TOP FX NEWS: 16 Jan 2024

CURRENCIES:

GBP/USD Analysis and Charts:

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:

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.

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STOCK MARKET:

Market Overview:

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.

Corporate Results:

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.