<p style=““ class=“text-align-justify“>Alongside the yen, the pound is a notable laggard today as cable falls further following a breakdown yesterday below 1.2000. The drop also took out support from the 23.6 Fib retracement level of the swing higher since September, seen at 1.1953. That gives sellers with more scope to chase a further downside move – potentially looking at the 100-day moving average (red line) next at 1.1663.</p><p style=““ class=“text-align-justify“>But of course, any further downside leg requires vindication from the US data later today. That will be key for dollar sentiment as the new year finally looks to get rocking.</p><p style=““ class=“text-align-justify“>Elsewhere, EUR/USD is down 0.2% to 1.0500 while AUD/USD is also down 0.2% to 0.6732 at the lows for the day. The latter is continuing to see a rejection of its 200-day moving average play out for now.</p><p style=““ class=“text-align-justify“>In broader markets, equities are tentative with S&P 500 futures flat and Treasury yields are also mostly little changed at the long-end of the curve so far today.</p>

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

<ul><li>Today’s inflation data is quite positive</li><li>Rates are to rise to the point that it will restore inflation back to 2% target</li></ul><p style=““ class=“text-align-justify“>He is one of the few to mention any talk about a top in terms of the tightening cycle. The others tend to steer clear of any clear line/area when it comes to the supposed terminal rate. As for his take that the inflation data today is „quite positive“, he probably should take a look at the core reading. Pfft.</p>

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

<p style=““ class=“text-align-justify“>While the headline annual inflation declined more than estimated, as was the case with the German, French, and Italian readings this week, core annual inflation actually jumped higher in December as seen <a target=“_blank“ href=“https://www.forexlive.com/news/eurozone-december-preliminary-cpi-92-vs-97-yy-expected-20230106/“ target=“_blank“ rel=“follow“>here</a>.</p><p style=““ class=“text-align-justify“>That will offer the ECB no respite in their fight against inflation, with rising price pressures becoming more embedded in other parts of the economy. As mentioned yesterday, such tentative signs of slowing inflation (via the headline) <a target=“_blank“ href=“https://www.forexlive.com/news/tentative-signs-of-slowing-inflation-not-going-to-change-the-ecbs-mind-20230105/“ target=“_blank“ rel=“follow“>isn’t going to change the ECB’s mind</a> – at least not yet.</p>

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

<ul><li>Economic confidence 95.8 vs 94.7 expected</li><li>Prior 93.7</li><li>Industrial confidence -1.5 vs -1.2 expected</li><li>Prior -2.0</li><li>Services confidence 6.3 vs 3.5 expected</li><li>Prior 2.3</li></ul><p style=““ class=“text-align-justify“>Amid a better economic showing during the winter, helped by milder weather conditions, euro area economic sentiment improved but the outlook remains subdued as recession risks are still on the cards. Of note, consumer inflation expectations declined further to 23.7 in December – down from 30.1 in November.</p>

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

<ul><li>Prior -1.8%</li></ul><p style=““ class=“text-align-justify“>Euro area retail sales picked up by more than expected in November, owing to more sales of fuel at petrol stations. That comes as energy prices come off further in the region amid milder weather conditions during the winter.</p>

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

<p>Market picture</p><p class=“MsoNormal“>Bitcoin
failed to break the $17K mark on Wednesday and has rolled back to $16.77K at
the time of writing. Price fluctuations remain more than subdued. BTC remains
slightly above its 50-day moving average (50-DMA). As capturing a critical
trending level has yet to encourage more buyers, it is worth looking cautiously
at the dynamics of the coming days.</p><p class=“MsoNormal“>Bitcoin was
able to touch a bottom at $16,000, signalled by a rise in the number of losing
addresses on the network, which exceeded 50% by the end of December, according
to a Coinbase report. The situation was similar in January 2015 and 2019, which
saw BTC bottom in previous cycles of decline.</p><p class=“MsoNormal“>The
situation in Ethereum is more optimistic, as it rallied powerfully yesterday on
a break of its 50-day average and is maintaining most of those gains on
Thursday morning. In addition, in ETHUSD, the 200 and the 50 SMA have already
turned upwards, which is one of the signs that the trend is changing. However,
we still need confirmation.</p><p>News background</p><p class=“MsoNormal“>Ripple CEO
Brad Garlinghouse expressed hope that US regulators will achieve regulatory
clarity on cryptocurrency regulation in 2023. In his view, the main problem is
that the US reference various past bills, but it is better to start from
scratch.</p><p class=“MsoNormal“>Sam
Bankman-Fried, the founder of failed cryptocurrency exchange FTX, has refused
to plead guilty to eight charges. Bloomberg notes that refusing to plead guilty
will give Bankman-Fried more information about the evidence against him. A
trial is set for October.</p><p class=“MsoNormal“>The world’s
second cryptocurrency exchange Coinbase will pay a $100 million fine.
Regulators note that the KYC requirement was followed formally by the exchange
and that the information provided by the user was not correctly verified when registering
a new client.</p><p class=“MsoNormal“>This article was written by <a target=“_blank“ href=“https://www.fxpro.com/“ target=“_blank“ rel=“follow“>FxPro’</a>s Senior Market Analyst Alex
Kuptsikevich.</p>

This article was written by FxPro FXPro at www.forexlive.com.

<ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/germany-december-preliminary-cpi-86-vs-91-yy-expected-20230103/“ target=“_blank“ rel=“follow“>Germany December preliminary CPI +8.6% vs +9.1% y/y expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/france-december-preliminary-cpi-59-vs-64-yy-expected-20230104/“ target=“_blank“ rel=“follow“>France December preliminary CPI +5.9% vs +6.4% y/y expected</a></li></ul><p style=““ class=“text-align-justify“>The saying is that central banks will look to stick with their prevailing argument/narrative for as long as they can get away with it, and that will apply again to the ECB as we kick start the new year. I mean, you don’t have to look too far back to be reminded of how stubborn they were in insisting that inflation was „transitory“. Ah, those were much simpler times.</p><p style=““ class=“text-align-justify“>The softer German and French (as well as Italian) consumer price inflation reports this week does make for an argument that perhaps the ECB might not have to be too hawkish, that is if inflation pressures are starting to cool.</p><p style=““ class=“text-align-justify“>But it is best to be reminded that a lot of this is helped by milder weather conditions in Europe during the winter and also the fact that energy prices have come off the boil and sunk back to levels before the whole Russia-Ukraine conflict – at least for now.</p><p style=““ class=“text-align-justify“>That said, this development will take time to make its way back to more core measures of inflation and with that being more sticky and overall inflation being well above the ECB’s 2% target still, policymakers have very good reason to keep pursuing their current stance.</p><p style=““ class=“text-align-justify“>The window might be closing for the ECB considering the rise in recession risks but the recent softness in energy prices have certainly helped to minimise the severity of the downturn towards the end of last year.</p><p style=““ class=“text-align-justify“>That will provide some comfort and added flexibility for policymakers to keep running with the ongoing hawkish theme, so don’t expect the latest set of inflation numbers this week to materially change that.</p>

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

<p style=““ class=“text-align-justify“>We’re seeing more tentative tones after the flow-driven moves to start the new year, with broader market sentiment also not hinting at much today. The dollar moved up a little to start the session but is now sitting little changed and more mixed as we slowly move towards North America trading.</p><p style=““ class=“text-align-justify“>USD/JPY is flat at around 132.57 following a run up to 132.90 earlier while GBP/USD is still down 0.3% to 1.2020 but off its earlier low of 1.2000 at least. Elsewhere, AUD/USD is down 0.1% to 0.6825 after having touched 0.6800 earlier and USD/CAD is up 0.2% to 1.3500 but off the high of 1.3527 earlier.</p><p style=““ class=“text-align-justify“>The euro continues to be more resilient, with EUR/USD up 0.1% to 1.0611 though the change is not anything significant.</p><p style=““ class=“text-align-justify“>Looking at other markets, equities are tepid with US futures flat and European indices marginally lower on the day. A lack of drive in the bond market also isn’t helping with 10-year Treasury yields flattish at around 3.71% at the moment.</p><p style=““ class=“text-align-justify“>As mentioned earlier, it seems like we do have to wait until after tomorrow’s US non-farm payrolls for markets to sort out their feet and get settled in – following the hustle and bustle in the past two days.</p>

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

<ul><li>Prior -2.9%</li><li>PPI +27.1% vs +27.5% y/y expected</li><li>Prior +30.8%</li></ul><p style=““ class=“text-align-justify“>The drop in producer prices in November was largely to do with the energy sector (-2.2%) with intermediate goods (-0.4%) also showing a marginal decline. Elsewhere, the prices for durable consumer goods (+0.2%), capital goods (+0.3%) and non-durable consumer goods (+0.6%) all moved higher. If you exclude energy, prices for the total industry actually increased by 0.1%.</p>

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

<ul><li>Composite PMI 49.0 vs 49.0 prelim</li></ul><p style=““ class=“text-align-justify“>Little change to the initial figures as the UK services sector flatlining more or less with overall business activity marginally lower in the final month of last year. The good news is that price pressures are lower but they do remain high from a historical perspective. S&P Global notes that:</p><p style=““ class=“text-align-justify“>“UK service providers ended the year with another downturn in new orders as strong inflationary pressures and worries about the economic outlook sapped demand. Overall levels of business activity fell only fractionally, despite an exceptionally challenging business environment and spending cutbacks due to cost of living difficulties. </p><p style=““ class=“text-align-justify“>“Stalling recruitment and lower backlogs of work added to signs that service sector companies are now experiencing fewer capacity pressures. Business optimism has recovered from the lows seen in the wake of last September’s ‚mini Budget‘, but many firms are braced for a sustained period of subdued demand in 2023. </p><p style=““ class=“text-align-justify“>“Around 40% of the survey panel expect a rise in business activity over the next 12 months, while 16% forecast a decline. Survey respondents commented on squeezed disposable incomes, elevated recession risks and a housing market downturn as key factors likely to constrain demand in the year ahead. Although service providers widely noted concerns about global economic headwinds and stubbornly high <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a>, there were also many reports citing positivity about factors within their control, including forthcoming product launches, expansion into new markets and planned business investment.“</p>

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