Currency Pairs Market Analysis

[Solid ECN]

Yen Strengthens Beyond 148 Against Dollar as BOJ's Ueda Hints at Policy Shift

Solid ECN – The value of the Japanese yen surged past 148 against the US dollar, rebounding from its near two-month low. This change follows recent comments from Bank of Japan Governor Kazuo Ueda, which ignited discussions about a potential alJapan'sn in Japan's financial strategy. Ueda noted an increasing possibility of consistently meeting the 2% inflation goal alongside wage increases. He mentioned that the central bank might reassess its extensive stimulus measures if this trend persists.

However, in its first session of the year, the Bank of Japan decided to continue its highly accommodative monetary stance, as was anticipated. The BOJ left its primary short-term interest rate unchanged at -0.1% and maintained the 10-year Japanese government bond yield cap at 1%. In other economic news, Japan witnessed a surge in private sector activities, reaching a four-month peak in January, primarily driven by a strong service sector performance. Additionally, the nation recorded a higher-than-expected increase in exports during December.​

 

[Solid ECN]

China Cuts Reserve Ratio, Stabilizes Yuan at 7.17

The value of the offshore yuan has stabilized at approximately 7.17 against the dollar. This follows investor evaluations of the repercussions of China's unexpected decision to reduce the reserve requirement ratio.

The People's Bank of China declared this change on Wednesday, planning to lower the ratio by 50 basis points next month. This strategy aims to revitalize China's faltering economy and is anticipated to inject around 1 trillion yuan of long-term capital. Recent gains in the yuan and predictions of interest rate reductions by other leading central banks this year allowed the PBOC to modify its monetary policy. Additionally, Premier Li Qiang led a cabinet meeting earlier this week, where authorities discussed adopting more vigorous and efficient strategies to bolster market assurance.​

 

[Solid ECN]

EUR/USD Dips to 1.0816, Historic Highs and Euro Inception Insights

Solid ECN – On Friday, January 26, the Euro to US Dollar (EURUSD) trading pair declined, falling by 0.0030 or 0.28%, closing at 1.0816 compared to 1.0846 at the end of the previous session. Looking back, the EUR/USD exchange rate recorded its highest value at 1.87 in July 1973. It's important to note that the euro was officially introduced as a form of currency on January 1, 1999. Despite this, it is possible to generate synthetic historical data that extends further back by calculating a weighted average of the currencies that preceded the euro.​

 

[Solid ECN]

Pound Strengthens Amid Positive PMI Data and BOE Rate Speculations

Soldi ECN – The UK pound surged to $1.28 versus the US dollar and hit a five-month peak against the euro, bolstered by unexpectedly robust PMI figures. These statistics could influence the Bank of England to adopt a gradual approach to reducing borrowing rates. Recent PMI surveys indicated a significant expansion in Britain's private sector, the most notable in seven months. This expansion was driven mainly by the service sector, which experienced its fastest growth since May.

In addition, recent economic reports showed a smaller-than-anticipated budget shortfall for Britain in December, potentially allowing for tax reductions in the upcoming March budget. However, other data pointed to the steepest drop in UK retail sales since January 2021 and a surprise uptick in inflation. With the Bank of England meeting on February 1st, interest rates are expected to maintain a 15-year peak of 5.25%. Compared to its European and American counterparts, the Bank is projected to delay rate cuts throughout the year.​

 

[Solid ECN]

Yen Near 2-Month Low Amid US Dollar Strength, BOJ Policy

The Japanese yen has been trading close to its two-month low, hovering around 148 against the US dollar. This trend is primarily attributed to the strength of the US dollar, fueled by strong economic indicators from the United States and the Federal Reserve's indication of a continued firm stance, which has tempered prospects of an early reduction in US interest rates this year. In Japan, investors are taking a cautious approach as they await a series of key economic reports due this week, including data on unemployment, industrial output, retail sales, and consumer confidence.

Recently, the yen saw a slight uptick following comments from Bank of Japan Governor Kazuo Ueda. Ueda noted an increasing chance of sustainably reaching the 2% inflation target, backed by wage growth. He also mentioned that the Bank of Japan might reevaluate its extensive stimulus program if this trend persists. However, at its first meeting of the year, the Bank of Japan decided to continue its highly accommodative monetary policy, a widely anticipated move.​

 

[Solid ECN]

Crude Oil Hits 2-Month High Amid Red Sea Attack.

Solid ECN - On Monday, WTI crude oil futures surged to around $79 per barrel, marking a two-month peak. This uptick was primarily driven by heightened concerns over potential supply disruptions following the Houthi group's assault on a Transfigura-managed fuel tanker in the Red Sea.

The incident, involving a missile strike near Yemen's coast last Friday, has led Transfigura to reevaluate the safety of continuing shipments through the Red Sea. Additionally, there's an anticipated decline in Russian refined oil exports due to repairs at several refineries due to recent drone strikes. On the demand front, robust economic figures from the US and new financial measures in China are boosting oil consumption prospects in these significant markets. While OPEC and its allies plan to convene virtually on February 1, it's not anticipated that they will make early decisions regarding their output policies.​

 

[Solid ECN]

NZ Dollar Stabilizes Amid Q4 Inflation Data, Eyes on RBNZ

Solid ECN - The New Zealand dollar stabilized at approximately $0.61, reflecting a calm market response to the country's latest inflation data, which aligned with expectations. In the final quarter, New Zealand's Consumer Price Index (CPI) experienced a modest increase of 0.5%, a deceleration from the 1.8% rise noted in the previous quarter. This brought the year-on-year inflation rate down to 4.7% in the fourth quarter, marking the lowest point since mid-2021 and declining from the 5.6% observed in the third quarter.

Market attention is now turning toward an upcoming speech by Paul Conway, the chief economist at the Reserve Bank of New Zealand, who is anticipated to counter predictions of a more accommodating monetary policy. In the meantime, the New Zealand dollar, often referred to as the Kiwi, faces challenges due to the strength of the US dollar, with market participants reevaluating their expectations for early interest rate reductions by the US Federal Reserve within the year.​

 

[Solid ECN]

Gold Price Surges Past $2,020 Amid Middle East Tensions

Solid ECN - Gold's value climbed to over $2,020 per ounce on Monday, recovering some of its recent losses, driven by increased demand for this secure asset amidst escalating tensions in the Middle East. This surge was primarily attributed to the missile strike by Houthi rebels on a Transfigura-managed oil tanker near Yemen's coast and a drone assault on American troops in northeastern Jordan, resulting in the death of three US soldiers.

The investment community is cautiously awaiting the US Federal Reserve's upcoming monetary policy decision. It's primarily anticipated that the interest rates will remain unchanged. Still, keen attention is on Federal Reserve Chairman Jerome Powell's commentary post-meeting for hints about initiating a potential easing phase. Additionally, the impact of unexpectedly robust US economic figures and the Fed officials' firm stance has lessened the likelihood of a rate reduction in March. Market predictions now suggest a 48% probability of a rate cut in March, a notable drop from the 86% likelihood recorded at December's end, per the FedWatch Tool by CME.​

 

[Solid ECN]

FTSE 100 Rises on Oil Gains, BoE Decision Awaited

Solid ECN - On Monday, the FTSE 100 experienced a modest increase, nearing the 7660 mark, marking its peak in almost three weeks. This growth was primarily driven by a 1.4% gain in Royal Dutch Shell and a 2% jump in BP stock values. The escalation of tensions in the Middle East played a role in bolstering oil prices, contributing to this upward trend.

Meanwhile, market participants anticipate the upcoming Bank of England's monetary policy announcement, expecting the central bank to maintain the interest rate at its current level for the fourth consecutive session.​

 

[Solid ECN]

Mexican Peso Recovers Amid Inflation Data and US Dollar Dip

Solid ECN - The Mexican peso has shown resilience, approaching the 17.2 level against the US dollar, recovering from a low in late January. This upturn is mainly due to the latest inflation figures from Mexico and a dip in the US dollar's strength. Market players had initially hoped for a more lenient approach from Mexico's central bank (Banxico). Still, higher-than-forecasted inflation rates checked these expectations in mid-January, which registered at 4.9% against an anticipated 4.78%, which rose from December's 4.46%.

In contrast, the Mexican economy is showing signs of vulnerability under stringent monetary policies, with economic activities in November shrinking by 0.5% month-on-month, a more-than-expected decline, and an increase from the previous month's figures. Concurrently, the US dollar's support has waned due to diminished prospects of early interest rate reductions by the Federal Reserve in 2024, following encouraging preliminary data from S&P Global on manufacturing and service sectors.​

 

[Solid ECN]

Euro Hits Low as ECB Rate Cut Looms; Recession Fears Rise

Solid ECN - The euro has recently fallen to its lowest point since December 12th, dipping close to $1.08. This decline is partly attributed to expectations of a rate reduction by the European Central Bank (ECB), potentially by 25 basis points as early as April. Upcoming GDP figures are likely to indicate a recession in the Eurozone for the final quarter of 2023, and a decrease in the inflation rate is expected for January. ECB officials, including de Guindos, Centeno, and Kazimir, have hinted at a probable interest rate cut shortly.

However, they have not provided specifics about the timing or conditions that would prompt such a decision. Recently, the ECB maintained its historically high-interest rates. President Lagarde noted it was too soon to consider rate cuts for the Eurozone while acknowledging that the economic growth outlook remains predominantly negative.​

 

[Solid ECN]

Stable GBP Awaits BoE Meeting; Rate Cut Odds Surge

Solid ECN - The British currency has found stability above $1.27 as market participants anticipate the Bank of England's initial policy meeting of 2024, scheduled for later this week. Current market consensus indicates that the bank rate is unlikely to change. However, investors will pay close attention to how the committee members cast their votes and the details of the statement that follows. During their last meeting in December, three members favored raising the rate by 25 basis points, hinting at the possibility of future policy tightening.

Yet, recent economic indicators, including lower-than-expected inflation and declining wage growth, hint at a potential shift in the central bank's next steps, possibly toward reducing borrowing costs. Current market predictions suggest a 42% chance of a rate reduction in May, with the likelihood increasing to 74% by June.​

 

[Solid ECN]

Australian Dollar Rises to $0.66 Amid Anticipation of GDP Report.

The value of the Australian Dollar has increased to approximately $0.66, offsetting its recent downturn. This change occurs as market participants eagerly anticipate Australia's GDP report for the fourth quarter, a significant precursor to the Reserve Bank of Australia's meeting scheduled for February 5th. Recent statistics indicate a larger-than-anticipated drop in Australian retail sales for December, attributed to consumers accelerating their holiday shopping to November, motivated by Black Friday sales.

Concurrently, the Australian Dollar faces ongoing challenges. Strong economic figures from the US and assertive comments from its central bank officials have heightened the anticipation that the Federal Reserve may maintain its current interest rate stance in the near term. Additionally, despite new economic measures in China, Australia's primary trading partner, the Australian currency has struggled to maintain momentum. This is partly because the Australian Dollar is often seen as a direct indicator of the Chinese yuan's performance.​

 

[Solid ECN]

NZDUSD Nears Key Fibonacci Levels, Bearish Trend Intact

The NZDUSD pair trades around 0.611, corresponding to the 23.6% Fibonacci support level, and is inside the Ichimoku cloud. The RSI indicator has returned from the 80 level, indicating that the downtrend will likely continue. The 38.2% Fibonacci resistance level further supports the bearish trend.

If the NZDUSD price remains below this level, the next target could be the recent lower lows at 0.60618, followed by the lower band of the bearish flag.​

 

[Solid ECN]

Gold Prices Hold Steady at $2,030 Amid Fed Rate Decision Anticipation.

On Wednesday, gold prices hovered at approximately $2,030 per ounce, maintaining a consistent trading pattern as market participants awaited the US Federal Reserve's decision on monetary policy. Expectations are high that the Fed will keep current interest rates. Key attention is on Fed Chair Jerome Powell's upcoming comments for indications of possible rate cuts within the year.

Nevertheless, more robust than anticipated, recent US economic data has lessened enthusiasm for potential rate reductions, exerting pressure on gold prices. Current market predictions indicate a below 50% likelihood of a Fed rate cut in March, a decrease from the 73% probability noted at the beginning of the year, as per CME's FedWatch Tool. Additionally, investors are exercising caution due to escalating geopolitical tensions in the Middle East, especially after a recent lethal drone strike on US forces near the Jordan-Syria border.​

 

[Solid ECN]

Silver Prices Hold Steady Around $23 Amid Geopolitical Tensions.

Solid ECN - Silver values have remained stable, hovering around $23 per ounce. This stability comes as investors maintain a cautious approach in anticipation of the upcoming Federal Reserve meeting and significant economic reports from the United States, including the crucial employment data. Market participants are keenly observing for indications of a slowdown in the job market and a potential shift towards a more dovish stance by Federal Reserve officials, following signs of easing in core PCE inflation, which suggests a reduction in inflationary pressures.

In the meantime, silver's status as a reliable safe-haven investment is reinforced by increasing geopolitical uncertainties in the Middle East. Recent events include the death of three American military personnel in northeastern Jordan, resulting from a drone strike, as well as ongoing assaults on commercial shipping in the Red Sea, which continue to keep the markets vigilant.​

 

[Solid ECN]

WTI Oil Prices Fluctuate Amid Fed Decision

Solid ECN - On Wednesday, West Texas Intermediate (WTI) crude oil futures decreased, settling near $77.5 a barrel. This decline partly reversed the gains from the prior session and mirrored the downturn in other volatile investments, as a cautious mood prevailed in the marketplace. Market participants were also cautiously anticipating the U.S. Federal Reserve's upcoming monetary policy announcement, with recent economic indicators diminishing expectations for reductions in interest rates.

Additionally, recent data revealed a continued contraction in Chinese manufacturing for the fourth consecutive month in January, pointing to persistent weak demand from the world's leading oil importer. Despite these factors, crude oil prices received some support due to concerns over escalating geopolitical tensions in the Middle East. This follows a recent lethal drone strike on American forces near the Jordan-Syria border. President Joe Biden of the United States acknowledged that the decision to respond to the incident was made. However, he withheld specifics to prevent a broader conflict in the region.​

 

[Solid ECN]

US Gas Futures Hit 9-Month Low: Why?

Solid ECN - The value of US natural gas futures has dropped to a nine-month low, falling under $2.1/MMBtu. This decrease is attributed to diminished demand and an upsurge in supply. The demand for heating is projected to decline further due to the forecast of above-average temperatures lasting until February 7th. In the meantime, gas production is on a recovery path following disruptions caused by a recent Arctic storm.

Current data indicates that gas storage levels are 5.2% above the typical seasonal average. Concurrently, it's anticipated that US LNG feed gas won't reach its peak levels until mid-February when the Freeport LNG export facility in Texas is expected to be fully operational again.​

 

[Solid ECN]

Dollar Index Stays Strong as Fed Dims March Rate Cut Hopes

Solid ECN - The dollar index remained stable above 103.5 on Thursday, staying close to its highest point in seven weeks following comments from Federal Reserve Chair Jerome Powell that diminished expectations for an interest rate decrease in March. During the Fed's press briefing, Powell indicated that lowering rates in March did not align with the central bank's primary scenario and emphasized the importance of keeping rates steady until there's significant evidence that inflation is on a downward path to the 2% goal.

The Fed's likelihood of a rate reduction in March has decreased sharply to 38% from 89% just a month earlier. Investors are now paying attention to the upcoming weekly unemployment claims, the ISM PMI data on Thursday, and the eagerly awaited monthly employment report on Friday. While the dollar gained strength against most major currencies, it saw a decline against the Japanese yen. This shift was primarily due to concerns surrounding New York Community Bancorp, a regional bank in the U.S., which led investors to seek more secure assets.​

 

[Solid ECN]

Hungary's Record Trade Surplus in Nov 2023

Solid ECN - In November 2023, Hungary reported a significant improvement in its trade balance, with a surplus of €1,580 million. This is a notable change compared to the €1,395 million deficit experienced in the same month the previous year. The country has enjoyed a continuous trade surplus for ten months, reaching its highest level since 1999. The decrease in exports was relatively minor at 3.1%, totaling €12,983 million, whereas imports saw a more substantial drop of 23%, amounting to €11,404 million.

Most of the trade, involving imports and exports, was with European Union countries, which comprised 77% of exports and 75% of imports. Hungary achieved a trade surplus of €9,509 million from January to November.​