Daily Forex News by XtreamForex.com

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EUR/GBP Regains Ground, Nearing Mid-0.8600 Range in Response to UK Inflation Data

The European currency pair EUR/GBP witnessed a modest rebound in the early hours of the European market session on Wednesday, as it climbed towards the mid-0.8600 territory, a notable recovery from its recent slump. The upswing in the pair was primarily fueled by a weaker-than-expected set of inflation figures from the UK, which put downward pressure on the British Pound and conversely offered a boost to the EUR/GBP exchange rate. As trading progressed, the pair was observed to be exchanging hands near 0.8645, marking an increase of 0.21% within the day’s trading activities.

In a surprising turn, the UK’s latest inflation report, disseminated by the Office for National Statistics (ONS), recorded a month-over-month (MoM) Consumer Price Index (CPI) decline of 0.2% in November, deviating from the flat rate previously reported and falling short of the modest 0.1% rise forecasted. On an annual basis, inflation climbed by 3.9%, a significant drop from the preceding value of 4.6% and below the anticipated consensus of 4.4%. A more focused view on the Core CPI, which strips out the more volatile components such as food and energy prices, reflected a deceleration to 5.1% in November from October’s 5.7%, not aligning with the market’s projected figure of 5.6%. This softer inflation outlook led to the Sterling losing ground against the Euro, providing momentum for the EUR/GBP currency pair.

Further complicating the monetary landscape, Sarah Breeden, Deputy Governor of the Bank of England (BoE), conveyed on Tuesday that the institution had not charted a fixed trajectory for interest rate adjustments, emphasizing the need for a continued restrictive policy stance to manage inflationary pressures effectively.

Adding to the broader economic context, data published by Eurostat revealed that the Eurozone experienced weaker inflation in November, attributed mainly to declining energy prices. Despite this easing, Christine Lagarde, President of the European Central Bank (ECB), cautioned that inflationary pressures could intensify in December, spurred by colder weather conditions leading to increased energy demand and higher prices. The ECB also acknowledged that the evolving challenges posed by climate change would inevitably complicate the monetary policy framework.

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Decline in Asian Stock Markets as Wall Street Pullback Concludes Historic Surge

The recent downturn in Asian stock markets marks a significant shift from the record highs that Wall Street had been experiencing, signaling a more cautious stance from investors. The pullback reflects a recalibration of expectations following a series of less-than-stellar corporate earnings reports and growing concerns that the market’s accelerated growth might not be sustainable. 

In Japan, the Nikkei 225 index suffered a 1.6% decline, closing at 33,140.47. The downward trend was led by Toyota, the prominent Japanese automaker, which witnessed a drop of up to 4% in its stock value. This decline was, in part, a reaction to the company’s announcement of a major recall involving 1 million vehicles due to a malfunctioning airbag issue, which increased the potential risk of injuries to passengers.

This news was compounded by revelations that Daihatsu, a subsidiary of Toyota specializing in small cars, had halted vehicle shipments both domestically and internationally. An investigation had uncovered inadequate safety testing for 64 car models, some of which were manufactured for other major brands like Mazda and Subaru. The seriousness of the situation was underscored by a raid conducted by Japanese transport ministry officials on Daihatsu’s offices.

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GBP/USD Remains Over 1.2800 as USD Weakens, Eyes on US Jobless Claims

The British Pound (GBP) maintains its strength against the US Dollar (USD), persistently trading above the pivotal 1.2800 level amidst a period of USD softening, with market participants keenly awaiting the release of US jobless claims data for further direction.

During the Asian trading session on Thursday, the GBP/USD currency pair saw a continued ascendancy beyond the 1.2800 threshold. A combination of reduced inflationary pressures within the American economy and the Federal Reserve’s (Fed) dovish stance has contributed to the depreciation of the US Dollar, thus favoring a rise in the GBP/USD exchange rate. At the time of this update, the pair is valued at 1.2810, marking a slight increase of 0.09% from the previous close.

Investor sentiment towards the Greenback is currently subdued, with the market largely convinced that the Fed is on the brink of implementing rate cuts. The CME Fedwatch tool evidences this belief, showing a more than 88% likelihood of rate reductions commencing in March 2024, and anticipates over 150 basis points in cuts throughout the next calendar year.

Conversely, the Bank of England (BoE) has signaled that rate decreases are not imminent within the United Kingdom. The BoE has upheld its interest rate at the current 5.25% during three consecutive meetings, suggesting a more cautious approach to monetary policy adjustments. Despite the central bank’s stance that discussions of rate cuts are premature, financial markets are betting on a potential reduction in rates by May of the following year.

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Stock Futures Creep Upward in 2023’s Final Trading Session as S&P 500 Nears Record High

As the final trading day of 2023 dawned, stock futures edged higher, signaling a potentially strong year-end close with the S&P 500 flirting with a record high. S&P 500 futures climbed by 0.1%, with a similar modest increase seen in the Nasdaq-100 futures. The Dow Jones Industrial Average futures inched up 28 points, reflecting a subdued optimism in the market. The S&P 500, less than 0.5% away from a new record, hinted at a year capped by a robust rally, particularly reinforced in the year’s final months.

This year has been marked by a remarkable recovery and resilience in stock markets. The Federal Reserve’s indication of a halt in rate hikes and the potential for rate cuts in the upcoming year catalyzed a shift in sentiment. This was evidenced by the 10-year Treasury yield’s significant drop from over 5% to under 3.9%. The prospect of a ‘soft landing’ for the U.S. economy, averting a recession, has further buoyed investors’ confidence, contributing to a broadening market rally in the fourth quarter.

December has been notably strong for smaller companies, with the Russell 2000 index surging nearly 14%, setting it on course for its best month since November 2020. This broadening rally is not just confined to small caps; the industrial-heavy Dow has also been hitting a series of record highs. According to Ryan Detrick, chief market strategist at Carson Group, a surge of 10% or more in the final two months historically suggests a bullish outlook for stocks into the new year.

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EUR/GBP Stays Near 0.8670 Before German Employment Data Release

During the early European trading hours on Wednesday, the EUR/GBP pair is exhibiting a narrow trading pattern, oscillating between 0.8665 and 0.8675. Market participants are keenly awaiting the release of German employment statistics for December, with the unemployment rate projected to stabilize at 5.9%. As of the current moment, the pair is hovering around 0.8670, marking a slight decline of 0.02% for the day.

This comes against the backdrop of a weakening UK manufacturing sector. In December 2023, the UK’s S&P Global Purchasing Managers’ Index (PMI) recorded a downturn, registering at 46.2, a slight drop from its previous 46.4 and falling short of market expectations. This downturn is part of a broader negative sentiment surrounding the British economy, amid concerns of a looming technical recession. Such economic pressures have exerted selling momentum on the British Pound (GBP), providing a comparative advantage to the EUR/GBP pair.

Conversely, the Eurozone has shown a marginally positive trend in its manufacturing sector. The HCOB Manufacturing PMI for the region slightly increased to 44.4 in December 2023, up from November’s 44.2, surpassing the anticipated figures. Similarly, the German Manufacturing PMI demonstrated an unexpected rise, reaching 43.3 in December, improving from the prior 43.1. These indicators suggest a relative strengthening in the Eurozone’s manufacturing activities, contributing positively to the Euro’s performance against the GBP.

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Asian Markets Decline Following Federal Reserve Minutes, with China at the Forefront

In the Asian financial markets, stocks experienced a downturn, with China’s market fragility contributing significantly to the cautious sentiment following revelations from the Federal Reserve’s meeting minutes. These minutes indicated a likelihood of persistently high interest rates, dampening investor enthusiasm.

As this information settled, a key index tracking Asian stocks continued its decline, marking a third consecutive session of losses. This downtrend was mirrored across various major markets from Australia to South Korea, with Chinese stocks notably experiencing a three-day downward trajectory. Even Japan’s Topix Index, which saw initial gains in its first trading session of the new year following a holiday break, could not escape the overall bearish mood and reversed its early gains.

In the United States, futures remained unchanged during Asian trading hours, reflecting the hesitation in the markets after the S&P 500 concluded Wednesday with a 0.8% decrease. This downturn extends a series of losses initiated in the last trading session of 2023. Similarly, the Nasdaq 100 witnessed a 1.1% drop, marking its fourth consecutive day of declines and the longest losing streak observed in two months.

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GBP/USD Ascends Towards 1.2700 Prior to US Nonfarm Payrolls Announcement

The GBP/USD exchange rate has been on an upward trajectory, reaching heights around 1.2690, as market activities ramp up during the Friday Asian trading session. This marks the third consecutive day of gains for the Pound, which has benefited from a streak of favorable economic reports from the United Kingdom. The rise, however, has been somewhat restrained by parallel positive economic releases from the United States.

In the UK, a surge in consumer credit was observed, with individuals’ borrowing increasing to £2.005 billion in November, up from a revised figure of £1.411 billion. Economic indicators such as the S&P Global/CIPS Composite Purchasing Managers’ Index (PMI) for December also painted an optimistic picture, climbing to 52.1 from a previous value of 51.7. The Services PMI followed suit, advancing to 53.4 from 52.7.

Yet, the British Pound is not without its challenges. It faces potential headwinds due to a broadly pessimistic economic outlook. Business leaders across the UK have been vocally pressing the Bank of England for prompt interest rate cuts to provide a lifeline to the weakening economy. This sentiment is echoed in the Institute of Directors Economic Confidence Index, which highlights a persistent erosion in optimism from British directors about the country’s economic future over the next year.

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Australian Dollar’s Gains Reduced Amid Strengthening US Dollar, Attention on Australian CPI

The Australian Dollar (AUD) slightly reduced its intraday gains as the US Dollar began to recover its recent losses on Tuesday. The AUD/USD pair, however, is still finding support due to a general improvement in risk sentiment. This shift in mood is partly influenced by remarks from members of the US Federal Reserve (Fed), who have hinted at the possibility of interest rate cuts by the end of 2024. Further buoying the Aussie Dollar is Australia’s positive economic data.

Recently released figures from the Australian Bureau of Statistics showed an encouraging trend. The seasonally adjusted Retail Sales for November increased by 2.0%, surpassing the forecasted 1.2% rise and recovering from a previous decline of 0.2%. Additionally, Building Permits for the month showed a positive change, reporting a 1.6% increase compared to the earlier 7.5%, against the anticipated 2.0% decrease. These developments come ahead of Wednesday’s release of the Monthly Consumer Price Index data, which is expected to provide further insights into the Reserve Bank of Australia’s (RBA) policy direction. Despite this positive data, the RBA is not expected to cut rates in its forthcoming February meeting.

In contrast, the US Dollar Index (DXY) is struggling due to a decrease in US Treasury yields. The risk-on market sentiment has been further fueled by the Fed members’ dovish comments, exerting pressure on the US Dollar.

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USD/CAD Falters Below 1.3400, Stays Under Recent Multi-Week Peak

The USD/CAD currency pair experienced a slight uptick, nearing the 1.3400 level as the European session commenced on Wednesday. Despite this increase, the pair remained just shy of the multi-week peak it had achieved on the preceding day, Tuesday.

The strength of the US Dollar is largely attributed to the robust yields of US Treasury bonds, which have been sustaining near a three-week apex since last Friday. Currently, the 10-year US government bond yield is staying firm above the 4.0% mark. This higher yield mirrors a shift in market sentiment, indicating a lessened expectation for a forceful policy loosening by the Federal Reserve (Fed). Such a financial landscape bolsters the US Dollar, providing a supportive backdrop for the USD/CAD currency pair.

Contrastingly, the pair’s upward trajectory is somewhat restrained by a continued interest in Crude Oil purchases, spurred by various supply-related anxieties. A series of geopolitical escalations in the Red Sea region, coupled with a halt in production at Libya’s most significant oil field, and a notable decrease in the US’s crude oil stocks, are key factors in this trend. These elements collectively prop up Crude Oil prices, which in turn benefits the Canadian Dollar (Loonie), given its status as a commodity-linked currency. Consequently, this dynamic imposes a ceiling on the potential gains for the USD/CAD pair.

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EUR/GBP Reduces Advances, Approaching 0.8600 Before ECB Economic Bulletin Release

The EUR/GBP currency pair experienced a halt in its two-day upward trajectory during the early European trading session on Thursday. Trading around the 0.8600 level, the pair witnessed a slight pullback from its weekly peak of 0.8620, marking a notable shift in its recent performance.

This change in the EUR/GBP’s dynamics can be attributed to several key economic statements and forecasts. Luis de Guindos, Vice President of the European Central Bank (ECB), made a significant remark on Wednesday, suggesting that the eurozone might have faced a recession in the last quarter. He also highlighted that the short-term economic prospects for the region appear subdued. This statement casts a shadow over the euro’s strength, influencing the currency pair.

Adding complexity to the eurozone’s economic outlook, Isabel Schnabel, a member of the ECB, commented on the central bank’s current strategies to combat inflation. She acknowledged the ongoing geopolitical tensions as a potential factor that could further fuel inflationary pressures. This insight underscores the delicate balancing act the ECB faces in its monetary policy decisions.

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EUR/USD Stays Under 1.1000 as Market Anticipates US PPI Data Release

The EUR/USD currency pair maintains its positive stance, displaying resilience against a renewed demand for the US dollar (USD) in the early Asian trading session on Friday. Currently, the major currency pair is trading at 1.0983, marking a modest gain of 0.11% for the day. This uptick is largely attributed to a risk-on sentiment prevailing in the market, as investors eagerly await key economic data from the United States.

On Thursday, the US Labor Department released data indicating that Initial Jobless Claims for the week ending January 6 had dropped to their lowest since mid-October. The figure decreased by 1,000 to 202,000, slightly down from the previous week’s revised count of 203,000. This decline suggests a strengthening labor market, a critical factor in economic assessments and monetary policy decisions.

Inflation figures also painted a notable picture. The US Consumer Price Index (CPI) for December reported a year-over-year increase of 3.4%, exceeding both the previous 3.1% reading and the market consensus of 3.2%. The Core CPI, which strips out the volatile food and energy prices, registered a 3.9% year-over-year rise in December, surpassing the expected 3.8%. These inflation metrics are closely monitored as they significantly influence the Federal Reserve’s monetary policy. Current market speculation, as per CME Group’s FedWatch tool, indicates about a 64% chance of a rate cut by the Fed in March, a slight decrease from last week’s expectations.

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USD/CAD Stays Below 1.3400, Focus on BoC Business Outlook Survey

During early European trading on Monday, the USD/CAD pair has been unable to break above the 1.3400 level. This stagnation can be attributed to a combination of a weakening US Dollar (USD) and disappointing US Producer Price Index (PPI) data. Currently hovering around 1.3391, the pair has seen a modest gain of 0.19% over the course of the day.

The market’s expectations for a more dovish Federal Reserve (Fed) have been on the rise. Data from the World Interest Rate Probability (WIRP) indicates that the probability of a rate cut at the Fed’s March meeting has jumped from 75% at the beginning of last week to nearly 85%. Furthermore, the swaps market is now anticipating around 175 basis points (bps) of easing from the Fed this year, a significant increase from less than 150 bps expected earlier. The upcoming release of the US December Retail Sales data on Wednesday is garnering significant attention, with forecasts predicting a monthly increase of 0.4%, up from November’s 0.3%.

In Canada, expectations are mounting for the Bank of Canada (BoC) to reverse its course of rate hikes and begin cutting interest rates as early as this spring. Current market pricing, as per WIRP, fully anticipates a rate cut at the BoC’s April meeting, with a total of nearly 150 bps in cuts expected for the year. The upcoming Canadian Consumer Price Index (CPI) for December, set to be released on Tuesday, is eagerly awaited as it could provide further insights into the BoC’s future monetary policy direction. Analysts are forecasting the headline inflation rate to rise to 3.3% year-over-year, up from 3.1% in November.

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WTI Rises to $72.70 Amid Supply Disruptions, Strikes Near US Consulate in Iraq

West Texas Intermediate (WTI) crude oil prices are showing signs of recovery, trading around $72.70 per barrel during the Asian session on Tuesday. This rebound comes after recent losses, driven by a series of geopolitical events affecting global oil supply routes and security concerns.

A key factor in the price surge is the ongoing supply disruptions in the Red Sea. The region has seen an increase in maritime security threats, primarily due to attacks by Yemen’s Houthi movement. These security concerns have forced many shipping vessels to alter their usual routes, leading to higher shipping costs and longer transit times for crude oil transportation. This disruption is significantly impacting the global oil supply chain, as the Red Sea is a crucial route for oil transportation.

In response to these threats, the US-led Combined Maritime Forces (CMF), based in Bahrain, issued an advisory last Friday. They warned all maritime vessels to avoid the Bab al-Mandab Strait, a key maritime chokepoint, highlighting the severity of the situation.

Further escalating tensions, Iranian state media reported that the Islamic Revolutionary Guard Corps (IRGC) launched missile strikes near the US Consulate in Erbil, northern Iraq. The missiles reportedly targeted areas believed to be espionage centers and bases for anti-Iranian groups. This development adds to the regional instability and raises concerns over potential broader conflicts.

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NZD/USD Rebounds Near 0.6150 After Chinese Data, Ending Two-Day Decline

During the Asian trading session on Wednesday, the NZD/USD currency pair saw a modest uptick. Despite mixed economic signals from China, the pair, often viewed as a proxy for Chinese economic performance, experienced some growth. Investors are now keenly awaiting the US Retail Sales data, expected later in the day, for further direction. Currently, the NZD/USD is trading at 0.6150, marking a 0.22% increase for the day.

In a detailed look at the Chinese economic data, the National Bureau of Statistics of China released figures indicating a mixed economic scenario. December’s Industrial Production in China saw a year-over-year increase of 6.8%, slightly above both the expected and previous figure of 6.6%. However, Retail Sales for the same month fell to 7.4% from a prior 10.1%, underperforming against the market consensus of 8.0%. This decline in Retail Sales suggests a potential slowing in consumer spending, a vital component of economic health.

The Gross Domestic Product (GDP) data from China also painted a complex picture. For the fourth quarter, China’s GDP expanded by 5.2% on an annual basis. This growth rate, while an improvement from the 4.9% expansion in the third quarter, was below the anticipated 5.3%. On a quarter-over-quarter basis, the GDP growth was 1.0% in Q3, aligning with expectations but down from the previous 1.3%.

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U.S. Stock Market Declines as Robust Economic Data Delays Expectations for Interest Rate Cuts

U.S. stocks experienced a downturn while bond yields surged on Wednesday, as the market absorbed robust economic data that appears to challenge expectations for quick interest rate reductions by the U.S. Federal Reserve.

The leading stock indices closed with losses, reacting to unexpectedly high holiday spending figures. Retail sales in December showed a significant 0.6% increase, surpassing economists’ projections of a 0.4% rise. This surge in consumer spending, a key driver of the U.S. economy, contributed to a noticeable climb in the 10-year Treasury yield, which ascended by three basis points to reach 4.104%.

This strong consumer expenditure has been a cornerstone in sustaining the U.S. economy, ensuring a resilient GDP growth in the face of tightening financial conditions. However, this latest set of data might increase the likelihood of the Federal Reserve maintaining a stringent monetary policy. The Fed has been closely monitoring for signs of economic slowdown and a definitive reduction in inflation rates. Adding to this complexity, the Consumer Price Index data for December indicated a higher-than-anticipated acceleration in inflation, climbing by 3.4% on a year-over-year basis.

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USD/CHF Approaches 0.8680 as SNB Chairman Expresses Swiss Franc Concerns

USD/CHF is maintaining its impressive upward trend that commenced on January 11, driven in part by concerns expressed by Swiss National Bank (SNB) Chairman Thomas Jordan regarding the appreciating Swiss Franc (CHF). Jordan’s remarks, delivered at the World Economic Forum (WEF) in Davos, focused on the potential impact of the CHF’s appreciation on the SNB’s ability to maintain positive inflation in the Swiss domestic economy. These comments have played a role in driving the USD/CHF pair slightly higher, with trading hovering around the 0.8680 mark during the Asian session on Friday.

The Swiss Franc experienced rapid appreciation towards the end of 2023, prompting the SNB to sound the alarm. The central bank emphasized that excessive strengthening of the CHF could pose a significant threat to the Swiss economy, potentially leading to a swift decrease in inflation. This warning has placed market participants on high alert, as they await key data releases such as Swiss Producer and Import Prices, which could provide further insights into the direction of consumer price inflation in Switzerland.

Meanwhile, the US Dollar Index (DXY) has been holding steady, maintaining recent gains and showing a positive bias. This strength in the USD is primarily attributed to robust US Treasury yields. The DXY is currently trading around the 103.40 level, and the 2-year and 10-year yields on US bond coupons stand at 4.36% and 4.16%, respectively, at the time of writing.

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USD/CHF Nears 0.8680 Amid Hawkish Fed Stance

The USD/CHF currency pair has embarked on a remarkable winning streak since its journey began on January 11. As of the Asian trading hours on Monday, it finds itself trading in close proximity to the 0.8680 mark. While this uptrend is a testament to the strength of the pair, it’s not without its challenges and dynamics that demand attention.

One significant factor affecting the USD/CHF exchange rate is the mounting anticipation among market participants regarding potential policy rate adjustments by the US Federal Reserve (Fed) in the year 2024. This expectation hinges on the belief that the Fed may opt for more substantial rate reductions compared to major central banks worldwide. This sentiment has the potential to exert downward pressure on the US Dollar (USD), impacting the USD/CHF pair.

However, it’s worth noting that amidst this backdrop of uncertainty, hawkish comments from Federal Reserve (Fed) members have emerged as potential stabilizers for the US Dollar. San Francisco Fed President Mary Daly, in her remarks delivered on a Friday, emphasized the central bank’s recognition of the substantial work required to achieve the goal of reining in inflation and returning it to the 2.0% target. This suggests a measured approach to policy changes rather than abrupt rate cuts, which could help mitigate potential losses for the USD.

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Asian Stocks Show General Growth as Chinese Market Rally Picks Up Again

In the dynamic landscape of Asian financial markets, there has been a notable upturn, primarily driven by significant positive movements within mainland China’s stock sector. This surge is attributed to the announcement of a new market support initiative, generating optimism among investors. Chinese stocks, particularly those listed in Hong Kong, have shown a remarkable increase of 3.2%, with the CSI 300 onshore benchmark reversing its initial downtrend to register a gain of 0.4%. This turnaround is largely a result of the Chinese government’s efforts to inject approximately 2 trillion yuan (equivalent to $278 billion) into the market. This funding, primarily sourced from offshore accounts of state-owned enterprises, is intended to stabilize the stock market by purchasing shares domestically.

Market experts, such as Daisy Li from EFG Asset Management HK Ltd., express a hopeful sentiment regarding the impact of the stabilization fund, especially considering the previous challenges faced by the market. This positive outlook is further supported by the gains observed in various currencies. The offshore yuan has appreciated by 0.4% against the US dollar, and the Australian dollar has also seen an increase of 0.5%.

Additionally, the Japanese yen continued to strengthen following remarks from Bank of Japan Governor Kazuo Ueda. Ueda acknowledged the increasing likelihood of the central bank achieving its inflation targets, although he noted the complexity in determining the exact timing for shifting away from the current ultra-loose monetary policy. These comments came in the backdrop of the Bank of Japan’s decision to maintain its policy settings and revise its economic forecasts.

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NZD/USD Drops Below 0.6100 After Brief Post-CPI Gains

The NZD/USD currency pair, commonly known as the Kiwi, has been facing challenges in leveraging its modest gains observed during the Asian trading session on Wednesday. The pair is hovering precariously close to a nearly two-month low, around the 0.6065-0.6060 region, a threshold it had encountered just the day before. Currently, the pair is trading slightly below the 0.6100 mark, showing little change over the day. However, a blend of economic factors may provide a buffer against more significant declines.

In a recent update, Statistics New Zealand disclosed a slowdown in domestic consumer inflation. The year-over-year rate dropped from 5.6% to 4.7% in the final quarter of 2023. Despite this deceleration, the inflation rate remains significantly higher than the Reserve Bank of New Zealand’s (RBNZ) target range of 1% to 3%. This persistent inflationary pressure reduces the likelihood of an imminent interest rate cut by the RBNZ. Such a scenario, coupled with a subdued performance of the US Dollar (USD), might offer some degree of support to the NZD/USD pair.

Conversely, the prospects for the US Dollar appear somewhat constrained, owing to expectations that the Federal Reserve (Fed) might not be quick to implement rate cuts, given the ongoing resilience of the US economy. This scenario is further compounded by geopolitical uncertainties, particularly in the Middle East, and a generally unstable global economic outlook. These factors collectively could bolster the USD, viewed as a safe-haven currency, and consequently limit the potential for significant gains in the risk-sensitive Kiwi.

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Gold Price Faces Difficulty Sustaining Gains, Awaits US GDP Data for New Momentum

The Gold price (XAU/USD) is exhibiting a slight upward trend in the early European trading session on Thursday. Despite this, the momentum remains tepid, with prices hovering near the weekly low reached the previous day. Investors appear cautious, opting to stay on the sidelines as they await the Advance US Q4 GDP growth figures. These figures are crucial as they could provide insights into the Federal Reserve’s (Fed) potential timeline for interest rate reductions. Any such adjustments by the Fed are likely to influence the trajectory of gold, a non-yielding asset, in the short term.

As the market gears up for this significant data release, the US Dollar (USD) is also under scrutiny. The USD has been struggling to gain substantial traction and remains below its peak since December 13, which was recorded on Tuesday. This relative weakness in the dollar is providing some degree of support to gold prices.

Additionally, the possibility of escalating geopolitical tensions in the Middle East is another factor bolstering gold’s appeal as a safe-haven asset. These tensions add to the complex global backdrop against which gold is currently being traded. However, the market’s reduced expectations for an aggressive policy easing by the Fed and anticipation of an early interest rate cut have contributed to keeping US Treasury bond yields at elevated levels. High yields on these bonds typically act as a deterrent for gold investments, as they offer returns, unlike the precious metal.

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