Bets for interest rate cuts in June by the Fed and ECB helped the pair. Investors expect the ECB to keep its rate unchanged next week. EUR/USD maintained the positive streak in the weekly chart. EUR/USD managed to clinch its second consecutive week of gains despite a lacklustre price action in the first half of the week, where the European currency slipped back below the 1.0800 key support against the US Dollar (USD). Fed and ECB rate cut bets remained in the fore It was another week dominated by investors' speculation around the timing of the start of the easing cycle by both the Federal Reserve (Fed) and the European Central Bank (ECB). Around the Fed, the generalized hawkish comments from rate-setters, along with the persistently firm domestic fundamentals, initially suggest that the likelihood of a "soft landing" remains everything but mitigated. In this context, the chances of an interest rate reduction in June remained well on the rise.  On the latter, Richmond Fed President Thomas Barkin went even further on Friday and suggested that the Fed might not reduce its rates at all this year. Meanwhile, the CME Group's FedWatch Tool continues to see a rate cut at the June 12 meeting as the most favourable scenario at around 52%. In Europe, ECB's officials also expressed their views that any debate on the reduction of the bank's policy rate appears premature at least, while they have also pushed back their expectations to such a move at some point in the summer, a view also shared by President Christine Lagarde, as per her latest comments. More on the ECB, Board member Peter Kazimir expressed his preference for a rate cut in June, followed by a gradual and consistent cycle of policy easing. In addition, Vice President Luis de Guindos indicated that if new data confirm the recent assessment, the ECB's Governing Council will adjust its monetary policy accordingly. European data paint a mixed outlook In the meantime, final Manufacturing PMIs in both Germany and the broader Eurozone showed the sector still appears mired in the contraction territory (<50), while the job report in Germany came in below consensus and the unemployment rate in the Eurozone ticked lower in January. Inflation, on the other hand, resumed its downward trend in February, as per preliminary Consumer Price Index (CPI) figures in the Eurozone and Germany. On the whole, while Europe still struggles to see some light at the end of the tunnel, the prospects for the US economy do look far brighter, which could eventually lead to extra strength in the Greenback to the detriment of the risk-linked galaxy, including, of course, the Euro (EUR). EUR/USD technical outlook In the event of continued downward momentum, EUR/USD may potentially retest its 2024 low of 1.0694 (observed on February 14), followed by the weekly low of 1.0495 (recorded on October 13, 2023), the 2023 low of 1.0448 (registered on October 3), and eventually reach the psychological level of 1.0400. Having said that, the pair is currently facing initial resistance at the weekly high of 1.0888, which was seen on February 22. This level also finds support from the provisional 55-day SMA (Simple Moving Average) near 1.0880. If spot manages to surpass this initial hurdle, further up-barriers can be found at the weekly peaks of 1.0932, noted on January 24, and 1.0998, recorded on January 5 and 11. These levels also reinforce the psychological threshold of 1.1000. In the meantime, extra losses remain well on the cards while EUR/USD navigates the area below the key 200-day SMA, today at 1.0828.

Pound Sterling turned south after facing rejection at 1.2700 against the US Dollar. US Nonfarm Payrolls and Powell's testimony to hog the limelight in the week ahead. Looking ahead, GBP/USD buyers stay hopeful whilst above the 200-day SMA at 1.2576. The Pound Sterling (GBP) returned to red against the US Dollar (USD), reversing the previous week's rebound. GBP/USD ran into offers once again near 1.2700, as the US Dollar (USD) paused its corrective downside. Pound Sterling eases as US Dollar stalls correction The Pound Sterling failed to sustain the previous week's upbeat momentum and gave into the modest rebound staged by the US Dollar, as the sentiment around the Greenback continued to be supported by the expectations of delayed interest rate cuts by the US Federal Reserve (Fed). The US Dollar paused its correction from three-month highs, despite softening Core Personal Consumption Expenditures - Price Index (PCE), as the probability for a June Fed rate cut remained more or less the same. The Fed's preferred inflation gauge aligned with estimates of 2.8% YoY in January but eased from December's 2.9% increase. The Greenback also drew support from the recent hawkish comments from several Fed policymakers, who continued to push back against bets for an early Fed policy pivot. Earlier this week, Kansas City Fed President Jeffrey Schmid, a new hawk, noted that the "Fed should be patient, wait for convincing evidence that inflation fight has been won." Fed Governor Michelle Bowman said on Tuesday that slower-than-expected progress on inflation has left her cautious about the monetary policy stance. Meanwhile, Atlanta Fed President Raphael Bostic said Thursday that the recent data shows the road back to the central bank's 2% inflation goal will be "bumpy." Chicago Fed President Austan Goolsbee, also speaking Thursday, said he expects rate cuts later this year but didn't specify when.  Markets are currently pricing in just about a 25% chance that the Fed could begin easing rates in May, much lower than an over 90% chance a month ago, according to the CME FedWatch Tool. For the June meeting, the probability of a rate cut now stands at about 65%, up from 60% at the start of the week. On the US data front, US Durable Goods Orders slumped by 6.1% in January while the CB Consumer Confidence index dipped to 106.7 in February. Both figures missed the market expectations. Meanwhile, US GDP was revised to an annual rate of 3.2% in the fourth quarter of 2023, from an initial estimate of 3.3% released last month. From the UK side, there were no high-impact economic data releases, and therefore, the focus remained on the American macro news for any trading impetus on the GBP/USD pair. The data from the US showed on Friday that the ISM Manufacturing PMI declined to 47.8 in February from 49.1 in January. This reading missed the market expectation of 49.5 and made it difficult for the USD to gather strength ahead of the weekend, allowing GBP/USD to stabilize above 1.2600. Week ahead: US Nonfarm Payrolls and Powell in focus GBP/USD traders gear up for another data-heavy economic calendar from the United States, with the central focus on the employment data and Fed Chair Jerome Powell's testimony. Monday is data-empty on both sides of the Atlantic, with the US ISM Services PMI and Factory Orders data likely to feature on Tuesday. On Wednesday, the US ADP Employment Change data and JOLTS Job Openings report will be eyed by investors, alongside the first day of Powell's testimony on the semi-annual Fed's Monetary Policy Report (MPR) before the House Financial Services Committee, in Washington DC. Also, of note will be the UK's Spring Budget announcement by Finance Minister Jeremy Hunt. The European Central Bank (ECB) will announce its policy decision on Thursday. The ECB event could have a EUR/GBP-driven "rub-off" effect on the Pound Sterling. However, the US Jobless Claims and day 2 of Powell's testimony will also impact the pair's near-term trading direction. Friday will feature the all-important US Nonfarm Payrolls and wage inflation data, which will be key to repricing the markets' expectations of the timing of the Fed rate cut. Besides, speeches from the Fed policymakers will continue to play their part in the GBP/USD price dynamics before the blackout period ahead of the next FOMC meeting begins on March 9. GBP/USD: Technical Outlook GBP/USD appears to be a "buy-the-dips" trade in the near term, as observed on the daily chart. The pair is clinging to the 21-day Simple Moving Average (SMA) at 1.2622 after having faced rejection at 1.2700 on multiple occasions. The 14-day Relative Strength Index (RSI) is sitting just beneath the 50 level, suggesting that GBP/USD could see some weakness ahead before buyers jump in. If the selling momentum gains traction, the pair could extend the weekly drop...

Gold climbed to a fresh one-month high above $2,050 this week. The technical outlook points to a slightly bullish tilt in the near term. February labor market data from the US could trigger a big reaction in XAU/USD. Gold (XAU/USD) gathered bullish momentum and reached its highest level since early February above $2,050 on Friday after spending the first half of the week consolidating in a tight channel. The near-term technical outlook for XAU/USD offers encouraging signs for buyers, but investors could ignore technical readings when reacting to February labor market data from the US next week. Gold price rose as US yields edged lower In the absence of high-tier macroeconomic data releases, the action in financial markets remained subdued at the beginning of the week and Gold closed the first two trading days with minor changes. The data from the US showed on Tuesday that Durable Goods Orders declined by 6.1% on a monthly basis, but this reading failed to trigger a noticeable reaction. On Wednesday, the US Bureau of Economic Analysis (BEA) announced that it revised the annualized Gross Domestic Product (GDP) growth to 3.2% from 3.3% in the initial estimate. The US Dollar (USD) came under modest selling pressure during the American trading hours and allowed XAU/USD to end the day in positive territory. Gold gathered bullish momentum on Thursday, when it touched its highest level in nearly a month at $2,050. Inflation in the US, as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, declined to 2.4% on a yearly basis in January, the BEA reported. This reading followed the 2.6% increase recorded in December and came in line with the market expectation. The Core PCE Price Index, the Federal Reserve's preferred gauge of inflation, rose 0.4% on a monthly basis, also matching analysts' estimates. The benchmark 10-year US Treasury bond yield declined below 4.3% with the immediate reaction to PCE inflation data and helped XAU/USD push higher. Some cautious remarks from Fed officials on the policy outlook, however, helped the USD hold its ground and limited Gold's upside ahead of the weekend. Atlanta Fed President Raphael Bostic noted that it might be appropriate to start reducing rates in summer, San Francisco Fed President Mary Daly argued that cutting rates too quickly could cause inflation to get stuck, and Cleveland Fed President Loretta Mester said that they can't expect last year's disinflation to continue. On Friday, Gold renewed its monthly high above $2,050 the US Treasury bond yields edged lower during the European trading hours. Gold price could extend uptrend on a soft US jobs report On Tuesday, the ISM Services PMI will be featured in the US economic docket. The headline PMI is forecast to hold above 50 in February and highlight an ongoing expansion in the service sector's business activity. In January, the Prices Paid Index of the PMI survey jumped to 64 from 56.7 in December, showing an acceleration in the input cost inflation. A similar increase in the inflation component in February could provide a boost to the USD and weigh on XAU/USD with the immediate reaction. The ADP Employment Change for February and January JOLTS Job Openings, to be released on Wednesday, will be the first employment-related data releases of the week. In January, private sector payrolls rose 107,000. A reading below 100,000 in ADP Employment Change could point to looser conditions in the labor market and weigh on the USD. As for the JOLTS report, the number of job openings has been fluctuating at around 9 million since October. Unless there is a significant change in this data, investors are likely to refrain from reacting ahead of Friday's February jobs report. In January, Nonfarm Payrolls surged by 353,000 and reaffirmed another pause in the Fed's policy rate in March. Strong Consumer Price Index and Producer Price Index readings for January, combined with the impressive labor market data, revived expectations for a further delay in the policy pivot. According to the CME FedWatch Tool, markets price in a 24% probability of a 25 basis points Fed rate cut in May and see a nearly 75% chance that the Fed will reduce the policy rate in June after staying on hold in March and May. A sharp drop in Nonfarm Payrolls growth, a reading below 150,000, could cause investors to reassess the possibility of a rate cut in May and trigger a sell-off in the USD with the immediate reaction. On the other hand, a print near 200,000 could be enough to reassure markets that the labor market is healthy enough for the Fed to delay the policy pivot until June. The market positioning suggests that the USD has some more room on the upside in this scenario. Fed Chairman Jerome Powell will present the Semiannual Monetary Policy...

EUR/USD stabilized above 1.0800 after closing in negative territory on Thursday. Inflation data from the Eurozone could drive the Euro's valuation. The US economic docket will feature ISM Manufacturing PMI for February. EUR/USD came under bearish pressure during the American trading hours on Thursday and closed the third consecutive day in negative territory. Although the pair manages to hold steady above 1.0800 on Friday, it could have a difficult time extending its recovery unless the Eurozone inflation data support the Euro. Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, declined to 2.4% on a yearly basis in January, the US Bureau of Economic Analysis reported on Thursday. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching analysts' estimate.  Hawkish comments from Federal Reserve (Fed) policymakers following the inflation data helped the US Dollar (USD) outperform its rivals and caused EUR/USD to turn south. Atlanta Fed President Raphael Bostic said that it might be appropriate to start reducing rates in summer, San Francisco Fed President Mary Daly argued that cutting rates too quickly could cause inflation to get stuck and Cleveland Fed President Loretta Mester noted that they can't expect last year's disinflation to continue.

Gold price sits at four-week highs of $2,051, eyeing a second straight weekly gain. US Dollar keeps the red with the Treasury yields after soft US Core PCE inflation data. Gold price confirmed a pennant breakout on the daily chart on Thursday. Gold price is consolidating near four-week highs of $2,051, gathering pace for the next push higher. A renewed weakness in the US Dollar (USD) alongside the US Treasury bond yields is prompting Gold buyers to take a breather ahead of another top-tier US economic data in the ISM Manufacturing PMI due later on Friday. ahead of the all-important data due later in the day. Gold price eyes US ISM PMI for further upside The US Dollar is seeing a fresh selling interest against its major counterparts after two straight days of gains, as risk sentiment remains in a sweeter spot on the final trading day of the week. Sluggish performance in the US Treasury bond yields could be also attributed to the underlying downbeat tone around the Greenback. Gold price is holding its three-day winning streak amid a broadly softer US Dollar and the US Treasury bond yields, also benefiting from the improvement in the Chinese services and manufacturing sector activity, as shown by the latest data from China's National Bureau of Statistics (NBS) and Caixin. China is the world's top Gold consumer. The NBS Non-Manufacturing PMI improved to 51.4 in February versus 50.7 in January, stronger than the estimation of 50.8. Further, China's Caixin Manufacturing Purchasing Managers' Index (PMI) rose to 50.9 in February when compared to the January reading of 50.8, above the market consensus of 50.6. Gold price rose more than 0.50% in Thursday's North American trading after the release of the US Core Personal Consumption Expenditures - Price Index (PCE) Index, which was aligned with estimates of 2.8% YoY in January but eased from December's 2.9% increase. Softening of the US Federal Reserve's (Fed) favorite inflation gauge toward its 2.0% target briefly knocked down the US Dollar while sending Gold price to the key $2,050 threshold. However, the upside in the Gold price was contained by the hawkish commentaries from the Fed policymakers. Atlanta Fed President Raphael Bostic said the recent data shows the road back to the central bank's 2% inflation goal will be "bumpy." Chicago Fed President Austan Goolsbee, also speaking Thursday, said he expects rate cuts later this year but didn't specify when.  Looking ahead, the focus remains on the US ISM Manufacturing PMI data and the end-of-the-week flows for fresh trading impetus in Gold price. The ISM PMI data will help shed more light on the Fed's timing of the interest rate cut. Markets are currently pricing in just about a 20% chance that the US Federal Reserve (Fed) could begin easing rates in May, much lower than an over 90% chance a month ago, according to the CME FedWatch Tool. For the June meeting, the probability of a rate cut now stands at about 65%. Gold price technical analysis: Daily– chart As observed on the daily chart, Gold price confirmed an upside break from a symmetrical triangle on Thursday after closing above the $2,034 key resistance. The 14-day Relative Strength Index (RSI) is holding comfortably above the midline, suggesting that there is more room for the upside. The immediate resistance is now seen at the four-week high of $2,051, acceptance above which on a daily closing basis could initiate a fresh uptrend toward the static resistance of $2,065. Further up, the $2,070 round level will be put to the test. On the other side, the initial demand area is seen at the previous two-week highs of $2,041, below which the 50-day Simple Moving Average (SMA) at $2,034 will be challenged. If Gold sellers manage to find a strong foothold below the latter, the 21-day SMA at $2,025 will be next on sellers' radars. Further down, the 100-day SMA at $2,014 could offer some temporary support to Gold buyers.

China's manufacturing sector continued its contraction for the fifth consecutive month, signalling ongoing sluggishness in the world's second-largest economy as Beijing prepares to unveil its annual growth target at the upcoming meeting of its always agreeable with President Xi parliament. The official manufacturing Purchasing Managers' Index (PMI) for February stood at 49.1, in line with the median forecast of analysts surveyed by Reuters. This figure was slightly lower than January's reading of 49.2; hence, the sector is still wallowing in contraction territory. On the other hand, the non-manufacturing PMI, which encompasses services and construction, recorded a reading of 51.4 and surpassed analyst expectations and marked an improvement from January's figure of 50.7 and, in no small part due to the policymaker's efforts to stabilize the property sectors. Still, The mixed performance across different sectors underscores the challenges policymakers face to get the demand side of the economy revving on all cylinders. While services and construction show signs of rebounding, the manufacturing sector continues to grapple with headwinds and subdued activity levels. The Yen remains in focus, with FX traders getting on and off the Bank Of Japan policy game of chance wheel. Outside of month-end Yen rebalancing swings, Governor Kazuo Ueda's overnight remarks added another twist to market rate hike expectations. Despite new momentum anticipating potential rate hikes, Ueda emphasized that the BoJ's price target remains elusive, indicating that the central bank is not ready to consider its first rate hike since 2007. In his statement following a meeting with a Group of 20 finance chiefs in Sao Paulo, Brazil, Ueda highlighted the importance of confirming whether the anticipated virtuous cycle between wages and prices has commenced. Hence, the Yen has returned over 100pb to the dollar in the past 12 hours. We did warn that volatility would pick up.

AUD/USD traded on the defensive and broke below 0.6500. Further weakness could drag spot to the 2024 lows. Retail Sales in Australia increased 1.1% MoM in January. AUD/USD added to Wednesday's decline and breached the key support at 0.6500 on the back of the firmer note in the US Dollar (DXY) on Thursday. Further loss of traction in the pair came amidst the increasing pick up in upside momentum in the Greenback, particularly after US inflation figures gauged by the PCE showed that disinflationary pressure remains well in place in the US economy, although comments from Fed officials continued to signal a potential rate reduction in June. In the meantime, the Aussie dollar suffered another slump in iron ore prices, which retreated sharply to levels last seen in late August near the $110 mark per tonne, always on the back of omnipresent concerns surrounding the still-absent economic rebound in China. Although potential stimulus measures in China may offer temporary support for a rebound, it is the sustained recovery news from the country that holds greater significance in providing stronger support to the Australian dollar and potentially initiating a more significant upward trend in AUD/USD. A revival in the Chinese economy is also expected to align with an uptick in commodity prices, which would further contribute to a stronger Australian currency. Regarding the Reserve Bank of Australia (RBA), it is hoped that the central bank's cautious approach should help alleviate substantial downward pressure on the AUD. The RBA is seen as one of the latest major central banks to initiate interest rate cuts, which contributes to this expectation. A look at the data releases Down Under show the Housing Credit expanded by 0.4% MoM in January, and preliminary Retail Sales rose by 1.1% on a monthly basis also in January. AUD/USD daily chart AUD/USD short-term technical outlook If sellers continue pushing stronger, AUD/USD initially confronts conflict near its 2024 bottom of 0.6452 (February 13). Breaking below this level might lead to a possible visit to the 2023 low of 0.6270 (October 26), followed by the round level of 0.6200 and the 2022 low of 0.6169 (October 13). On the upside, after clearing the weekly top of 0.6595 (February 22), the pair may retest the temporary 55-day SMA at 0.6623, which coincides with the late-January highs (January 30). A break above this range might lead to the December 2023 peak of 0.6871 (December 28), followed by the July 2023 high of 0.6894 (July 14) and the June 2023 top of 0.6899 (June 16), all before the important 0.7000 barrier. It is worth noting that the AUD/USD's downward bias should be minimized once it clears the crucial 200-day SMA at 0.6559 convincingly. According to the 4-hour chart, further retracements appear in place for the time being. The initial support level is 0.6442, followed by 0.6347 and 0.6338. On the other side, the 200-SMA aligns at 0.6554 before 0.6595 and 0.6611. Furthermore, the MACD fell below zero, and the RSI dropped to the proximity of 37.

Markets Amid persistent optimism surrounding artificial intelligence, Thursday saw the S&P 500 and Nasdaq Composite continue their ascent, marking a positive trend for the major averages as they headed towards a successful month for investors. This positive momentum persisted despite the release of the consensus PCE print. The personal consumption expenditures price index, considered the Federal Reserve's preferred inflation gauge, showed a 0.3% rise in January compared to December. Similarly, the core index, which excludes volatile food and energy prices, saw a 0.4% increase. These figures aligned with economists' expectations, and given the upward trajectory of stocks throughout the year; some investors perceived the absence of hotter-than-expected inflation news as a less problematic macro signal. Indeed, market participants continue to focus on the broader bullish sentiment, especially in sectors associated with artificial intelligence, which continues to drive the sustained upward trajectory of major market indices. This trend persists despite indications of sticky inflation at the beginning of the year. The resilience of investor optimism in sectors related to artificial intelligence underscores broader confidence in the potential for technological innovation to fuel economic growth and corporate performance. All in all, at the end of the day, it seems that investors were lathered in relief, especially those who were concerned that inflation would accelerate further, potentially leading the Fed to delay rate hikes for an extended period or, worse, to initiate rate increases again. The PCE warmer reality  While the quickest and warmest inflation PCE development in a year is likely not the ideal setup, it could have been worse. Leading up to the release, the BLS stirred controversy with an email sent to so-called "super users," indicating that the high reading on rental inflation in the January CPI release was partially attributed to the calculation method rather than actual inflation. This communication added a layer of complexity to the interpretation of the inflation data. This is an absolute PR comedy show. Following the email, which raised concerns among recipients regarding the calculation of rental inflation in the January CPI release, the agency attempted to retract its statement, urging recipients to disregard the previous communication. However, this attempt to rectify the situation came after the news spread, leading to confusion and speculation. Meanwhile, Bloomberg journalist Matthew Boesler encountered difficulties obtaining information as inquiries were redirected among government departments, raising questions about the reliability of everything the BLS is doing. The Federal Reserve has consistently emphasized its reliance on data to inform decisions regarding monetary policy. So, if the data is unreliable, where does that leave most who are not " super users"? Lathered in relief From a cross-asset perspective, the component in the PCE data still underscores the challenges the Fed may encounter in navigating monetary policy amid evolving inflationary conditions. Excluding energy and housing, services inflation surged by 0.6% last month compared to December. This type of inflation, often called "sticky" inflation, represents a significant challenge for the Fed and overall price dynamics. The 0.6% increase marks the most robust growth in services inflation since March of 2022, a notable period coinciding with the Federal Reserve's interest rate liftoff. Although the in-line core inflation readings might lather a bit of relief, especially as the event risk is now behind us, which can sometimes serve as a bullish catalyst on its own, it's essential to acknowledge that the warmer, bordering on hot inflation data underscores the prevailing belief that navigating the final stretch of managing inflation will likely be a challenging and uneasy journey for all. However, we join the prevailing belief that the direction of travel is lower. Forex markets 149.20 Given How Are You Left? If you are a dollar-yen trader like us, you should expect some volatile times leading up to the next Bank of Japan meeting as traders jump on and off the BoJ policy hamster wheel. As we suggested yesterday, if not for the constant and overly noisy PCE coverage, USDJPY would have traded closer to 149 ( 149.20 was the low post-PCE).  Still, given the noisy end-of-month rebalancing, especially with fully hedged funds needing to adjust Yen hedges after spectacular gains on Tokyo stocks this month, I would not read too much into mid-day New York price action that coincides with WMR London Fix, where month-end rebalance noise tends to crescendo  A drop below 140 USD JPY (135 is our H2 target) will also require support from the Fed to initiate rate cuts, narrowing the policy divergence with the Bank of Japan (BoJ). But currently, the recent series of robust US economic activity and inflation data at the beginning of this year challenges any bearish US dollar outlook. 

EUR/USD stays below 1.0850 in the European morning on Thursday. German and US inflation data will be watched closely by market participants. The pair faces key near-term support level at 1.0800. EUR/USD recovered from the weekly low it touched below 1.0800 and ended the day virtually unchanged on Wednesday. The pair fluctuates in a tight range near 1.0850 early Thursday as investors await key data releases. The data from France showed on Thursday that the Consumer Price Index (CPI) rose 0.9% on a monthly basis, surpassing the market expectation for a 0.7% increase. This reading helped the Euro edge higher in the early European session.

Markets Unless you were out caving, like Lando Norris was and missed out on when the Lewis Hamilton to Ferrari news broke, you likely heard that Equities hit fresh record highs last week in several markets from Europe to Japan. In North America, the rally was fuelled by a stellar earnings report by Nvidia on Wednesday, which sparked broader exuberance on AI's benefits and resulted in the largest single-day value creation event in US stock-market history. In classic melt-up fashion, a stampede of investors has been gobbling up virtually every investible asset with some attachment to Nvidia, leaving bewildered bears in the wake. While one might have anticipated some profit-taking on Friday, it may very well occur to some extent this week ahead of the PCE. Still, with call skew experiencing a crazy surge in demand as investors seek upside protection, it suggests that investors of all stripes could be coming around the idea that Nvidia is not a bubble. Indeed, we are only at the start of the runway, so it's conceivable that the AI plane has not yet taken full flight. Financial markets have adjusted their rates expectations, now pricing 75-100 basis points of Federal Reserve interest rate cuts for the year, a notable shift from the 150-175 basis points favoured just a few weeks ago. Risk-sensitive assets typically experience downward moves when rate cut expectations fizzle; however, in the equity markets, the prevailing narrative is outperformance driven by the technology sector, overruling normal market dynamics. All the talk is about the PCE this week, but with January's Producer Price Index (PPI) and Consumer Price Index (CPI) reports suggesting outsized increases in critical components of the PCE deflator, the market is already braced for an uptick with the consensus forming around .4 % month on month increase. And it certainly won't sit well with the Feds, who need to see more month-on-month prints below 0.2% to convince them that inflation is confidently returning to the 2% year-on-year target before entertaining rate cuts. Still, policymakers and investors could look through the January increase. Temporary factors, including residual seasonality and the increase in portfolio-management service prices, are critical drivers behind the January increase. Similarly, some of the expected gains in personal income come from cost-of-living adjustments and an unsustainably high nonfarm payroll print. Even if prices exhibit a 0.3% to 0.4% rise in January, the yearly rate could decrease slightly due to a favourable comparison with the previous year. Consequently, the gap between core inflation measures may widen to 1.2 percentage points, marking the most significant disparity over 22 years and three times the long-run median since 1960. Indeed, the muddled macro environment continues, and we completely understand the Fed's frustrations. That said, we think the impact of Nvidia wanes slightly this week on the build-up of the PCE, creating a few opportunities to score some reversion points on risk betas. Forex Global investor risk sentiment has improved at the start of this year, reflecting growing optimism about a softer landing for the global economy. Furthermore, evidence suggests that the emergence of AI is bolstering corporate revenues and ultimately enhancing productivity. This trend underscores the increasing confidence among investors regarding the resilience and adaptability of businesses in the face of economic challenges. USD/JPY has returned to the "intervention zone," if not for that, it is conceivable we would be trading on 152's The prevailing global risk-on conditions and the new record high in Japanese equities have likely bolstered the Bank of Japan's (BoJ) confidence in achieving price stability. Governor Ueda's recent remarks in the Diet reflect a more optimistic and assertive tone, suggesting increasing confidence within the BoJ regarding the prospects of fostering higher wages and inflation. Economists are considering the possibility of a rate hike by the BoJ in April. However, a hike could take place as early as March, which may be underestimated by the markets at present. The current movements in USD/JPY are dominated by the changes in the 2-year and 10-year US Treasury yields. The latter has historically shown a strong correlation. Still, if traders pick up on any indications of a potential rate hike by the BoJ in March, it may cause a reversal in USD/JPY, pushing the pair back towards the 142 level.

Gold price rises for the second straight day on Thursday, eyes $2,050. US Dollar slips on risk reset and expectations of soft US Core PCE inflation data. The technical setup on the 4H chart remains in favor of Gold buyers. Gold price is trading in the green zone for the second straight day early Thursday, stretching toward the two-week high of $2,041. A broad US Dollar (USD) selling amid an improvement in risk sentiment is underpinning the Gold price ahead of the all-important Personal Consumption Expenditures - Price Index (PCE) data due later in the day. Will US inflation data aid the Gold price upside? China's stock markets are making a strong comeback after the previous rout, aiding the recovery in the overall market sentiment. The risk-recovery is undermining the US Dollar, allowing Gold price to extend Wednesday's upswing. The Greenback is also bearing the brunt of the heavy selling seen in the USD/JPY pair after the Japanese Yen rallied hard on the hawkish comments from the Bank of Japan (BoJ) board member Hajime Takata said that "momentum is rising in spring wage talks," signaling that a policy pivot could be on the cards sooner than expected. That said, Gold price remains on the front foot also on the back of expectations that US Core PCE Price Index, the US Federal Reserve's (Fed) preferred inflation measure, is expected to rise 2.8% YoY in January, slowing from a 2.9% increase in December. The headline annual PCE  inflation is seen falling to 2.4% in the same period from 2.6% in December. Cooling inflation could revive early Fed rate cut bets, offering the much-needed boost to the non-interest-bearing Gold price. Markets are currently pricing in about 80% chance of a no rate cut by the Fed in the May meeting while the probability that the Fed will begin lowering rates in June stands at 62%, down from about 70% seen a week ago. Gold price technical analysis: Four-hour chart The pennant breakout and the Golden Cross confirmed on Tuesday and Wednesday respectively indicate more gains are in the offing for the Gold price. The 50-Simple Moving Average (SMA) cross the the 200-SMA for the upside on the four-hour timeframe, validing a Golden Cross. Th Relative Strength Index (RSI) is pointing north above the midline, adding credence to the bullish potential. Acceptance above the two-week high of $2,041 is needed to continue to the bullish momentum toward the $2,050 psychological barrier. The next upside target for Gold buyers is aligned the static resistance near $2,065. On the other side, if Gold buyers fail to defend 21-SMA at $2,033, a fresh downswing toward the 50-SMA at $2,028 cannot be ruled out. A breach of the latter could trigger a fresh drop toward the 100-SMA at $2,022. The last line of defense for Gold buyers is Friday's low of $2,016.

AUD/USD resumed the downward bias and breached 0.6500. Extra pullbacks could shift the attention to the 2024 low near 0.6450. Inflation in January remained sticky around 3.4%. The Australian dollar resumed its downward path after a sluggish start to the week, retreating to the area of multi-day lows in the sub-0.6500 region on Wednesday. This sharp downtick in AUD/USD occurred in response to a noticeable rebound in the Greenback, which lifted the USD Index (DXY) back above the 104.00 hurdle despite the move lower in US yields. Contributing to the decline in spot remained the still unabated corrective move in iron ore prices, which extended their retracement to fresh multi-month lows near the $125.00 mark per tonne against the backdrop of equally persevering concerns around the Chinese housing market. Spot price movements mirrored the subdued performance of the US Dollar, with investors weighing the likelihood of the Federal Reserve (Fed) implementing monetary easing around June or later. This sentiment was reinforced by recent comments from certain Fed officials as well as solid fundamentals. While potential stimulus measures in China could temporarily support a rebound, sustained recovery news from the country is crucial for providing stronger backing to the Australian dollar and potentially triggering a more substantial uptrend in AUD/USD. A resurgence in the Chinese economy is also anticipated to coincide with an increase in commodity prices, which should be supportive of a stronger AUD. Concerning the Reserve Bank of Australia (RBA), the cautious stance of the central bank is expected to mitigate significant downward pressure on the Australian dollar, as it is among the latest G10 central banks to begin the process of interest rate cuts. Regarding the RBA, its Monthly CPI Indicator showed consumer prices rose by 3.4% in January, matching December's uptick. In the wake of the release, the expectation for RBA easing saw minimal influence, despite market indicators suggesting an 80% probability of the first cut occurring in August, while the swap market continues to anticipate approximately 40 bps of total easing within the year. AUD/USD daily chart AUD/USD short-term technical outlook In case sellers keep pushing harder, AUD/USD initially faces contention at its 2024 low of 0.6452 (February 13). Breaking below this level may result in a potential visit to the 2023 low of 0.6270 (October 26), followed by the round level of 0.6200 and the 2022 low of 0.6169 (October 13). On the upside, after clearing the weekly high of 0.6595 (February 22), the pair may retest the temporary 55-day SMA at 0.6626, which coincides with the late-January tops (January 30). A break above this range may take spot to the December 2023 peak of 0.6871 (December 28), followed by the July 2023 high of 0.6894 (July 14) and the June 2023 top of 0.6899 (June 16), all before the key 0.7000 barrier. It is worth mentioning that AUD/USD should see its downside bias mitigated once it clears the important 200-day SMA at 0.6559 on a convincing fashion. The 4-hour chart indicates that further weakness now appears in the pipeline. The initial support emerges at 0.6442 ahead of 0.6347 and then 0.6338. On the other hand, the 200-SMA aligns at 0.6554 prior to 0.6595 and 0.6611. Furthermore, the MACD slipped below zero, while the RSI navigated around 32.