GBPUSD tests four-day uptrend on mixed UK data, US Dollar’s rebound

Markets fail to defend the week-start optimism amid mixed statistics and a cautious mood ahead of Wednesday’s US inflation data. The same allows the US Dollar to lick its wounds after starting the week on a back foot, mainly due to unimpressive data and Fed talks.

Even with the US Dollar’s hesitance to fall, the EURUSD, the GBPUSD and the Antipodeans remain dicey as traders fear sooner rate cuts from the ex-Fed central banks, as well as economic troubles outside the US.

Further, Crude Oil appears inactive after falling the most in seven weeks the previous day. The reason could be linked to mixed headlines about the Geopolitical tensions in the Red Sea and China. That said, the Gold Price prints mild gains as traders seek solace in the yellow metal in times of market uncertainty, especially amid the downbeat yields and firmer equities.

Equities on Wall Street and in the Asia-Pacific zone closed positive but the US stock futures remain mildly offered.

On a different page, BTCUSD and ETHUSD buyers take a breather after the previous day’s stellar run-up as the US SEC Chairman prods optimism about the spot ETF approvals.

Following are the latest moves of the key assets:

• Brent oil remains indecisive near $76.50 after falling the most in nearly two months the previous day.
• Gold price prints 0.40% intraday gains to around $2,035 at the latest, after a downbeat start of the week.
• USD Index struggles around 102.20 as it seeks more clues to defend last week’s gains as we write.
• Wall Street closed with gains and so did the Asia-Pacific stocks. However, equities in the UK and Europe trade mixed during the initial hour.
• BTCUSD and ETHUSD print mild losses to pare the previous day’s heavy gains, around $46,800 and $2,310 respectively at the latest.

The market struggles for clear directions…

Monday’s mixed US data and Fed talks weighed on the US Dollar. That said, the US Conference Board released the Employment Trends data for December that favored the previous optimism about the US job market by rising to 113.15 from 113.05 (revised from 112.48). However, the New York Federal Reserve’s (Fed) one-year inflation expectations fell to the lowest level since January 2021, to 3.0% from 3.4% prior. Not only the one-year inflation expectations but a fall in the three-year and five-year inflation forecasts also contributed toward Greenback’s corrective pullback.

Moreover, the Federal Reserve Officials tried pushing back dovish concerns from the US central bank and defended the US Dollar despite softer yields. That said, Atlanta Fed President Raphael Bostic said that the Fed can let the restrictive policy continue to work to slow down inflation while also suggesting an initial rate cut in Q3. On the contrary, Fed Governor Michelle Bowman showed her willingness to back the hike (in interest rates) if inflation progress stalls but also mentioned the chance that inflation could continue to come down without further interest-rate hikes.

Apart from the unimpressive US data and mixed Fed talks, optimism about the Red Sea transition and a lack of major negatives from China, after a two-day losing streak on debt woes, favored the cautious optimism. On Monday, the Dow Jones came out with a report suggesting that some of the shipping lines have come to an agreement with Houthi forces to prevent their ships from being attacked in the Red Sea, which in turn eases supply-crunch woes.

It’s worth noting that the Bank of England (BoE) officials have been hawkish of late and hence managed to defend the GBPUSD buyers, despite lacking upside momentum after a four-day uptrend.

Talking about the UK data, the Like-for-Like Retail Sales growth eased to 1.9% YoY for December versus 2.6% prior while Barclays card spending data suggests 2.3% YoY growth versus 2.9% previous readings.

Elsewhere, the Eurozone Sentix Investor Confidence improved for the third consecutive month to -15.8 for January, versus -16.8 prior, whereas the bloc’s Retail Sales growth deteriorated to -1.1% for November compared to -0.8% previous readings and -1.5% market forecasts. It should be noted that the Economic Sentiment Index for the old continent rose to 96.4 for December versus 94.0 prior. With this, the EURUSD remains dicey while printing mild gains around 1.0960.

Additionally, Japan’s Tokyo Consumer Price Index (CPI) for December eased to 2.4% YoY versus 2.6% prior whereas the CPI ex Food, Energy also softened to 3.5% YoY for the said month versus the 3.6% prior. The same prods the USDJPY sellers even as the US Treasury bond yields lack recovery momentum.

It should be noted that Australia’s Retail Sales marked a stellar growth of 2.0% YoY for November, compared to 1.2% market forecasts and -0.2% prior. The same, however, joined unimpressive Aussie housing data and debt woes in China to prod the AUDUSD bulls.

Talking about cryptos, the US Securities and Exchange Commission (SEC) Chairman Gary Gensler roiled optimism about the spot ETF approvals while tweeting that the crypto investments may be ‘exceptionally risky’. The US SEC’s Gensler also added, “Companies offering crypto investments may not be following the law.”

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Few second-tier data to watch for intraday signals…

After witnessing downbeat German Industrial Production in the last hour, the trade balance data from Canada and the US will join the US NFIB Business Optimism Index to entertain the intraday traders. However, major attention will be given to the central bankers’ speeches to confirm the exit of the restrictive monetary policies across the globe in 2024, which in turn can help improve the sentiment and weigh on the US Dollar.

May the trading luck be with you!