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EUR/USD continues to edge higher following Thursday’s rally. Nonfarm Payrolls in the US are forecast to rise by 180,000. The pair could encounter stiff resistance at around 1.0900. After touching its lowest level since December 13 at 1.0780 in the European session on Thursday, EUR/USD reversed its direction in the second half of the day and closed in positive territory. The pair holds comfortably above 1.0850 early Friday and the near-term outlook points to a bullish tilt. The US Dollar (USD) came under selling pressure in the American session on Thursday as US Treasury bond yields continued to push lower following disappointing employment-related data releases. Weekly Initial Jobless Claims rose to 224,000, the highest reading since early November, and the Employment Index of the ISM Manufacturing PMI survey declined to 47.1 in January from 47.5 in December.

Summary Eurozone GDP was flat in the fourth quarter, meaning the region narrowly avoided a technical recession during the second half of last year. Moderate growth in employment and real household incomes and still-subdued sentiment surveys argue against a deep slump in Eurozone activity. However, they do not offer much encouragement for a quick rebound either. We forecast Eurozone GDP growth of 0.7% for 2024, up only slightly from 0.5% in 2023. Eurozone CPI inflation slowed further in January, while when estimated on a six-month annualized basis, underlying inflation already appears to be trending at a pace broadly consistent with the European Central Bank’s (ECB) 2% inflation target. Should Eurozone economic growth remain weak enough, and underlying inflation ebb further, we believe the ECB could feel comfortable enough to begin lowering its policy interest rate with a 25 bps cut to 3.75% at its April monetary policy meeting. We also forecast a cumulative 175 bps of rate cuts from the ECB over our forecast horizon through until mid-2025. Our forecast pace of rate cuts is broadly in line with market implied pricing through September of this year, but somewhat more gradual thereafter. Moreover, we view the risks as likely tilted… Read More »Eurozone economy slipping, but not slumping

Gold price consolidates the rally to monthly highs on US NFP Friday.   US Dollar and Treasury bond yields attempt a bounce amid risk-on mood.   Gold price remains a ‘buy the dips’ trade after the triangle breakout, as the daily RSI stays bullish. Gold price is taking a breather early Friday, having rallied 1% to hit fresh monthly highs at $2,065 on Thursday. A modest uptick in the US Dollar (USD), tracking the US Treasury bond yields rebound, is acting as a headwind for Gold price ahead of the highly-anticipated US Nonfarm Payrolls (NFP) data release. US Nonfarm Payrolls to spike up Gold Price Volatility Gold traders brace for a volatility spike on the release of the critical US labor market data, with the NFP figure expected to come in at 180K for January while Average Hourly Earnings are seen rising at an annual pace of 4.1% in the same period. A stronger-than-expected NFP print combined with a surprise upside in the wage inflation data is likely to affirm the US Federal Reserve’s (Fed) pushback against early rate cuts, infusing a new life into the US Treasury bond yields while driving the US Dollar back toward multi-week highs against its… Read More »Gold Price Forecast: Will solid US Nonfarm Payrolls trigger a XAU/USD correction?

AUD/USD dropped to a new three-month low near 0.6500. Chinese Caixin data came in slightly above estimates. The RBA is largely anticipated to leave its rates unchanged. There was no respite for the selling pressure around the Aussie dollar on Thursday, this time dragging AUD/USD to fresh three-month lows in the boundaries of the 0.6500 contention zone. Indeed, the pair retreated for the third straight session on the back of tepid gains in the greenback and discouraging results from the Chinese docket, where China’s Caixin Manufacturing PMI failed to surprise markets in January, coming in just above consensus. Meanwhile, the ongoing leg lower in spot seems to have broken below the critical 200-day SMA in quite convincing fashion, allowing for the continuation of the bearish trend at least in the short-term horizon. While additional stimulus measures by the PBoC to support China’s stock market and foster economic recovery post-pandemic initially lent some support to the Aussie dollar, those effects rapidly dissipated pari passu with the absence of positive surprises from the fundamentals of that economy. On another front, the anticipated decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance at its February 6 meeting is… Read More »AUD/USD Forecast: Further weakness appears on the cards

Europe It’s been a weak start to the month for European markets as investors weigh the messaging from both the Federal Reserve and the Bank of England, which appears to be that rate cuts are coming, just not as soon as markets were hoping 24 hours ago, prompting some modest weakness across the board. Today saw EU inflation slow by less than expected in January, while the Bank of England was split when it comes today’s monetary policy decision. What we can glean from today’s press conference with Bank of England governor Andrew Bailey is that while the tightening bias has gone, and that a rate cut is coming, the MPC isn’t too keen to signal one yet given the elevated levels of services inflation, and that we might have to wait until June. It was a similar story from Fed chair Jay Powell just under 24 hours ago when he pretty much stomped on the idea of a March rate cut from the Fed, although like the Bank of England, the Fed did signal the end of its own tightening bias. The FTSE100 has performed slightly better than its European peers largely due to a solid day for Shell whose shares… Read More »Bank of England signals cuts are coming, just not as soon as markets would like

XAU/USD Current price: 2,061.48 United States Treasury yields plummeted following mixed employment-related data. The Nonfarm Payrolls report is expected to show that 180K new positions were added in January. XAU/USD is firmly bullish in the near term and looks to test record highs. Gold price resumed its advance and XAU/USD reached a fresh weekly high of $2,065.54, as financial markets left behind the Federal Reserve (Fed) announcement and focused on United States (US) data. The economy keeps proving resilient as the  ISM Manufacturing PMI improved to 49.1 in January from 47.1 in the previous month. Additionally, Q4 Nonfarm Productivity rose 3.2%, beating expectations, while Unit Labor Cost in the same period increased 0.5%, less than the 1.7% expected. Wall Street turned positive, while government bond yields plunged, adding pressure on the Greenback. The 10-year Treasury note currently yields 3.83% after peaking at around 4.06% on  Wednesday, while the 2-year note offers 4.17%. The focus now shifts to the January US Nonfarm Payrolls (NFP) report. Fed Chairman Jerome Powell noted after the FOMC meeting that: “Inflation has eased from its highs without a significant increase in unemployment,” taking off some of the pressure on the labor market. The NFP report is… Read More »Gold Price Forecast: XAU/USD aims to test January high at $2,079

The Fed kept rates unchanged while also trimming hopes for a March cut, and this weighed on the commodities complex yesterday. Meanwhile, a bearish weekly oil inventory report from EIA added to the downward pressure on the oil market. Energy – Crude Oil retreats Crude oil prices retreated sharply yesterday amid broader negative sentiment in the market after the Federal Reserve left rates unchanged and dashed hopes for a rate cut anytime soon. ICE Brent front-month contract has been trading at around US$80.2/bbl as of the time of writing, down around 5% since making its peak earlier in the week. The EIA weekly oil report was somewhat bearish for oil prices. US commercial crude oil inventories increased by 1.2MMbbls for the week ended on 26 January, the first increase in over three weeks. The market was anticipating a drawdown of around 0.2MMbbls, while API reported a decline of 2.5MMbbls. However, when factoring in the SPR releases, the build was even larger, with total US crude oil inventories increasing by around 2.1MMbbls. Total US commercial crude oil stocks now stand at 422MMbbls, still around 5% below the five-year average. The unexpected build in the stocks could be largely attributed to the… Read More »The commodities feed: Fed comments weigh on the complex

EUR/USD trades slightly below 1.0800 in the European morning on Thursday. The US Dollar continues to gather strength following the Fed policy announcements. January inflation report from the Euro area and mid-tier US data releases will be watched closely. EUR/USD made sharp moves in both directions in the American session on Wednesday before closing the day marginally lower. The pair stays under modest bearish pressure early Thursday and trades below 1.0800 in the European morning.

Gold price looks to revisit two-week highs above $2,050 early Thursday. US Dollar and Treasury bond yields look to US jobs data after the hawkish Fed.    Gold price confirmed a triangle breakout amid a bullish daily RSI. Gold price is back in the green, on its way to retest the two-week high of $2,056 set on Wednesday. The US Dollar (USD) is fading its uptick amid a renewed appetite for risk assets, as markets cheer China’s fiscal support while assessing the US Federal Reserve (Fed) interest rate outlook. Gold price regains poise, as focus shifts to US jobs data China’s Vice Finance Minister Wang Dongwei announced on Thursday that they “will appropriately increase investment under the central government budget”, which “will help expand domestic demand.” This comes after China’s Caixin Manufacturing Purchasing Managers Index (PMI) remained at 50.8 in January, suggesting a steady growth in the country’s manufacturing sector. The market consensus was for a 50.6 reading. The further boost to risk sentiment in Asia faded the uptick in the US Dollar, motivating Gold buyers to regain control. Additionally, the persistent weakness in the US Treasury bond yields across the curve is also helping the non-yielding Gold price to… Read More »Gold Price Forecast: XAU/USD looks north with a triangle breakout in play

The Fed maintained its monetary policy unchanged, as widely expected. Powell signalled optimism on inflation but pushed back on March cut. We still stick to our call for a first cut in the next meeting, and will focus on labour supply and leading growth data during the intermeeting period. Phasing out QT will also be discussed more in-depth in March, no new signals today. EUR/USD price action around the FOMC meeting should be viewed in light of the drop in US rates following renewed concerns about the health of US regional banks. In the end, EUR/USD finished close to the 1.08 level and about flat on the day, we still look for 1.07 in 6M and 1.05 in 12M. The Fed remains firmly ‘in a risk management mode’ as it continues to make progress on both sides of the dual mandate. Powell struck an optimistic tone on inflation, stating that data seen so far has been ‘good enough’ and that the Fed simply needs to see more similar evidence on disinflation in order to initiate the cutting cycle. There are two-sided risks to starting either too late or too early, but the cuts are ultimately on the way in any… Read More »Fed review: In a risk management mode