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MTrading Team • 2024-05-22

GBPUSD prints four-day winning streak on better-than-forecast UK inflation, Fed Minutes eyed

GBPUSD prints four-day winning streak on better-than-forecast UK inflation, Fed Minutes eyed

A cautious optimism prevails in the market as traders await Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting. Also keeping the traders at bay are the mixed concerns about China and growing geopolitical tensions in the Middle East, not to forget mostly unclear signals from the top-tier central bank speakers.

As a result, the US Dollar Index (DXY) stays defensive during the third day of recovery while riskier assets remain dicey by the press time. With this, the EURUSD pauses a two-day losing streak despite lacking upside momentum, especially when European Central Bank (ECB) President Christine Lagarde confirmed a rate cut in June but showed confidence in controlling inflation. Further, GBPUSD rises to the highest level in two months, up for the fourth consecutive day, on better-than-expected UK inflation data while USDJPY picks up bids to reverse the previous day’s retreat from a weekly high amid unimpressive Japan statistics and a lack of clarity about the Bank of Japan’s (BoJ) next move.

AUDUSD extends the previous day’s recovery whereas NZDUSD rises the most among the G10 currency pairs due to the Reserve Bank of New Zealand’s (RBNZ) hawkish halt. USDCAD prints the first daily loss in three as Oil sellers take a breather.

Crude Oil drops to a one-week low, falling for the third consecutive day despite lacking downside momentum, on a surprise build in the US Oil inventories per the American Petroleum Institute (API), as well as due to the US update of releasing gasoline from the Strategic Petroleum Reserve (SPR). Moving on, Gold holds lower grounds after falling for the first time in three days as trade war woes surrounding China join the US Dollar’s corrective bounce.

Elsewhere, BTCUSD and ETHUSD both print intraday losses amid anxiety surrounding the spot ETH ETF approvals. However, Ethereum appears stronger as most of the potential issuers of the spot ETH ETF have filed details with required amendments.

Following are the latest moves of the key assets:

  • WTI Crude oil drops for the third consecutive day, printing mild losses near $78.00 at the latest.
  • Gold prints a two-day losing streak even as it posts a minor downside to $2,415 by the press time.
  • The USD Index stays defensive around 104.60 after rising in the last two consecutive days.
  • Wall Street closed with minor gains and helped the Asia-Pacific shares to edge higher. That said, British and European shares lack clear directions during the initial trading hour.
  • BTCUSD and ETHUSD both print mild losses near $69,800 and $3,760 as we write.
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US Dollar grinds higher ahead of FOMC Minutes…

On Tuesday, a slew of Federal Reserve (Fed) officials participated in a penal discussion on the "Central Banking in the Post-Pandemic Financial System". Among them, Federal Reserve Bank of Atlanta President Raphael Bostic, Cleveland Fed President Loretta Mester and Federal Reserve Bank of Boston President Susan Collins gained attention as they appeared optimistic on the US economic growth while defending the current restrictive monetary policies. On the same line, Fed Governor Michael Barr said, “The Fed needs to sit tight for longer than we previously thought.” However, Fed Governor Christopher J. Waller also spoke to CNBC while rejecting the need for rate hikes. Hence, most of the Fed officials seemed hawkish and allowed the US Dollar to remain firmer despite lacking the upside momentum.

On a different page, US Treasury Secretary Janet Yellen raised concerns about China and Russia while speaking at the G7 meeting of finance ministers. Further, the British Chamber of Commerce in China marked expectations that doing business in China to become harder over the next five years. Additionally, China’s Global Times (GT) raised concerns about the dragon nation’s readiness to slap more tariffs on imported cars.

Elsewhere, the UK’s Consumer Price Index (CPI) for April came in better than expected and raised doubts about Bank of England (BoE) Governor Andrew Bailey’s latest comments suggesting the next move on rates will be a cut.

Furthermore, ECB President Lagarde spoke in an interview with the Irish TV and showed confidence in keeping the inflation under control. The policymaker also said, “The forecast that we have for next year and the year after that is really getting very, very close to target, if not at target. So, I am confident that we've gone to a control phase."

Talking about Japan, the Asian major marked mixed data early Wednesday as the trade numbers eased and the Machinery Orders improved but the Reuters Tankan sentiment data remains steady. Also weighing on the Yen could be the lack of clarity about the BoJ’s next move and the latest rebound in the US Treasury bond yields.

AUDUSD cheers the market’s slightly positive mood to remain on the front foot, extending the previous day’s rebound from a one-week low, whereas the NZDUSD marks the biggest daily jump in a week after the RBNZ held the benchmark rates unchanged, as expected, but upwardly revised the forward rate guidance. The same pushed back the rate cut and signaled expectations of a rate hike during the year.

Crude Oil bears the burden of a surprise build in the weekly US oil inventories and the news that the US Department of Energy’s (DOE) Office of Petroleum Reserves will release 1 million barrels (42 million gallons) of gasoline in the Northeast Gasoline Supply Reserve (NGSR). Furthermore, Gold price stays depressed amid the US Dollar’s corrective bounce and mixed headlines about China, mostly downbeat. It’s worth noting, however, that the yellow metal remains in the demand zone near the all-time high marked earlier in the week ahead of today’s key Fed Meeting Minutes.

  • Strong buy: USDCAD, USDJPY, US Dollar
  • Strong sell: AUDUSD, NZDUSD, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

All eyes on FOMC Minutes…

As Fed Chair Jerome Powell pushed back the concerns of rate hikes in the latest monetary policy meeting and drowned the US Dollar, traders will be keen to seek clues about the US central bank’s next moves, especially when other FOMC members show a lack of interest in rate cuts. Should the FOMC Minutes suggest more pressure on the policymakers to defend the current monetary policy in 2024, versus the market’s expectations of witnessing two rate cuts in the year, the US Dollar will extend the latest recovery and weigh on the commodities and the Antipodeans.

Meanwhile, the statements suggesting the policymakers’ hesitance in lifting the rates, as well as clear support for the rate cuts, the US Dollar might snap the two-day winning streak and brace for another weekly loss. In that case, Thursday’s PMIs for May and Friday’s US Durable Goods Orders will also be important to watch.

May the trading luck be with you!