This article was written by Justin Low at www.forexlive.com.

• The BoE left interest rates unchanged as expected at the last meeting
  with no dovish language as they reaffirmed that they will keep rates high for
  sufficiently long to return to the 2% target.
• Governor Bailey pushed back against rate cuts
  expectations as he said that they cannot state if interest rates have
  peaked.
• The employment report showed job losses in December and
  lower than expected wage growth.
• The UK CPI beat expectations across the board, which is
  going to reinforce the BoE’s neutral stance.
• The UK PMIs showed the Manufacturing sector falling
  further into contraction while the Services sector continues to expand.
• The latest UK Retail Sales missed expectations across the
  board by a big margin as consumer spending remains weak.
• The market expects the BoE to start
  cutting rates in Q2.

JPY

• The BoJ kept its monetary policy unchanged at the last meeting with interest
  rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference
  cap.
• Governor Ueda repeated once again that they won’t
  hesitate to take easing measures if needed and that they are not foreseeing
  sustainable price increases unless wage growth picks up.
• The latest Japanese CPIshowed that inflationary pressures
  are easing although they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate remained unchanged near cycle lows.
• The Japanese Manufacturing PMI fell further into contraction but
  the Services PMI ticked higher remaining in expansion.
• The latest Japanese wage data missed expectations by a big margin
  and as a reminder the BoJ is focusing on wage growth to decide whether to tweak
  its monetary policy.
• The Tokyo CPI, which is seen as leading indicator
  for National CPI, eased further but the Core-Core measure remains stuck at
  cycle highs.
• The market expects the BoJ to hike
  in Q2.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY broke
through the key resistance zone
around the 184.40 level and after a retest, extended the rally to new highs
with the hot UK CPI report today increasing the bullish momentum. The buyers
will look for dip-buying opportunities while the sellers should lean on the
cycle high around the 188.68 level to position for a drop back into the 178.00
handle.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the trendline where we
can also find the confluence with the
50% Fibonacci retracement level
and the red 21 moving average. The
sellers, on the other hand, will want to see the price breaking lower to
position for a drop into the 184.40 support and target a break below it.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the spike higher following the UK CPI
release. We can also see the key support zone around the 186.00 handle
highlighted by the green box. That’s where the buyers will have a better risk
to reward setup, while the sellers will know if they could start to position
for much lower prices in case we see a break.

Upcoming Events

Today, we will get the US Retail Sales and
Industrial Production data, while tomorrow we will see the latest US Jobless
Claims figures. On Friday, we conclude the week with the Japanese CPI, the UK
Retail Sales and the University of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.

• Prior +2.4%
• Core CPI +3.4% vs +3.4% y/y prelim
• Prior +3.6%

No changes to the initial estimates and with a slight easing of core prices from November to December, it still keeps the ECB on track. However, the real challenge will be starting from this year, as the disinflation process may not be as linear a trajectory as seen in 2023.

This article was written by Justin Low at www.forexlive.com.

• Disinflation is happening, is strong and will continue
• Monetary conditions should adjust but awaiting data first to confirm disinflation outlook

This just reaffirms the current ECB stance of being data-dependent. Amid all the pushback by policymakers though, traders are still well convinced of a April rate cut at this stage. The odds of that are no longer fully priced in but are still sitting at ~94% currently.

This article was written by Justin Low at www.forexlive.com.

The euro and pound are trading little changed against the dollar on the session now, while other major currencies are still looking fairly sluggish against the greenback. Cable rose to a high of 1.2675 earlier after the UK inflation data but has pared that advance to 1.2640 levels currently.

For now, the dollar remains in charge with USD/JPY especially keeping higher by 0.4% at 147.75 and still angling for a break above its 100-day moving average (red line):

USD/CAD is seen up 0.2% to 1.3523, still keeping a break above its own 200-day moving average of 1.3480. Meanwhile, the antipodean currencies are also struggling amid a more defensive risk mood and poor China data from earlier. AUD/USD is down 0.6% to 0.6545 while NZD/USD is down 0.4% to to 0.6113 and inching closer towards a test of its own 200-day moving average at 0.6092.

The bond market remains mostly steady so far today with 10-year Treasury yields flattish at 4.065%. Equities are still struggling hard with European indices holding well over 1% losses across the board while S&P 500 futures are down 0.5% currently.

In other markets, gold is down 0.4% to $2,019 while Bitcoin is also marked down by 1.5% to $42,770 on the day.

It’s all still to play for in trading today, with US retail sales data coming up later. That is set to be the next key hurdle for markets to work through. A stronger report there will solidify chances of a soft landing in the economy, while reaffirming added flexibility for the Fed to play around with the timing of a policy pivot.

This article was written by Justin Low at www.forexlive.com.