Articles

UK’s Johnson: It is not enough to say sorry

200169   January 31, 2022 23:45   Forexlive Latest News   Market News  

For what it’s worth, UK PM Johnson is addressing parliament on the Covid rule breaking at No 10 Downing Street

• sorry for the way this matter has been handled
• sorry for the things we did get right
• no use saying this or that was within the rules
• I understand the anger people feel
• it is enough to say sorry
• accept Sue Gray’s general findings in full
• we are making changes now to the way Downing Street is run
• changes will allow us to get on with job we elected to do
• I will say more incoming days about steps we will take
• the question to the public is whether we can be trusted to deliver. We can be trusted

Meanwhile the British police commander investigating the Downing Street parties says:

• we are looking at potential individual breaches of the Covid rules
• we will contact those we want to speak to by email or post to ask questions about alleged events
• we intend to contact people in a matter of weeks
• Well over 500 pages and over 300 photographs from cabinet office

Meanwhile the GBPUSD is extending to a new session high at 1.3454. The price is also moving further away from its 100 hour moving average at 1.34388. Stay above that moving average now will keep the buyers satisfied. The 30.2% retracement of the move down from the January 20 high comes in at 1.34734. That is the next upside target followed by the falling 200 hour moving average which is approaching the 1.3500 level.

RBA Preview: Forecasts from eight major banks, focus is on monetary policy stance

200168   January 31, 2022 23:09   FXStreet   Market News  

The Reserve Bank of Australia (RBA) will meet on Tuesday, February 1 at 03:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of eight major banks regarding the upcoming central bank’s decision. The RBA is expected to end its pandemic-related bond-buying program while market participants speculate policymakers will bring forward rate hikes’ guidance.

ING

“The RBA will probably say they’ll keep rates as they are until all, not just most, of the evidence points to a hike. But we might not have too long to wait for that and asset purchases may soon be on the way out. Even if we get a hawkish tilt, the market’s already hawkish pricing along with external woes should limit AUD/USD upside”

ANZ

“We expect the RBA to forecast trimmed mean inflation of 3% by mid-2022 with unemployment falling below 4% by the end of year. Despite this we expect the RBA Board to say it will wait until wages growth accelerates further before it lifts the cash rate. This will be a complicated message for the market to absorb. But it will be a clear signal the RBA is serious about wanting to see sustainably faster wages growth before it moves.  Its forecast for wages growth will likely point to a rate hike in the first half of 2023 as being its central case, but Lowe will also admit for the first time that a move in 2022 is a possibility if wages growth comes through faster than forecast. This will likely reinforce the market’s belief a rate hike will happen this year.”

Westpac

“The RBA will announce that the QE government bond-buying program will come to an end in February. The cash rate will be held at the record low of 0.1% at this meeting. However, some shift in language is likely in the decision statement. Westpac expects the RBA to begin a tightening cycle this August. The RBA will acknowledge that inflation is now back in the target band and that the unemployment rate is nearing full employment. The RBA expects wages growth to lift – but will highlight uncertainty around the speed and timing of that likely acceleration.”

Standard Chartered

“We maintain our call for the RBA to end QE in February. The bigger question will be how RBA responds to recent labour and inflation data. Notably, Q4 trimmed mean CPI rose 2.6% YoY, moving above the mid of RBA’s target range of 2-3%. In addition, the print is higher than the end-2022 projection of 2.25% in the November Statement on Monetary Policy. While one print does not mean that underlying inflation is now sustainably within the 2-3% range, RBA may need to acknowledge upside risk to inflation. We will watch for any removal of reference to wages and inflation to take some time to reach its target or the RBA “being prepared to be patient”. We will also watch for any changes to the reference on materially high wage growth being needed to generate higher inflation. We currently expect the RBA to start hiking rates in November this year; however, the risk is increasing for the first hike to be earlier.”

Danske Bank

“The RBA is widely expected to end QE purchases. We do, however, think RBA is unlikely to take a hawkish stance as markets are currently pricing.”

TDS

“The Target Cash rate is likely to remain at 0.10% but the Bank’s central scenario for the u/e rate, trimmed mean and wages growth is likely to be consistent with the Bank lifting the cash rate this year. The economic forecasts and the Bank formally announcing an end to QE provide room for the removal of state-based forward guidance. The Aus front end should underperform.”

SocGen

“We expect the RBA to maintain the cash rate target of 0.10% and to announce that the government bond purchase programme will end from mid-February. The question is whether they will revise the forward guidance on the timing of the first policy rate hike. We think the RBA is likely to introduce a subtle change; maintaining the conditions for a rate hike, but removing the qualifications of ‘likely to take some time’ and ‘the Board is prepared to be patient’.”

Citibank

“The RBA’s first meeting for 2022 is likely to see it end its QE program and upwardly revise its underlying inflation forecasts following the Q4 CPI upside surprise. But although we now believe the RBA is poised to hike rates twice in H2’22, it’s probably still early for the RBA to turn hawkish. But hawkish risks could arise this week if the Bank softens its language around the requirement for wages growth, though unlikely.”

EUR/USD pushes higher and flirts with 1.1200

200167   January 31, 2022 23:02   FXStreet   Market News  

• EUR/USD approaches the key barrier at 1.1200.
• German 10y Bund yields advance past 0.03%.
• EMU flash Q4 GDP rose 4.6% YoY, 0.3% QoQ.

The buying interest around the European currency keeps growing on Monday and pushes EUR/USD to the very boundaries of 1.1200 the figure.

EUR/USD bid on risk-on trade, data

EUR/USD posts gains for the second session in a row on Monday, bolstered by the generalized risk-on sentiment, positive data releases and investors’ repricing of a potential interest rate hike by the ECB at some point by year end.

In addition, yields of the key German 10y Bund advance to levels last seen in May 2019 past 0.03%, while yields of the US 10y benchmark navigate above 1.80%.

In the euro docket, advanced EMU Q4 GDP figures showed the economy is expected to have expanded 0.3% QoQ and 4.6% YoY. In Germany, preliminary inflation figures now see the CPI rising 0.4% MoM in December and 4.9% from a year earlier.

EUR/USD levels to watch

So far, spot is gaining 0.38% at 1.1190 and faces the next up barrier at 1.1198 (weekly high January 31) seconded by 1.1304 (55-day SMA) and finally 1.1369 (high Jan.20). On the other hand, a break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) en route to 1.1000 (psychological level).

WTI dips below $87.00 level, though still well within recent ranges and not far from multi-year highs

200166   January 31, 2022 23:02   FXStreet   Market News  

• WTI recently dipped below $87.00 back towards session lows, but remains broadly well supported close to recent highs.
• Strategists cite geopolitics (Russia/Ukraine/Nato), OPEC+ supply concerns and robust/recovering demand as sources of oil market support.

Oil markets have seen a subdued start to the week, with front-month WTI futures spending most of Monday’s session thus far consolidating within an $87.00-$88.00 range, not far below last week’s multi-year highs at $88.82 per barrel. More recently, WTI has dipped under the $87.00 level and is trading in the red by about 50 cents and at session lows. However, WTI remains well within recent ranges and there is plenty of support in the form of recent bottoms in the low $86.00s.

Analysts/market commentators continue to cite uncertainty relating to future Russian oil supply in case the country takes military action against Ukraine, which the UK warned was “highly likely” over the weekend, as supportive to crude oil prices. The head of NATO has subsequently called for the military alliance to “diversify” its energy supply (i.e. the EU becoming less reliant on Russia for oil and gas). Moreover, the US government has been engaging the UAE and other Middle Eastern nations to make up for the shortfall if Russian energy exports are barred as a result of sanctions for military action against Ukraine.

Meanwhile, ahead of this week’s OPEC+ meeting, where the group is expected to stick to its policy of gradual 400K barrels per day in output hikes each month, analysts continue to cite concerns about the inability of smaller producers to keep up with production quota hikes. The latest OPEC Monthly Oil Market Report from two weeks ago highlighted Nigeria and Angola as facing the worst production struggles, though Libya has also been a culprit of low supply recently. Elsewhere, one oil market strategist said that an outage of a major pipeline in Ecuador after a spill was also providing support.

To put it bluntly, there are plenty of supply-side factors supporting crude oil at multi-year highs right now. Analysts at Reuters pointed out that the Brent futures curve is in its steepest backwardation since 2013 when oil prices were at the time about $100 per barrel. Last Friday, the Brent future for March delivery was $6.75 more expensive than the Brent future for September delivery, suggestive of expectations that market conditions are expected to be significantly tighter in the near-term than the medium-term. That tightness, said some analysts, is being exacerbated by economic reopening in Europe as Omicron, with much of it having been under some sort of lockdown in late-2021.

Reserve Bank of Australia Preview: A hawkish surprise from Lowe & Co?

200164   January 31, 2022 22:51   FXStreet   Market News  

• The RBA is expected to end its pandemic-related bond-buying program.
• Market participants speculate policymakers will bring forward rate hikes’ guidance.
• AUD/USD corrective advance could continue only once above 0.7100.

The Reserve Bank of Australia has a monetary policy meeting on Tuesday, February 1^st. The central bank has anticipated that it would put an end to its A$350 billion bond-buying programs in this meeting while maintaining the view that rate hikes will remain low at least until 2024. However, market players are anticipating that policymakers will bring forward rate hikes’ guidance to early 2023.

Inflation up, wage growth lagging 

At the same time, there’s mounting speculation the RBA will have to respond faster to mounting inflationary pressures. Some market analysts believe the central bank will have no choice but to kick-start lifting rates as soon as this year.

Australian policymakers have conditioned rate hikes to wage growth surging to at around 3%. They estimate that with wages advancing at such a pace, inflation will be sustainably in the 2-3% target band. The next quarterly wage report will be out on February 23^rd, with the latest figure at 2.2% YoY.

Meanwhile, employment figures have been upbeat ever since the economic reopening mid-October. The country added 64.8K new jobs in December after creating 366K positions in the previous month, while the Unemployment Rate contracted to 4.2%.

Inflation, on the other hand, has risen to an annual rate of 3.5% in December, while the core Trimmed Mean Consumer Price Index rose to 2.6% in the same month, up from the previous 2.1%. Consumer Inflation Expectations shank to 4.4% in January from 4.8% previously.

So, while wage growth is still far from the RBA’s target, inflation is not. The trimmed mean aforementioned figure is between the central bank’s target for the first time since 2014, which means that the RBA has high chances of changing its forward guidance to even a closer date than 2023.

Overall, market players anticipate a hawkish stance from Governor Philip Lowe & Co.

AUD/USD possible scenarios

Heading into the event, the AUD/USD pair is recovering some ground, trading at around 0.7060. The pair bottomed at 0.6966 on Friday, the lowest since July 2020. The greenback is responsible for the latest AUD/USD decline, as an aggressive US Federal Reserve has boosted demand for the American currency while putting equities in a selling spiral. Wall Street has closed in the red for the previous four weeks, and much of the upcoming direction will continue to depend on US equities’ behaviour.

From a technical point of view, the daily chart shows that the corrective movement could extend, as the pair has surpassed the 23.6% retracement of its January decline, as technical indicators bounce from their recent lows. Nevertheless, they remain far below their midlines, while the pair is developing below moving averages, indicating the advance could be temporal.

The 4-hour chart shows that the price is currently advancing above a bearish 20 SMA, but also that technical indicators lost momentum near their midlines, hinting at limited buying interest. The 38.2% retracement of the mentioned slide stands at 0.7098, the level to break to confirm further gains in the upcoming sessions. Below 0.7045, on the other hand, the risk will turn back south.

GBP/USD reclaims 1.3400 amid an improved market mood and USD weakness

200163   January 31, 2022 22:49   FXStreet   Market News  

• The GBP/USD advances 0.28% during the North American session.
• An improved market mood and increasing bets of the BoE hiking five times keep the GBP bid.
• GBP/USD is downward biased in the long-term but, in the near-term, is under upward pressure.

The British pound extends its recovery, amid on Friday snapping two days in a row loss. At the time of writing, the GBP/USD is trading at 1.3434 in the North American session. As shown by the cash markets in Europe, the market sentiment is positive but, US equity futures point to a lower open. Nevertheless, risk-sensitive currencies, led by the antipodeans and the GBP, rise in the day to the detriment of the greenback.

Risk appetite and money markets expecting five rates hikes by the BoE underpins the GBP

Since the Asian session, the pair remained buoyant, rising to the daily high around 1.3450, as market mood carried the New York appetite throughout the weekend. It appears the lift in the GBP is attributed to the Bank of England monetary policy meeting, to be held on February 3, where market participants expect a rate hike towards 0.50%. Furthermore, In the last couple of hours, money markets expect five rates of the Bank of England, expecting the bank’s rate to finish around 1.50%, according to Reuters.

In the meantime, some headlines throughout the weekend, the UK’s PM Boris Johnson and Chancellor Rishi Sunak aim to finalize a package of measures to support low-income households. Regarding domestic political issues, UK’s Foreign Secretary Liz Truss said that PM Boris Johnson is the best person to lead the Tories to the next election.

Atlanta’s Fed President does not rule out a 50 bps rate hike

Over the weekend, Atlanta’s Fed President Raphael Bostic expressed that he foresees at least three rate hikes, beginning in March, but emphasized that the US central bank would increase 50 basis points if inflations remain “stubbornly high,” according to the FT.

An absent UK economic docket left the pair lying in the dynamics of the BoE’s monetary policy meeting ahead. In contrast, the US economic docket on Monday would feature the Chicago PMI and the Dallas Fed Manufacturing Index, both for January. The readings for the former is expected at 61.7, while Dallas Mfg. Index for December was 8.1.

GBP/USD Price Forecast: Technical outlook

The GBP/USD remains downward biased. The daily moving averages (DMAs) stay above the spot price, except for the 50-DMA, underneath at 1.3416, acting as support. Nevertheless, the 100-DMA at 1.3517 is at the reach of the GBP/USD spot price, though a daily close above is required to open the door for higher prices.

That said, the GBP/USD first resistance would be 1.3500. A breach of the latter would expose the former 100-DMA at 1.3517.

Contrarily, the GBP/USD first support would be the 50-DMA at 1.3416. A break of that level would open the door towards 1.3400 that if it gives way to USD bulls (let’s not count them out, as month-end flows loom), that would pave the way towards the 2022 YTD low at 1.3357.

United States Chicago Purchasing Managers’ Index above expectations (61.7) in January: Actual (65.2)

200162   January 31, 2022 22:49   FXStreet   Market News  

Feed news

USD/TRY drops to multi-day lows near 13.4000

200161   January 31, 2022 22:45   FXStreet   Market News  

• USD/TRY adds to Friday’s losses and retests 13.3000.
• The softer dollar collaborates with the downside in spot.
• Turkey’s trade deficit widened in December.

The Turkish lira extends Friday’s renewed upside bias and drags USD/TRY to the area of multi-day lows near 13.3000 on Monday.

USD/TRY weaker on USD selling, risk-on

USD/TRY trades on the defensive for the second session in a row at the beginning of the week following the broad-based risk-on environment as well as the offered stance in the US Dollar.

Indeed, better-than-expected Manufacturing PMI in China for the current month and published over the weekend lent support to the risk-associated universe at the beginning of the week, supporting the demand for lira as well as the rest of the EM FX space.

In the meantime, the pair continues to move within a consolidative mood, which kicked in with the new year and after investors seem to have digested the government’s FX-protected lira deposits scheme (announced in late December).

In the domestic docket, December’s trade deficit widened to $6.79B, with exports rising 22.2% and imports expanding 23.2%. Further data saw tourism income increasing 95% to $7.631B during the October-December period.

What to look for around TRY

The pair keeps the multi-session consolidative theme well in place, always within the 13.00-14.00 range. The range bound stance appears reinforced by the recent steady hand by the Turkish central bank, while skepticism keeps running high over the effectiveness of the recently announced plan to promote the de-dollarization of the economy. In the meantime, the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are forecast to keep the domestic currency under pressure for the time being.

Key events in Turkey this week: Manufacturing PMI (Tuesday) – January CPI, Producer Prices (Thursday).

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is retreating 1.11% at 13.3991 and a drop below 12.7523 (2022 low Jan.3) would expose 10.2027 (monthly low Dec.23) and finally 9.9082 (200-day SMA). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).

Axie Infinity price to trap bears before posting 20% gains

200159   January 31, 2022 22:45   FXStreet   Market News  

• Axie Infinity price action tests support on the monthly S2 at $51.90.
• AXS price looks set for a rebound as the low from Sunday holds.
• Expect bears to get trapped in the false break below S2, getting squeezed out.

Axie Infinity (AXS) looked set for another leg lower, but bears are getting trapped on their entries on the break of the monthly S2 again. The low from Sunday still holds for now and could be the start of a squeeze on the bears that could go all the way up towards $60.36, holding 20% gains. Vital for this setup is that indices in both Europe and the US can go out with a green print.

Axie Infinity bear trap depends on green numbers in the equity space

Axie Infinity bulls have a tough nut to crack with bears still present and squash every bullish attempt marked in the Relative Strength Index (RSI) with an uptick away from the oversold area. But the joke could be on the bears for once, as bears are until now still unable to firmly break below the S2 and historical support at $60.36. Even the low from Sunday is not yet in sight for a test, so bulls are doing their part of the work to keep momentum present. 

AXS price thus could simply be taking a breather for the day, trapping bears in the process, and now see bulls coming in yet again for the US session, lifting price back above $51.90. Should earnings this week further surprise the upside, expect the high of Sunday to be tested and break, squeezing out further any bears positions. This should pave the way for hitting $60,36 by the end of this week.

AXS/USD daily chart

With earnings season, some significant tech stock is set to publish its earnings this week, which could still hold some downside surprises, triggering further selloff inequities. Expect cryptocurrencies to see that correction being extended into their asset class, with AXS dipping below last week’s low around $45 and opening up a correction towards $26.70. That would mean another 45% of losses as both a stronger US dollar and risk-off sentiment would weigh in on the price action.

Major US indices open up with mixed results

200158   January 31, 2022 22:40   Forexlive Latest News   Market News  

The major US indices are open up with mixed results. The Dow and S&P are lower while the NASDAQ index is trading higher. The Russell 2000 which fell over 20% from its high last week is currently down as well.

This week, there will be a number of key earnings releases. AMD, Paypal, Alphabet, GM, Starbucks, Meta (Facebook), Amazon, Ford, Merck, Bristol Meyers Squibb all are scheduled to announce their quarterly earnings.

Fed’s Daly and George are expected to speak today. George will speak at 12:40 PM ET/1740 GMT.Daly will speak at 11:30 AM ET/1630 GMT. The muzzle is off the Fed after their interest decision last week. So Fed Speak will be a focus as the market debates hikes and how many and balance sheet (when and by how much).

The US jobs report will be announced on Friday with expectations for nonfarm payroll to rise by about +166K versus +199K although estimates are wide and varied. Canada will also announce their jobs report on Friday with -91.5K expected after last month’s 54.7K rise.

A snapshot of the market currently shows:

• Dow industrial average -136 points or -0.39% at 34590
• S&P index unchanged at 4431,5
• NASDAQ index +85 points or 0.62% 13857
• Russell 2000 -1 point at 1966

US stocks are set to open mixed

200157   January 31, 2022 22:29   Forexlive Latest News   Market News  

The major US stock indices are set open mixed as per the futures contracts.

• S&P index, -13 points
• Dow industrial average, -178 points
• NASDAQ index, +14 points

On Friday, the major indices soared (NASDAQ had its best day since March), and that took them higher on the week. Nevertheless the NASDAQ is down 12% in January and on pace for its worst month since October 2008.

The energy sector jumped in January and was the only positive sector this month the S&P. Consumer discretionary in real estate were the weakest sectors in January.

UK “partygate” scandal: Sue Gray inquiry says some gatherings should have have been allowed

200156   January 31, 2022 22:29   FXStreet   Market News  

A number of lockdown gatherings should not have been allowed to take place or develop in the way that they did, the Sue Gray inquiry into No10. Downing Street lockdown breaches said, according to a government update. The full report has not been released due to an ongoing police enquiry, but the UK government has released an update on its contents.