He adds that if there is a bias to take action, it might just be a little bit more as he says „we are where my dot has been“.
This article was written by Justin Low at www.forexlive.com.
The pair is moving up today as the dollar is seeing a bit of a pullback to last week’s advance. We are seeing price now nudge back just above 1.2500 but does it really mean anything for cable at this point?
For now, the technical argument is indicating that it would take more than a push above the figure level (at least this one) to push the agenda on the part of buyers. The weekly chart shows that:
The pair did run up against the highs from May last year at 1.2660-66 but ultimately failed to breach that on last week’s close. In fact, that sharp rejection was the first weekly drop in cable in nine weeks. But it also comes just under a key technical point in the form of the 100-week moving average (red line), now seen at 1.2693.
As such, even with a push back above 1.2500, it hardly means anything for any upside move in cable unless buyers can look to take out the levels pointed out above.
And even before that, there is the near-term resistance points from the 100 and 200-hour moving averages, now seen at 1.2558 and 1.2575 respectively.
As for any downside push, the 10 and 17 April lows at 1.2343-53 is going to be a key supportive region to watch before any potential breakdown towards the 100-day moving average at 1.2250 currently. Those will be key targets to watch on any further selling during the week.
In terms of the fundamental picture, a lot of the positive vibes has already been priced in for sterling it would seem. The BOE did as expected and didn’t really offer any stronger conviction to battle inflation down the road. Bailey & co. even kept the door open to pausing and with markets already pricing in a peak of 4.85% in the bank rate, there’s not much room left for any further hawkish implications.
The 5.00% mark is of course the big one to watch but that will depend on the BOE’s conviction next month and also incoming UK economic data in the weeks ahead. But with market pricing already being nearly there, it’s hard to imagine more upside to come for the pound from this factor alone.
As for the Fed side of the equation, Fed funds futures are still pointing to around three rate cuts by year-end and all else being equal, that pricing can only turn to be more hawkish at this point. Markets are convinced the Fed will pause but policymakers have insisted that they want to keep rates higher for longer.
As such, the current outlook does suggest that the risks to the rates pricing are skewed towards the possibility that traders could be wrong. That is unless something else breaks in the US economy and the Fed is forced to „save the day“ by kicking off the rate cut cycle earlier than they intend to.
If you consider the above elements, the path of least resistance may be lower for GBP/USD especially if the technical considerations are also favouring the dollar for now. But even so, the amount of weakness in price may be largely contained as markets are still trying to sort out their feet in dealing with all of the other narratives above.
This article was written by Justin Low at www.forexlive.com.
The upcoming week is expected
to be quite eventful and filled with data releases in all markets. The most
important events will be:
On Monday, the U.S. will release the Empire State Manufacturing Index,
providing insights into the manufacturing sector’s performance.
Tuesday will see several key
releases. In Australia, the Westpac consumer sentiment data and the Monetary
Policy Meeting Minutes will be important to watch. Meanwhile, the U.K. will
report the claimant count change, average earnings index 3m/y, and the
unemployment rate. Additionally, the eurozone will share the German ZEW
economic sentiment report. In Canada, important data such as the CPI m/m,
manufacturing sales m/m, core retail sales m/m, and retail sales m/m will be
published. In the U.S., we’ll get the industrial production data.
Moving on to Wednesday,
Australia will report the Wage Price Index q/q, offering insights into wage
growth. In the U.S., attention will be on the release of building permits and
housing starts, providing indicators for the housing market’s performance.
Thursday will bring
significant updates. Australia will share the employment change and
unemployment rate figures, shedding light on the labour market. In Europe, it
will be a bank holiday in observance of Ascension Day. In the U.S., the focus
will be on the unemployment claims, Philly Fed manufacturing index, existing
home sales, and the CB leading index. Moreover, the Bank of Canada (BoC)
Governor Macklem is expected to hold a press conference in Ottawa, discussing
the Financial System Review.
Lastly, on Friday, Japan will
release the National Core CPI y/y, providing insights into inflation trends.
The G7 Meetings will take place, with discussions revolving around global
economic and geopolitical issues. In the U.S., Fed Chair Powell will
participate in a panel discussion titled „Perspectives on Monetary
Policy“ at the Thomas Laubach Research Conference in Washington DC.
Furthermore, some Fed members are expected to deliver remarks throughout the
day.
Tuesday’s release of the RBA minutes will provide valuable insights into the
surprising 25bps rate hike delivered by the Bank at its previous meeting,
catching many off guard as they anticipated a pause. During the meeting, the
RBA maintained a hawkish stance, indicating the need for further tightening
measures to combat the persistently high inflation levels. The Bank emphasized
its commitment to taking the necessary actions to address the issue. In
Australia, although inflation may have reached its peak — currently standing
at 7% — it remains significantly elevated compared to the Bank’s target and
the current forecast is that it will take a couple of years to return to
target.
The upcoming labour market data for the U.K. could show some improvement,
particularly in terms of participation, employment and wage growth. The
consensus among analysts is for the unemployment rate to remain unchanged at
3.8%, but Citi forecasts a positive 3-month employment change to 190K from the
previous 169K. Should the labour market data continue to exhibit strength,
there is a possibility that the Bank of England will hike the rate by another
25bps at its next meeting in June. However, the decision will also take into
account other factors, such as the forthcoming CPI data scheduled for release
on May 24th, which will contribute to shaping the BoE’s stance.
In the U.S., headline retail sales are projected to rise by 0.7% for the
month-over-month data, while core retail sales are expected to show a modest
uptick of 0.5% m/m. However, Bank of America’s „Consumer Checkpoint“
data suggests a softening in consumer spending, with total card spending per
household declining to -1.2% year-over-year (Y/Y).
The upcoming CPI data for Canada will be closely monitored this week, as its
results carry significant weight. The consensus forecasts a 0.5% increase for
the month-over-month figures, while the year-over-year CPI is expected to drop
slightly from 4.3% to 4.2%. Citi analysts anticipate continued easing in the
y/y figures towards 3% in the coming months, largely driven by substantial base
effects from lower energy prices. Additionally, the Bank of Canada has
emphasized that if inflation persists above target, further tightening is
possible.
The labour market in Australia
remains tight. This week’s data is expected to show wage growth acceleration
primarily driven by the private sector. The unemployment rate is at the
historical 50-year low level of 3.5% under NAIRU forecasts of 4%-4.5%.
In the U.S. housing starts are
expected to see some further decreases, with a consensus of -1.4% m/m to 1.4M
from 1.42M. The consensus for building permits in April is 1.44M, a slight
growth from the previous 1.43M, but analysts from Citi anticipate a much higher
rise to 1.51M (6.2% m/m).
On Thursday, Australia will release labour market data, including the
employment change figures and the unemployment rate. The consensus suggests
that the unemployment rate will decline from 3.5% to 3.4%, while the
participation rate is expected to remain unchanged. Although the current labour
market data appears robust, there are indications from the business sector of a
slight easing in labour demand. Thursday is a bank holiday in most of Europe in
observance of Ascension Day.
For the U.S. – unemployment
claims; Philly Fed manufacturing index; existing home sales and the CB leading
index;
In the U.S. all eyes will be
on the unemployment claims data as it can give us some clues about the labour
market. The consensus is for a drop from 264K to 251K, suggesting the labour
market remains tight for now. Some softness is likely for existing home sales
with a drop to 4.30M from 4.44M being expected. Mortgage application data will
be an important factor for existing home sales, which might stall because
homeowners are reluctant to sell and give up their existing mortgage rates that
are much lower than current ones.
On Friday, Bank of Canada
Governor Macklem is scheduled to hold a press conference in Ottawa, focusing on
the Financial System Review. While these events usually do not yield
significant announcements, it is worth paying attention as there is a
possibility that he may provide new insights on inflation.
In Japan, the National Core
CPI year-on-year data will be released. Over the past few months, Japan has
experienced moderate economic growth, and this trend is expected to continue in
the near future. Although inflation in Japan remains elevated, consumer prices
are considerably lower compared to other developed countries. There are
indications that inflation in Japan may have already peaked, and with the
implementation of government subsidies and the modest economic growth, it is
possible that inflation will gradually return to the Bank’s target.
On Friday, Federal Reserve
Chair Powell is scheduled to speak at the Thomas Laubach Research Conference in
Washington DC, where he will participate in a panel discussion focused on
„Perspectives on Monetary Policy.“ While this event is not anticipated
to yield any significant developments, there is a possibility that Chair Powell
may address topics such as inflation and future rate hikes in his remarks.
This article was written
by Gina Constantin.
This article was written by ForexLive at www.forexlive.com.
The USD is the ending the day as the strongest of the major currencies, while the NZD is the weakest.
The move higher in the greenback can be attributed to:
In May 2023, the University of Michigan Index of Consumer Sentiment dropped by 9.1% MoM to 57.7 (from 63.5 last month), representing a 1.2% YoY decrease from May 2022. The Current Economic Conditions index experienced a -5.4% MoM decline to 64.5 (from 68.2), but increased by 1.9% YoY. Meanwhile, the Index of Consumer Expectations saw a significant 11.7% MoM drop to 53.4 from 60.5 last month, accompanied by a 3.3% YoY decline.
The fall was attributed to renewed concerns about the economy’s trajectory, erasing more than half of the gains since last June’s historic low. Despite the absence of recession indicators in macroeconomic data, consumers‘ worries escalated in response to negative economic news, including the debt crisis standoff. It was the inflation expectations that got the most attention. The 1-year inflation expectations slightly decreased to 4.5% in May from 4.6% in April, but the long-run 5-year inflation expectations, after two years of stability, reached its highest level since 2011, increasing from 3.0% to 3.2% this month.
Regarding the extension of the debt ceiling, the Congressional Budget Office (or CBO) released projections for cash flow absent legislation to extend the debt ceiling. According to projections they see the US treasury running out of money in the 1st 2 weeks of June (dependent on inflows and outflows and the timing of such). If things are just right and they get passed mid-month when additional tax inflows are expected, the government may cobble along to the July. However, there is also a chance they could also run out of money more toward the beginning of the month.
This week, the congressional leaders met with Pres. Biden with little progress made. They were expected to meet again today, but that meeting was postponed in favor of having staff members continue to work on a solution. Leaders are not expected to get together again until Monday or Tuesday of next week.
The full details, led to additional dollar buying as the fears of default started to enter into the markets.
Finally, technical breaks and some of the major currency pairs help to push the US dollar higher.
For the current week, the US dollar rose against all the major currencies. Looking at the greenbacks changes:
The biggest gain came against the AUD and the NZD on risk-off flows. Those currencies also move lower after weaker China data this week.
In the US stock market today the major indices all moved marginally lower with the NASDAQ index leading the way with a decline of -0.36%. The Dow industrial average was near and change but still cause lower for the 5th consecutive day this week and the 9th time in 10 trading days since the beginning of May. The Dow industrial average fell -0.03%. The S&P index fell -0.16%.
For the trading week, the Dow industrial average fell -1.11%, the S&P index fell -0.29% but the NASDAQ index squeaked out a small 0.4% gain.
In the US debt market today yields moved higher after the stronger inflation expectations data. Yields were modestly higher for the week:
in other markets:
Thanks for all the support. Hope you have a good weekend.
This article was written by Greg Michalowski at www.forexlive.com.
The final numbers are showing:
For the trading week, the Dow and S&P are ending lower. The Nasdaq was up marginally:
Looking at some of the big cap stocks this week:
The regional banks were under pressure this week:
This article was written by Greg Michalowski at www.forexlive.com.
Looking at the 4-hour chart, the price this week also fell below a neckline of a head and shoulder formation.
On the downside, the 38.2% retracement of the move up from the November 22 low would target $25,071. Ahead of that would be swing highs going back to February around the $25,270 level. Move below the 38.2% and the door opens for more selling momentum.
Moving back above the $27,000 level would probably disappoint sellers, and back above the broken neckline would also hurt the sellers looking for more follow-through selling off of the head and shoulders break.
This article was written by Greg Michalowski at www.forexlive.com.
Below are the major releases for next week, organized by day, including expectations and previous release values:
Monday, May 15
Tuesday, May 16
Wednesday, May 17
Thursday, May 18
Friday, May 19
This article was written by Greg Michalowski at www.forexlive.com.
For the trading week crude oil prices are down $1.28 or -1.79%. That is the 4th down week in a row. From the swing high during the week of April 10 to the settlement today, the price is down around -16.25% (the high price during the week of April 10 reached $83.53).
For the trading year, the price is down around -12.87% (the end-of-the-year level was at $80.26).
Looking at the hourly chart, the price high this week reached $73.89 on Wednesday. On Thursday, the price fell below both the 100 and 200-hour moving averages. In trading today, the corrective high ticked briefly above the 200-hour moving average but quickly reversed. The price low tested the 38.2% retracement of the move up from the exhaustive low from back on May 3. That level came in right around the $70 level.
Stay below the 200-hour moving average keeps sellers more control. Breaking below the 38.2% retracement would open the door for a run toward the 50% midpoint at $68.77.
This article was written by Greg Michalowski at www.forexlive.com.
He doesn’t really want to give much away but as things stand, markets are voting that they can afford one more rate hike in June to come. After that, it will be quite dependent on the upcoming economic data from the UK in the weeks ahead.
This article was written by Justin Low at www.forexlive.com.
Markets:
It was a relatively quiet session as markets continue to trudge along after the US CPI data earlier this week. The prevailing narrative i.e. major central banks likely to pause their respective tightening cycles, is still the key theme but the economic releases this week isn’t adding or subtracting from that in the past few days.
The dollar remains steady with EUR/USD down 0.2% to 1.0890 as sellers try to test waters below the 1.0900 mark. Meanwhile, GBP/USD is up 0.1% to 1.2525 and staying little changed in general as UK Q1 GDP meets estimates.
The greenback is seen firmer slightly against the yen with USD/JPY up 0.2% to 134.80, with higher yields helping. Elsewhere, the antipodeans are lagging with NZD/USD down over 1% to 0.6225 after a plunge back below its 100-day moving average as the downside momentum gathers following softer RBNZ inflation expectations earlier today.
In other markets, equities are holding some optimism towards the end of the week but European indices are more or less closing the week where they started. In the commodities space, gold is trading lower and eyeing a test of the $2,000 mark again with silver down over 1% again after its sharp fall yesterday.
This article was written by Justin Low at www.forexlive.com.