPS) stood at a robust $4.93, surpassing the predicted $4.64, reflecting the company's strong profitability and operational efficiency. These surprising results boosted market sentiment and led the US major indices to close at new historical highs after the stock became the most watched and important stock on the planet lately.
The surge in Nvidia's revenue can be largely attributed to its data center business, which saw a monumental increase of over 400%, amounting to $18.4 billion. This growth has been driven by the widespread adoption of Nvidia's Hopper GPU computing platform and InfiniBand networking solutions, which are integral to AI training and inference applications. Nvidia's CEO, Jensen Huang, has highlighted the company's pivotal role in the AI revolution, stating that "Accelerated computing and generative AI have hit the tipping point," a sentiment that resonates with the global demand for AI capabilities.
Nvidia's Earnings Reflect Positively on Market Share
The market's response to Nvidia's earnings was overwhelmingly positive, with the company's stock price climbing approximately 16% leading gains in both the S&P 500 and Nasdaq 100. This investor confidence is bolstered by Nvidia's forward-looking projections, which estimate sales to reach around $24.0 billion in the upcoming quarter. Nvidia is position to reach a $2 trillion market valuation for the first time, further bolstered by a record $277 billion one-day increase in market capitalization. This optimistic outlook is particularly noteworthy given the supply constraints faced by the company's next-generation B100 chip, which is already in high demand.
Industry analysts have attributed Nvidia's strong performance to the soaring demand for AI across various tech sectors. Nvidia's RTX chips have become a cornerstone for generative AI, gaining popularity among gamers and creators alike. The company's software and services offerings have also made 'great progress,' achieving an annualized revenue run rate of $1 billion. Nvidia's AI enterprise system, which is likened to 'an operating system for artificial intelligence,' is set to be monetized per GPU, further expanding the company's revenue potential.

 

[Z Forex]

Interest Rate Speculations and Inflation Dynamics with Key Economic Indicators

On Tuesday, the dollar experienced a decline as investors anticipated a series of US economic reports that will offer new insights into the Federal Reserve's timeline for potentially reducing interest rates. With recent strong US consumer and producer price data, market sentiment has shifted, virtually eliminating expectations for a rate cut at the Fed's March meeting and delaying forecasts for a reduction from May to June. Key data releases, including US durable goods figures and the January US Personal Consumption Expenditures Price Index—the Fed's preferred inflation gauge—are scheduled for later this week.
In Europe, European Central Bank President Christine Lagarde indicated on Monday that inflation is moving closer to the central bank's targets. Despite this progress, the ECB intends to maintain its restrictive monetary policies for now, citing recent wage growth figures as positive yet insufficient to assure the ECB of a victory over inflation. This week, additional insights are expected from the German Consumer Price Index and the Eurozone Harmonized Index of Consumer Prices.
In the UK, speculation about a delay in interest rate cuts emerged following testimony by Bank of England Governor Andrew Bailey to the Treasury Committee. Bailey did not specify the number of anticipated cuts but suggested a trajectory toward lower rates.
In Japan, January's National Consumer Price Index reported a year-over-year increase of 2.2%, down from 2.6% in December, with the CPI excluding fresh food surpassing expectations at 2.0% YoY. This inflation data that has exceeded expectations has led to a cautious approach among investors regarding the Bank of Japan's potential departure from negative interest rates, supporting the Japanese Yen and contributing to a rise in Japanese government bond yields.
Gold prices saw a slight increase on Tuesday as the dollar weakened, with investors looking forward to a crucial US inflation report amidst a week packed with data publications and Federal Reserve officials' speeches, which could shed light on the Fed's rate cut plans. Meanwhile, crude oil prices rebounded due to concerns about shipping disruptions in the Red Sea, despite the pressure from a more hawkish Fed stance on demand. This rebound was partly triggered by an incident on Feb. 24, when the Houthis reportedly targeted the US-flagged oil tanker Torm Thor in the Gulf of Aden, an attack confirmed by the US Central Command as unsuccessful.

 

[Z Forex]

Navigating the Economic Shift: Japan's January 2024 CPI Analysis

• Meeting the Target: Japan's CPI rises by 2.0% year-on-year in January 2024, aligning with the BOJ's inflation goal and signaling a potential change in long-standing monetary policy.
• Sectorial Insights and Monetary Policy Implications: Despite the mixed sector performance, with energy prices dropping and accommodation fees soaring, market anticipation grows for an end to the BOJ's negative interest rate policy by spring 2024 amidst rising underlying inflation.

Japan's January CPI Meets BOJ Target
The Consumer Price Index (CPI) for Japan in January 2024 has been reported at a 2.0% year-on-year increase, meeting the Bank of Japan's (BOJ) inflation target and suggesting a potential shift in monetary policy. This rate of inflation is significant as it could prompt the BOJ to consider its first interest rate hike since 2007. The core-core CPI, excluding both fresh food and energy, also rose by 3.5% from the previous year, indicating persistent underlying inflationary pressures.
In a detailed look at the various sectors, energy prices have notably decreased by 12.1%, contributing to the tempered overall inflation rate. Food prices, while still on the rise at 5.9%, have shown a deceleration in growth. Accommodation fees have surged by 26.9%, likely influenced by the rebound in tourism. Service prices have increased by 2.2%, slightly higher than the rise in goods prices at 2.1%.
Market expectations are now leaning towards the BOJ ending its negative interest rate policy possibly by the spring of 2024. This anticipation is based on the service sector prices, which may reflect the increased labor costs due to Japan's tight labor market. The January CPI reading is the lowest since March 2022, suggesting a slowdown in inflation. However, the impact of higher import costs, partly due to a weaker yen, appears to be declining.
BOJ Governor: Rising Inflation Spurs Interest Rate Hike Speculation
BOJ Governor Kazuo Ueda has acknowledged that underlying inflation is on the rise, with price increases spreading from goods to services. Despite the current slowdown, the core CPI is expected to stay above 2 percent throughout the year. Any further interest rate hikes will likely rely on an uptick in private consumption, which needs to be supported by real wage growth.
In the previous year's shunto (spring wage negotiations), Japanese firms agreed to an average wage increase of 3.6%, which could influence future inflation trends. As the economic landscape evolves, the CPI data for January 2024 serves as a critical indicator of Japan's economic health, with the BOJ's policy decisions being closely watched by economists and market participants alike. For those seeking the most current and comprehensive information, the Japanese Statistics Bureau and the Bank of Japan provide official reports and statements.

 

[Z Forex]

Global Financial Update: Navigating Inflation, Interest Rates, and Economic Indicators Amidst Geopolitical Tensions

The dollar saw a slight increase as investors overlooked recent U.S. manufacturing data, focusing instead on the upcoming release of the Federal Reserve's preferred inflation metric, the core personal consumption expenditures (PCE) price index, for signals on potential interest rate cuts. Despite a 6.1% drop in U.S. durable goods orders last month, surpassing the anticipated 4.5% decrease, market sentiment remained steady, with attention turning to the PCE index, expected to show a 0.4% rise.
Market participants are also awaiting the U.S. Gross Domestic Product (GDP) Annualized data for the fourth quarter and preliminary goods trade balance. Additionally, speeches from Federal Reserve officials Bostic, Collins, Williams, and Bank of England’s Mann are scheduled for later in the week.
In Germany, the Gfk Consumer Confidence Survey for March aligned with expectations at -29, maintaining the previous month's level. Focus shifts to Germany's upcoming Retail Sales and Consumer Price Index (CPI) inflation data for further economic insights.
Bank of England (BoE) Deputy Governor Dave Ramsden highlighted ongoing inflationary pressures, indicating the need for more data before adjusting the BoE’s policy stance. Despite forecasts of inflation returning to the 2% target by the second quarter of 2024, rising to about 2.75% later, market expectations of a rate cut by the UK central bank in August appear increasingly unrealistic based on officials’ comments.
Japan's core CPI outperformed expectations, sparking speculation that the Bank of Japan might soon end negative interest rates. However, Japan's unexpected recession in the fourth quarter may delay any tightening of monetary policy, affecting the yen amidst a global risk-on rally in equity markets.
Gold prices stabilized as lower U.S. Treasury yields balanced a stronger dollar, with investors eyeing key inflation data and Federal Reserve officials' remarks to determine the timing of potential rate cuts. The PCE report and GDP data are anticipated to influence gold's trajectory.
The oil market faces headwinds from rising borrowing costs curtailing global economic growth and oil demand. Ongoing ceasefire talks between Israel and Hamas, along with attacks on civilian shipping in the Red Sea, add to the uncertainty. Despite these challenges, geopolitical risks in the Middle East and signs of a robust U.S. physical market are tempering concerns over global oil demand, limiting the decline in crude oil prices.