• No reason for BOE to move rates in lockstep with either Fed or ECB

Cable is up from around 1.2355 to 1.2385 on the day now as Pill is trying to temper with market expectations. The BOE had previously said they were comfortable with markets pricing in a move in August. However, traders had recently pushed to test that narrative by pricing in a June move – which is now at near 50% (it was 62% before the PMI data today). I reckon we’re seeing a bit of a walk back in that regard now.

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

• Policy outlook has not changed substantially since March
• There has been little news in recent months on inflation persistence
• Now seeing signs of a downward shift in the persistent component of inflation dynamic
• A cut in the bank rate would not entirely undo the restrictive policy stance
• Will need to maintain a degree of restrictiveness in policy stance to squeeze out inflation persistency
• Absence of news and passage of time have brought a bank rate cut somewhat closer

This is pretty much the step before the step to cut rates. As such, the language is angling towards a move in the next few months. As for market pricing, a move in June is ~51% priced in. Meanwhile, an August move is ~98% priced in after the PMI data today.

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

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US CPI beat expectations for the third
  consecutive month, while the US PPI came in line with forecasts.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US ISM Manufacturing PMI beat expectations by a big margin with
  the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to
  the lowest level in 4 years.
• The US Retail Sales beat expectations across the board by a
  big margin with positive revisions to the prior figures.
• The market now expects the first rate cut in
  September.

AUD

• The
  RBA left interest rates unchanged as expected at the last meeting and
  finally dropped the tightening bias.
• The
  last Monthly CPI report came in line with
  expectations although the underlying inflation measure increased from the prior
  month.
• The
  latest labour market report missed expectations.
• The
  wage price index surprised to the upside as wage
  growth in Australia remains strong.
• The
  latest Australian PMIs showed the Manufacturing PMI almost
  jumping back into expansion while the Services PMI ticked slightly lower
  remaining in expansion.
• The
  market expects the first rate cut in February 2025.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD fell
below the 0.64 handle but eventually bounced back to retest the previous lows
where we can also find the 38.2% Fibonacci retracement level
for confluence. This is
where we can expect the sellers to step in with a defined risk above the
Fibonacci level to position for a drop into the 0.6272 level. The buyers, on
the other hand, will want to see the price breaking higher to increase the
bullish bets into the 0.65 resistance zone
where we have also the red 21 moving average for
confluence.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
lower diverged with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, it led to a pullback into the resistance around the
0.6475 level. If the price were to break higher, the chances for a reversal
will increase and we could see a quick rally into the 0.6520 resistance.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor upward trendline defining the current bullish momentum with the
red 21 moving average acting as dynamic support. The buyers are leaning on this
trendline to
keep bidding up the pair into new highs. The sellers, on the other hand, will
want to see the price breaking lower to pile in and position for a drop into
new lows.

Upcoming Events

Today we get the US Flash PMIs. Tomorrow, we have
the Australian CPI data. On Thursday we will see the latest US Jobless Claims
figures, while on Friday we conclude the week with the US PCE report.

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

Well, that’s quite a bummer in European morning trade. There was a bit of life after the PMI data earlier but things have quickly settled back down. Dollar pairs are sitting within 10 pips of one another, showing very little change on the day.

That speaks to the lack of conviction we’re seeing for the time being. Hopefully that will change when we get to the US PMI data later, to help set the tone for the sessions ahead as well. Otherwise, it might stay quieter until we get to the US Q1 GDP data on Thursday and the PCE price index on Friday.

If anything else, USD/JPY remains one to pay close attention to as it holds close to the 155.00 mark.

In other markets, gold is still down a little over 1% at $2,300 while equities are hoping to post back-to-back daily gains this week. S&P 500 futures are up 0.2% but things are still looking a little nervy, as seen in US trading yesterday. Nonetheless, investors managed to snap the run of six straight days of losses so let’s see if they can keep the bounce going for now.

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

It was a quick one at that, as EUR/USD backs away from the earlier high of 1.0695 to fall to 1.0655 on the day. The data doesn’t change the ECB’s plan for a move in June but it is perhaps a first step in keeping their options open after that. For now at least, traders are more focused on the next move.

And as mentioned earlier:

„Taking that into consideration, the euro bounce we’re seeing might not have much legs to it. But at least from the near-term chart above, EUR/USD is working above both its 100 and 200-hour moving averages again. That sees the near-term bias turn more bullish at least. But we’ll see if price can hold above the high last week at 1.0690 for the day. If that doesn’t last, I’m inclined to fade this move for a quick one.“

A good ol‘ fade the pop trade in the bag. Now, we’re back to square one on the day. And with price action continuing to consolidate in and around the key hourly moving averages, we’ll have to wait on the US PMI data to settle the score.

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