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EUR/USD Current price: 1.0843 European data was mixed, as the German economy contracted in Q4. Attention shifts to United States employment-related figures ahead of Fed, NFP. EUR/USD recovered some ground, but bears hold the grip. The EUR/USD pair hovers around 1.0840, recovering some of the ground lost on Monday amid a better market mood weighing on the US Dollar. Wall Street closed the day in the green after its overseas counterparts hesitated for direction, with US indexes benefiting from earnings reports and a positive surprise from the United States (US) Treasury, which cut its quarterly borrowing estimate. As a result, government bond yields fell sharply, putting additional pressure on the USD demand. European data was mixed, as Germany confirmed the economy contracted in Q4. The Gross Domestic Product (GDP) declined 0.3% in the three months to December, while the annualized reading came in at -0.2%, as expected. However, the Eurozone GDP in the same period was up 0.1% from a year earlier, better than the 0% expected. Additionally, the January Economic Sentiment Indicator posted 96.2 as expected, while Consumer Confidence in the same month contracted to -16.1. Market players will now turn their eyes to US data, as the country will… Read More »EUR/USD Forecast: Optimism limits US Dollar demand

EUR/USD trades slightly above 1.0800 following Monday’s decline. Near-term technical outlook suggests that the bearish bias remains intact. Disappointing growth figures from Germany and Euro area could further weigh on the Euro. EUR/USD started the week on the back foot and touched its lowest level since mid-December below 1.0800 in the early American session on Monday. Although the pair manages to hold above this level in the European morning on Tuesday, it risks losing it in case European data disappoint. Mixed comments from European Central Bank (ECB) officials weighed on the Euro on Monday. ECB Vice President Luis de Guindos said inflation risks were tilted to the downside and ECB policymaker Mario Centeno argued that the central bank should start cutting rate sooner than later, while avoiding abrupt moves. On a hawkish note, Governing Council member Peter Kazimir said that a rate cut in June is more probable than April but the exact timing is secondary to the decision’s impact.

We saw a cautious start to the week for European markets yesterday with the CAC 40 and DAX both treading water close to last week’s record closing highs, and today’s economic numbers expected to show further evidence of weak economic activity in Europe. US markets were slightly more upbeat with the S&P500 setting fresh record highs ahead of tomorrow’s Fed rate meeting and today’s earnings numbers from Microsoft, Alphabet and AMD all of which will be reporting after the closing bell, while the other three from this week’s big cap earnings releases from Amazon, Apple and Meta are all due to report Thursday. The strong finish in the US could see European markets open at, or close to recent record highs themselves later this morning. In view of the gains that we’ve seen in these big cap stocks over recent weeks the bar has been set very high. How high can be shown in the current value of just these 5 companies of Apple, Amazon, Alphabet, Meta Platforms and Microsoft which add up to a total market cap of just over $10trn, putting the total value of all 5 companies at over 50% of the total market cap of the Nasdaq 100.… Read More »German economy set to be confirmed in recession

Federal Reserve preview There are also two major central bank meetings and a raft of economic data that is worth watching. The Fed will announce interest rates on Wednesday. No change is expected, and there will be a press conference afterwards, so the focus will be on the accompanying statement and what Jerome Powell is willing to tell the press. Analysts will be watching to see if the Fed suggests that the market is getting too excited about the prospect of multiple rate cuts this year. The market is pricing in just over 6 rate cuts for 2024, with the first rate cut now expected to come in May, and for rates to end the year at 3.95%. The Fed’s last ‘dot plot’ only had 3 rate cuts expected by the FOMC, who actually make the rate decisions. Why stocks could stymie Fed rate cuts The recent stock market acceleration in the US could be a fly in the ointment for Fed rate cuts. The rally in US stocks added $8 trillion to share holder value, the S&P 500 set fresh records in 5 straight sessions in the last week, and financial conditions are at their loosest since 2022, as… Read More »The Fed could struggle to stick to their dovish rhetoric

Gold price consolidates the previous rebound near $2,030 amid a weaker US Dollar. Risks of further geopolitical escalation counter falling March Fed rate cut bets. Gold price could stay rangebound due to mixed technical indicators, ahead of US jobs data.   Gold price is treading water near $2,030 early Tuesday, consolidating the previous rebound to a four-day high of $2,038. Gold price is weighing the further escalation in the geopolitical tensions between the Middle East and the United States (US) against the backdrop of reduced bets for a March Federal Reserve (Fed) interest rate cut. Gold price looks to US JOLTs data for fresh impetus Amidst the latest development on the Middle East and the US geopolitical conflict, Sky News reported that US President Joe Biden is likely to authorize military action in the Middle East as early as Monday night. This comes in response to the killing of three US service members by an unmanned aerial drone attack on forces stationed in northeastern Jordan near the Syrian border. Markets stay risk-averse and trade with caution, as they also remain wary amid a deepening real estate crisis fuelled Chinese demand worries, after a Hong Kong court ordered the liquidation of… Read More »Gold Price Forecast: XAU/USD set for bull-bear tug-of-war ahead of US jobs data, Fed verdict

It appears more and more likely that the Federal Reserve is poised to completely abandon any pretense of fighting inflation, despite the fact CPI remains well above the 2 percent target. The Fed has already paused interest rate hikes, and most analysts expect rate cuts later this year. Now, the financial news networks have started chattering about the possibility of the central bank either slowing or even ending its balance sheet reduction plan. Speculation about the end of balance sheet reduction started early this month with the release of the FOMC meeting minutes. They revealed that some committee members thought they needed to “begin to discuss” technical factors that would direct their decision to slow the runoff of maturing bonds from its balance sheet.  Dallas Fed President Lorie Logan was the first committee member to talk about it publicly, saying that the central bank should begin tapering the runoff of bonds from its balance sheet when its reverse-repo facility fell below a certain level. More recently, Federal Reserve Governor Christopher Waller said it would be “reasonable” to start thinking about tapering off quantitative tightening this year. If the Fed has done enough to slay price inflation, ending balance sheet reduction would… Read More »Fed balance sheet reveals it was a half-hearted inflation fight

AUD/USD maintains the trade around the 0.6600 region. Australia’s Inflation Rate takes centre stage later in the week. The FOMC gathering and US NFP are seen as key drivers. Another day, another erratic performance of AUD/USD, which remains trapped within the multi-session consolidative phase in place since the middle of the current month. This time, however, spot managed to start the week in quite a positive fashion. The daily strengthening of the Australian dollar contrasts with noticeable gains in the greenback. The resilience of the Australian currency is evident in recent reports indicating additional stimulus measures by the People’s Bank of China (PBoC) to bolster China’s stock market and ignite economic recovery in the post-pandemic era, which has been slower to materialize thus far. The influence of China, along with the anticipated decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance next month, continues to be perceived as a factor that will restrict the potential for the pair to rise in the coming weeks. This also suggests that there may be more subdued trading in the short-term future, at least.   Regarding the Reserve Bank of Australia (RBA), the recorded decrease in inflation metrics during December,… Read More »AUD/USD Forecast: Extra rangebound remains on the table

Summary The Animal Spirits Index (ASI) had a strong close to 2023, shooting up by 0.51 points in December. In all, the ASI was somewhat volatile throughout 2023, largely reflecting the surprising turn that the year took. While oscillating consumer confidence and economic policy uncertainty weighed heavily on the ASI, financial markets showed remarkable strength and boosted the index throughout the year. We suspect 2024 will bring continued volatility in the ASI. While we expect the FOMC to begin their cutting cycle this year, which will likely boost the index, a pull back in consumption may accelerate the labor market’s moderation, which could weigh heavily on the ASI via lower consumer confidence. A Year in Review The Animal Spirits Index had a strong close to 2023. The index shot up by 0.51 points in December, marking the largest increase since February 2019. Strong gains in both the consumer confidence and S&P 500 components of the index drove the uptick. In all, the ASI was somewhat volatile throughout 2023, trending up until August, then sharply decreasing through November, and finishing out with a year-end rally in December. Our previous reports detail the methodology of the index, but on a basic level, an… Read More »Up, down and all around: A 2023 review of Animal Spirits

As the events of 2024 unfold on the world stage, the Brent oil market is being driven by many factors. Most interestingly, 2023 ended with global oil inventories, especially Brent, at their lowest level since mid-2022. According to the International Energy Agency (IEA), this fluctuation in inventories has added an even more significant element of unpredictability to the market, so it is more important than ever to understand where the price of oil will move! This analysis explores the intricacies of supply, geopolitical influences, economic conditions, and internal OPEC+ dynamics that combine to shape the trajectory of oil prices. Geopolitical tensions and price forecasts  The geopolitical landscape in the Middle East remains a critical factor for the Brent market in 2024. Tensions in the Red Sea and Yemen pose significant risks to oil flow along major trade routes. For example, Brent prices experienced a spike following US and UK airstrikes on Houthi targets, reflecting the market’s sensitivity to regional conflicts. Wall Street analysts expect a moderate recovery in Brent crude oil prices in 2024, averaging around $85 per barrel. Forecasts for Brent crude oil in 2024 present a diverse picture. The US Energy Information Administration (EIA) forecasts an average price… Read More »Behind the Barrel: Unveiling OPEC+’s Role in Shaping Tomorrow’s Oil Market

EUR/USD Current price: 1.0821 European Central Bank policymakers maintain a cautious stance on rate cuts. The macroeconomic calendar is scarce on Monday but is packed this week. EUR/USD flirts with fresh January lows, could extend its slide towards 1.0760. The Euro is the weakest US Dollar rival at the beginning of a new week, as the EUR/USD pair barely holds above the 1.0800 mark. Market participants are pushing bets of a 25 basis points (bps) rate cut in April higher, despite comments from European Central Bank (ECB) officials against such a move. ECB Governing Council official Peter Kazimir said that a rate cut is more probable in June than in April, adding that signs of disinflation are positive but that there is not enough information to make a confident conclusion. Finally, he noted that the ECB is not behind the curve, it’s the market getting ahead of events. Also, Vice-President of the ECB Luis de Guindos said that the central bank will cut rates when policymakers are sure inflation meets the 2% goal. As his colleague, de Guindos, remarked on the good progress in inflation but clarified they are not still there.   Meanwhile, the macroeconomic calendar has little to… Read More »EUR/USD Forecast: Bears maintain the pressure, aim to pierce 1.0800