I don’t know how this ends but it can’t go on.

Update: The group claimed they used missiles to hit the British oil ship Marlin Luanda.

This article was written by Adam Button at www.forexlive.com.

The sources say that the meeting on 1 February will see no recommendations on oil output policy. Adding that a decision on whether or not to extend the voluntary output cuts into April would only likely come at the end of February. One of the sources did warn that the decision’s timing was not yet clear though.

For some context, OPEC+ ministers will meet online next week for the JMMC meeting.

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

• Interest rates should start to go down
• But ECB is in no rush to begin the process for now
• Cutting rates too early would be by all mean worse than waiting just a bit
• There’s the risk that inflation starts to come back and then one would need to raise rates much more

This fits with the earlier remarks from his peers but markets are still sticking to their guns. A rate cut for April is still ~91% priced in at the moment. The euro has moved off earlier lows but it owes more to a decline in the dollar on the session.

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

Yesterday, the Nasdaq Composite managed to close
around the highs thanks to another slate of positive economic data as the US Q4 GDP
surprised to the upside and the inflation details were better than expected.
The US Jobless Claims, on the
other hand, missed expectations across the board but they are still around
cycle lows and given the volatility of the data, the market might need some
bigger misses before starting to get worried. Today we conclude the
week with the US PCE report, where the market expects the disinflationary trend
to remain intact and keep on supporting the soft-landing narrative.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
yesterday managed to close around the highs following strong economic data and
falling Treasury yields. From a risk management perspective though, the buyers
will have a much better risk to reward setup around the previous high at 15150
where they will also find the confluence with the
red 21 moving average, the trendline and the 38.2%
Fibonacci retracement level.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more clearly the
bullish setup around the previous high at the 15150 level. If the price were to
break below the level, then we can expect the sellers to extend the drop into
the trendline where the buyers will have another opportunity to go long. The divergence with the
MACD, which
is generally a sign of weakening momentum, suggests that a pullback into the
15150 level is very likely.

Nasdaq Composite
Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with the price yesterday bouncing on the most
recent swing high level and the red 21 moving average. The buyers leant on this
support to position for another rally, but if the price were to break lower in
the next few days, then we can expect the sellers to pile in to target a drop
into the 15150 zone.

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

• External demand is weak and higher borrowing costs are dampening investments
• Consumers remain cautious on spending activity
• Inflation could slow noticeably at the start of the year, primarily on base effects

The stagnation and negative growth in the euro area economy continues into this year as any major recovery in growth conditions remain elusive. Germany might not be the sick man of the bloc now but it remains uninspiring at best. And the overall economic situation sure doesn’t look too promising to start the new year.

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

The dollar is trading more mixed now in European morning trade, with yields sitting lower and equities posting a decent recovery off earlier lows. Of note, US futures have pared some of the heavier losses with S&P 500 futures now down just 0.2%.

Tech shares are still leading the downside, with Nasdaq futures down 0.5%. But that at least is less painful than the losses to start the session. The drag in tech comes from Intel’s softer guidance for Q1 this year, despite Q4 results beating estimates.

If anything else, do keep a watchful eye on the rates market as that could have implications for broader sentiment. And that includes a spillover impact on the equities space. The US PCE price report will be the main event later in the day and that should have some impact on rates, depending on the data.

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

The policy decision later should be a more straightforward one. There will be no changes in the key rates and the language and forward guidance will be similar to what we have gotten in December last month. There will not be any surprises on that front and that means the focus and attention will be on Lagarde’s press conference instead. So, what can we look forward to?

To keep things short, I only see two likelihoods in which there will be a notable reaction in markets.

The first would be Lagarde going on record to rule out rate cuts for March and April. As things stand, traders are not eyeing a move in March but are pricing in ~71% odds of a 25 bps cut in April.

Lagarde can point to a number of factors here such as developments in the Red Sea, wanting to wait on the outlook for wage pressures, and even just alluding to the fact that they’re not satisfied with the disinflation narrative just yet. On the final point, it will mostly come down to her tone.

What makes this an option and arguably the best outcome for the euro currency and for higher yields, is that Lagarde has to be rather explicit about it. Any ways in which she is viewed to be more timid would quickly withdraw the above playbook.

The second likelihood will be Lagarde deciding to be vague and leave open the door for a rate cut in March or April. I wouldn’t put it past her to do so but that will definitely knock the euro lower and give traders a reason to look to fully price in a move for April once again. Risk assets should also get a slight lift if Lagarde does decide to pursue this route.

All that being said, the most likely scenario is one that sees a rather dull reaction in markets. It is the case where Lagarde just mostly talks about being data-dependent and offers some light pushback to the current market pricing. She won’t explicitly rule out a rate cut as early as April but is likely to say that such a move could be fitting „by the summer“.

At the same time, she is to acknowledge better inflation developments in recent months but will argue that the job is not done and price pressures could be a bit more resistant for the time being.

That will maintain the status quo that we’re seeing and force traders to wait on the March meeting before taking stock of the ECB outlook again.

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

That’s a big drop in the headline reading as UK retail sales fall at its fastest pace in 3 years this January. Adding to the worrying picture is that the volume of sales for this time of the year is seen at -47, the lowest reading since May 2020. CBI notes that:

„Looking ahead, demand conditions will remain challenging as higher interest rates continue to feed through to mortgage payments and household incomes.“

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

Yesterday, the Dow Jones dropped following the big
beat in the US PMIs as the
rise in Treasury yields weighed on the market. The data was still in support of
the soft-landing narrative with the commentary in the PMI report citing fastest
output growth in seven months and sharp cooling in inflation. Given the
resilience of the labour market and consumer spending, the rate cuts continue
to be pushed back a little, but as long as the disinflationary trend remains
intact, we can expect the Fed to proceed with the “insurance” cuts anyway.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones yesterday
fell into the close with the price now standing right around the previous high
and the blue 8 moving average. This is
where we can expect the buyers to step in with a defined risk below the level
to position for a rally into another all-time high. The sellers, on the other
hand, will want to see the price breaking lower to target a bigger correction
into the 37066 level.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we
have a good support zone around the previous high as there’s also the confluence with
the 38.2% Fibonacci
retracement level and the moving averages. A break
below the support should give the sellers even more conviction for a drop into
the 37066 level.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
recent price action formed what looks like a double top with
the support zone around the previous high being the neckline. What happens
around this level will likely decide where the price will go in the next few
weeks. A bounce should lead to a rally while a breakout is likely to trigger a
selloff into the 37066 level.

Upcoming Events

Today we will see the Advance US Q4 GDP and the
latest US Jobless Claims figures. Tomorrow, we conclude the week with the US
PCE report.

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

• Digital pound would enhance user choice by complementing, not replacing cash transactions
• There would be further public consultation on a digital pound prior to introduction of any primary legislation by the government
• Upon completion of design phase around the middle of the decade, BOE and the government will decide on whether to proceed to create a digital pound
• Digital pound would only be introduced once both houses of parliament had passes the relevant legislation
• The legislation introduced would guarantee users‘ privacy
• Digital pound would be a claim on the BOE, unlike unbacked cryptocurrency assets

I wouldn’t expect them to rush or push too hard on this matter. As things stand, no major central bank is committing too keenly on this project. China was among the first big names to try and pioneer it but the take up has been rather underwhelming to say the least.

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