January 16, 2024
TOP FX NEWS: 16 Jan 2024
GBP/USD Analysis and Charts:
- Falling UK wages provide optimism for the Bank of England.
- Cable faces pressure due to USD strength.
Key Points from ONS Labour Market Overview:
- UK wage growth decelerated in November.
- Unemployment rate remained unchanged.
- Despite slowing wage growth, it remains high enough to deter an immediate UK rate cut.
Latest UK Implied Rates:
- First UK Base Rate cut anticipated in May.
- Predictions indicate a total of 131 basis points in cuts for the upcoming year.
US Dollar Strength:
- The US dollar shows strength after a long weekend.
- US dollar index reaches a 10-day high.
- Factors include slightly higher US Treasury bond yields and geopolitical concerns in Ukraine and the Red Sea.
GBP/USD Technical Levels:
- Cable approaches a support level at 1.2667.
- Potential breakdown may target the 38.2% Fibonacci level at 1.2628, prior lows cluster around 1.2610/15, and the 50-day simple moving average at 1.2608.
- Upside movement may face resistance at 1.2742, with further hurdles near recent highs up to just under 1.2800.
- European stocks and US futures decline.
- Dollar reaches a one-month high, impacting various market sectors.
- Bonds experience a fall as central bank officials resist aggressive interest rate cut expectations.
Stock and Futures Movement:
- Stoxx Europe 600 index heads for a five-week low, led by declines in retailers and banks.
- S&P 500 futures slip by 0.6%, Nasdaq 100 contracts drop by up to 0.9%.
- Treasuries decline across the curve, with ten-year yields and the 2-year debt rising about six basis points each.
Central Bank Comments and Rate Cut Expectations:
- European Central Bank Governing Council member Francois Villeroy de Galhau emphasizes it’s too early to declare victory on inflation.
- Traders await Federal Reserve Governor Christopher Waller’s speech for cues on the timing of a Fed rate cut, with a two-in-three chance seen in March.
- ECB Governing Council member Robert Holzmann and President Christine Lagarde express uncertainty about assured rate cuts, citing lingering inflation and geopolitical risks.
UK Economic Data:
- Economic data in the UK supports the case for Bank of England rate cuts.
- Wage growth cools at one of the fastest paces on record, leading to a weakening of the pound against the dollar.
- Morgan Stanley and Goldman Sachs Group Inc. expected to report continued lull in investment banking activity.
- High borrowing costs, geopolitical tensions, and recessionary risks dampen deal-making.
Global Economic Outlook and Oil Prices:
- Oil prices remain steady amidst Houthi attacks in the Red Sea, contributing to tensions in the Middle East.
- Global benchmark Brent holds around $78 a barrel, while West Texas Intermediate trades below $73.
MSCI Asia Pacific Index:
- Slides 1.3%, halting a three-day rally.
- Hang Seng Index faces the worst day in about two months due to property-sector funding plans impacting bank shares.
Upcoming Market Events:
- Key events this week include Germany ZEW survey expectations, US Empire Manufacturing, and earnings reports from Goldman Sachs Group Inc. and Morgan Stanley.
- Federal Reserve Governor Christopher Waller is scheduled to speak on Tuesday.
Stay tuned to VT Markets Daily Analysis for all your daily CFD updates.
My name is Styliana Charalambous, possessing a professional qualification as a Chartered Certified Accountant and a Bachelor’s Degree in Accounting and Finance. Highly motivated financial analyst with expertise in audit and investment strategies. I have several years of experience in the finance industry, as an audit supervisor at KPMG and the Head of Investment & Market Research in a multinational Fintech company.
Passionate about personal finance, investing, and creating finance content on social media. Lecturer in Accounting & Finance at Canterbury Christ Church University. I am the Founder and CEO of Selfmade Academy, an organization that helps thousands of students worldwide to plan for their financial future and make smart decisions about their money