Pound Sterling hit fresh weekly low on sustained US Dollar demand. GBP/USD traders look to S&P Global US and UK PMI data in the week ahead.                    Looking ahead, GBP/USD seems poised for a rebound but bearish potential remains intact. The Pound Sterling (GBP) continued to remain in the back seat against the US Dollar (USD), as GBP/USD extended its bearish momentum into the fifth week in a row. UK economic data fail to lift the Pound Sterling The price action around the GBP/USD pair was mainly driven by a host of top-tier economic data releases from the United States (US) and the United Kingdom (UK), which helped reprice the markets' expectations of a dovish policy pivot by the US Federal Reserve (Fed) and the Bank of England (BoE). The pair traded directionless at the start of the week on Monday, as traders moved on the sidelines and refrained from placing any fresh positional bets, in anticipation of the all-important US Consumer Price Index (CPI) data due on Tuesday. The UK labor market report was also published on Tuesday, which put a fresh bid under the Pound Sterling. Data released by the Office for National Statistics (ONS) showed on Tuesday, employment rose by 72K in the final three months of 2023 and the Unemployment Rate fell to 3.8% in the same period. Resilient pay growth and strong hiring backed the narrative of "higher interest rate for longer" by the BoE. However, hawkish commentary from the Fed officials combined with hotter-than-expected US inflation data reinforced the selling interest around GBP/USD. The annual CPI inflation in the US fell to 3.1% in January following a brief increase to 3.4% in December but outpaced forecasts of 2.9%. The US CPI edged up 0.3% MoM, the most in four months, and above forecasts of 0.2%. Hot US inflation report justified the Fed's pushback against early and aggressive interest rate cut expectations, triggering a fresh rally in the US Treasury bond yields and the US Dollar. In light of this, GBP/USD reversed sharply from the weekly high of 1.2688 to as low as 1.2575. The correction in the currency pair gained momentum on Wednesday after the annual CPI inflation in the UK remained unchanged at 4.0% in January, against the market forecast of an increase to 4.2%. Core CPI arrived at 5.1% YoY in the reported month, missing estimates of 5.2%. Softer UK inflation data dialed down odds of BoE interest rate cuts for this year. Markets now price about 70 basis points (bps) of BoE easing this year, down from about 100 bps seen a week ago. On the contrary, hot US CPI numbers made markets push back their expectations of a Fed policy pivot until June. Markets have almost priced out a March Fed rate cut while a lower than 50% chance of easing is seen for the May meeting. Downbeat US Retail Sales data capped the US Dollar upside, offering relief for the Pound Sterling on Thursday. This came after the Pound was heavily impacted by the confirmation of a technical recession in the UK. US Retail Sales declined by 0.8% in January, the US Census Bureau reported on Thursday, worse than the market expectations for -0.1%. Meanwhile, UK Gross Domestic Product (GDP) contracted by 0.3% in the three months to December, having shrunk by 0.1% between July and September. Despite a weak UK economic outlook, BoE policymakers remained quite optimistic and maintained the central bank's hawkish bias, offering legs to the tepid recovery in GBP/USD on Thursday. Pound Sterling buyers gave into the US Dollar resurgence, in anticipation of hot US Producer Price Index (PPI) inflation data and an improvement in the UoM Consumer Sentiment.  GBP/USD failed to capitalize on strong UK Retail Sales data on Friday. The UK Retail Sales rebounded 3.4% over the month in January vs. 1.5% expected and -3.3% reported in December, the latest data released by the ONS showed on Friday. Later in the day, the US Bureau of Labor Statistics announced that the Producer Price Index rose 0.9% on a yearly basis in January, compared to the market expectation for an increase of 0.6%. The Core PPI increased 2% in the same period to surpass analysts' estimate of 1.6%. The USD held resilient against its peers after these data releases and made it difficult for GBP/USD to stage a rebound ahead of the weekend. Week ahead: PMIs take center stage It's a relatively data-light week after a busy one, as the S&P Global PMI data from both sides of the Atlantic will draw attention. Also, it is a US holiday on Monday, in observance of Presidents' Day. The first half of the week is devoid of any high-impact macro data releases, and hence, Pound Sterling traders will...

Gold registered losses for the second consecutive week. The technical outlook suggests that the bearish bias remains intact. Sellers could take retain control in case $2,000 is confirmed as resistance. Gold declined for the second consecutive week, pressured by the recovering US Treasury bond yields and renewed US Dollar (USD) strength. Next week's economic calendar will feature February PMI data and FOMC Minutes. Whether or not $2,000 holds as resistance will also be key for XAU/USD's next directional action. Gold price turned south following hot US inflation data Gold edged lower at the beginning of the week and registered small losses on Monday. As investors refrained from taking large positions ahead of the key inflation data from the US, however, XAU/USD's action remained limited. The US Bureau of Labor Statistics reported on Tuesday that the Consumer Price Index rose 3.1% on a yearly basis in January. This reading came in above the market expectation of 2.9%. Additionally, the Core CPI, which excludes volatile food and energy prices, increased 3.9% to match December's print. As the CME FedWatch Tool probability of the Federal Reserve (Fed) leaving the policy rate unchanged in the next two policy meetings climbed above 60% after the CPI data, the benchmark 10-year US Treasury bond yield advanced to 4.3% and Gold declined below $2,000 for the first time in 2024. After gaining 0.7% on Tuesday, the US Dollar (USD) Index corrected lower and closed in negative territory on Wednesday. In turn, XAU/USD fluctuated in a tight channel at around $1,990 following the previous day's sharp decline. The data from the US showed on Thursday that Retail Sales fell 0.8% to $700.3 billion in January. Retail Sales ex Autos contracted by 0.6% in the same period. The 10-year US yield declined toward 4.2% after the disappointing data and allowed XAU/USD to recover back above $2,000 in the second half of the day. Commenting on inflation data, Fed Vice Chair for Supervision Michael Barr said policymakers are confident that inflation is on the path towards the 2% target. Barr, however, added that he would need to see "continued good data" before advocating for a rate cut. Gold failed to build on Thursday's recovery gains on Friday after producer inflation data from the US. The BLS announced that the Producer Price Index (PPI) for final demand rose 0.9% on a yearly basis in January. This reading followed the 1% increase recorded in December but came in above the market expectation of 0.6%. The annual Core PPI rose 2% in the same period, compared to December's increase of 1.8%. On a monthly basis, the Core PPI was up 0.5% following the 0.1% decline recorded in the previous month. The 10-year US yield climbed back above 4.3% with the initial reaction and made it difficult for XAU/USD to stretch higher ahead of the weekend. Gold price could react to PMI data next week Stock and bond markets in the US will be closed on Monday in observance of the President's Day holiday.  On Wednesday, the Fed will release the minutes of the January 30-31 policy meeting. In the post-meeting press conference, Fed Chairman Jerome Powell said that a rate cut in March was not likely but noted that an unexpected weakening in the labor market could make them consider a rate reduction sooner. The impressive January jobs report after the meeting caused investors to refrain from pricing in a March rate cut and didn't allow Gold to gain traction in the first half of February. At this point, investors are more interested in whether the Fed will wait until June to execute a policy pivot. Hence, the Fed's publication is unlikely to offer fresh clues regarding the timing of the rate cut. On Thursday, S&P Global will release the preliminary Manufacturing and Services PMI reports for February. An unexpected weakening in the private sector's business activity, with either of the headline PMIs dropping below 50, could revive expectations for a May rate cut and help XAU/USD gain traction with the immediate reaction. Investors will also pay close attention to comments regarding price pressures in the surveys. In case the input inflation in the service sector proves to be sticky, the USD could stay resilient against its rivals and limit the metal's upside even if the PMI readings disappoint. Gold technical outlook The Relative Strength Index (RSI) indicator on the daily chart stays below 50, suggesting that the bearish bias remains intact. However, sellers could refrain from betting on further Gold weakness after XAU/USD closed above the $2,000 psychological level on Friday, which is reinforced by the 100-day Simple Moving Average. In case $2,000 stays intact as support, $2,020 (Fibonacci 23.6% retracement of the October-December uptrend, 20-day SMA) could be seen as next resistance before $2,030 (50-day SMA).  If Gold returns below $2,000...

Markets on the rise as S&P 500 looks to close out sixth consecutive gain. UK retail sales helps allay fears after yesterday's GDP drop. US PPI in view, with jump in import prices highlighting risk of a secondary inflation push. European markets are in the green once again this morning with the German DAX hitting another fresh record high in early trade. The UK remains a key focus as retail sales data provides yet another consideration for traders that continue to process yesterday's slump into a technical recession. The release of inflation data out of the US earlier in the week provided an uphill battle for those hoping to see the S&P 500 clock in a sixth consecutive weekly gain. However, we are once again seeing investors buy the dip, with US indices looking primed for a positive end to the week. UK retail sales staged a dramatic bounceback in January, posting the largest monthly rise in trade since April 2021. Coming off the back of a concerning -3.3% December slump, this helps build a story that might justify yesterday's -0.3% Q4 GDP reading. Instead, it seems to be a case that we are seeing a shift in UK consumption, bolstering claims that Q1 will bring a welcome rebound in economic growth. The surge in both the value and volume of transactions served to highlight a relatively strong picture for demand, although this will have taken some of the pressure off the Bank of England after a week that saw lower-than expected inflation and growth. Looking ahead, US PPI inflation brings a final hurdle for markets, as we weigh up the potential for further dollar strength should producer prices start to pick up once again. Much like wages, producer prices provide a key gauge of underlying inflation pressures being felt by US businesses, with traders looking out for any signs of increased costs as Red Sea disruptions impact the cost of shipping globally. Coming off the back of yesterday's concerning surge in import prices that posted the biggest monthly jump in almost two-years, any additional signs of resurgent inflation pressures could lead to a renewed push higher for the US dollar.

EUR/USD stabilized above 1.0750 after posting gains for two consecutive days. Strong resistance seems to have formed at 1.0800. Producer inflation and consumer sentiment data will be featured in the US economic docket. EUR/USD stays in a consolidation phase above 1.0750 on Friday after closing the previous two days in positive territory. Although the pair's near-term technical outlook points to a buildup of bullish momentum, buyers could remain on the sidelines unless 1.0800 is flipped into support. Mixed macroeconomic data releases from the US and the positive shift seen in risk mood made it difficult for the US Dollar (USD) to hold its ground on Thursday and allowed EUR/USD to extend its recovery. Retail Sales in the US declined 0.8% on a monthly basis in January, while the weekly Initial Jobless Claims declined to 212,000 from 220,000.  Later in the day, the US Bureau of Labor Statistics will release the Producer Price Index (PPI) data for January. The PPI is forecast to rise 0.1% on a monthly basis following December's 0.1% decline. A negative monthly PPI print could weigh on the USD with the immediate reaction. On the other hand, an unexpected increase of 0.3% or bigger could provide a boost to the currency and force EUR/USD to stay on the back foot. According to the CME FedWatch Tool, markets are currently pricing in a near 70% probability of the Federal Reserve (Fed) leaving the policy rate unchanged at the next two policy meetings. The market positioning suggests that the USD could weaken sharply in case investors start leaning toward a policy pivot in May. EUR/USD Technical Analysis The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 50 and EUR/USD closed the last 5 4-hour candles above the 20-period and 50-period Simple Moving Averages (SMA), highlighting a bullish tilt in the short-term technical outlook. 1.0800 (Fibonacci 23.6% retracement of the latest downtrend, 100-day SMA, upper limit of the descending regression trend channel) aligns as critical resistance for EUR/USD. In case the pair rises above that level and confirms it as support, it could target 1.0830 (50-day SMA) and 1.0860 (200-period SMA) next. On the downside, immediate support is located at 1.0760 (50-period SMA) before 1.0730-40 (20-period SMA, mid-point of the descending channel) and 1.0700 (end-point of the downtrend, psychological level).

Gold price pauses its recovery early Friday, awaits key US inflation data. US Dollar bounces with Treasury bond yields, following weak US Retail Sales data-led decline.  Gold price remains a 'sell the bounce' trade as the daily RSI turns south below the 50 level.   Gold price is treading water just above $2,000, consolidating its rebound from two-month lows of $1,984 set on Wednesday. The further upside in Gold price appears elusive, as the US Dollar (USD) has regained lost footing amid a modest recovery in the US Treasury bond yields and a cautiously optimistic market environment. Weak US Retail Sales data saves the day for Gold price Markets cheer Thursday's weak US Retail Sales data for January, which brought early US Federal Reserve (Fed) rate cuts chatter back on the table, accentuating the profit-taking slide in the US Dollar, as well as, the US Treasury bond yields. The market mood remains mixed so far this Thursday's trading, as investors assess the conflicting messages from US Federal Reserve (Fed) policymakers and its implications on the pricing of the dovish policy pivot this year. The uncertainty around the timing of Fed interest rate cuts, following strong US Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) data for January, keeps the corrective mode intact in the US Dollar, as well as, the US Treasury bond yields. US Retail Sales declined by 0.8% in January, the US Census Bureau reported on Thursday, worse than the market expectations for -0.1%. Early Friday, the US Dollar managed to gather strength once again, in anticipation of hot Producer Price Index (PPI) inflation data and an improvement in the UoM Consumer Sentiment. The US PPI is forecast to rise at an annual pace of 0.6% in January, as against a 1.0% increase reported previously, Monthy PPI inflation is expected to rebound to 0.1% in the same period vs. -0.2% previous. Meanwhile, the UoM Preliminary Consumer Sentiment is set to inch higher to 80.0 this month vs. January's 79.0.   The data could reverberate hawkish Fed expectations, fuelling another upside in the US Dollar at the expense of the Gold price. Additionally, the end-of-the-week flows will influence the Gold price action while investors will resort to profit-taking after an action-packed US economic calendar this week. Apart from the data, speeches from Fed officials will be closely scrutinized for the Fed rate cut expectations. US data and the Fedspeak would likely set the tone for the Gold market in the coming week. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price recaptured the 100-day Simple Moving Average (SMA), now at $1,994 on Thursday on a daily closing basis, reviving the bullish interest. The 14-day Relative Strength Index (RSI), however, has turned lower below the midline, warranting caution for Gold buyers. Adding credence to the bearish bias, the 21-day and 50-day SMAs Bear Cross, confirmed last week, also remains in play. Therefore, Gold price likely remains a 'sell the bounce' trading opportunity. The immediate support level is aligned at the 100-day SMA of $1,994. Other healthy support levels are now seen at the two-week low of $1,984, below which the December 13 low of $1,973 and the horizontal 200-day SMA at $1,966 will be tested. On the flip side, if the renewed upside in Gold price gains traction, a fresh rally toward the 21-day SMA of $2,023 could be in the offing on a sustained break above the previous day's high of $2,008.

Asian stocks are on track for their fourth consecutive weekly gain, potentially marking the longest winning streak in over a year unless they experience an unlikely decline of more than 1% on Friday. Despite recent economic setbacks, such as Japan and Britain slipping into recession at the end of last year and U.S. retail sales declining more than expected last month, the regional and global interest rate environment remains supportive for risk markets. Weaker economic indicators could pave the way for relatively looser monetary policy, providing a bullish backdrop for Asian markets, particularly from an interest rate perspective, if not an eventual economic one. Despite initial concerns at the beginning of 2024 regarding a potential equity selloff, investors have remained resilient, defying skeptics and maintaining a positive trajectory. However, market attention is now focused on the upcoming release of the Producer Price Index (PPI) in the U.S. on Friday, which could very well play a significant role in shaping market sentiment. The PPI's implications for the Federal Reserve's preferred inflation gauge make it a closely watched indicator. Market participants hope that the PPI data does not signal further discomfort similar to this week's hotter Consumer Price Index (CPI) readings. Ideally, investors hope that CPI readings were wrong and that the PPI throughput to the PCE price growth would receive a more favourable response when released later in the month. Despite the potential for market volatility surrounding the PPI release, there remains a prevailing belief that the market's confidence in lower policy rates will outweigh any negative data outcomes. This sentiment suggests that the direction of policy rates holds more influence over market dynamics even though the magnitude of rate cuts has been trimmed. Considering the current economic landscape, it was widely understood that the market's pricing-in of 175 basis points (bps) worth of rate cuts for 2024 was ambitious, particularly in the absence of concrete data confirming a slowdown in the US economy. Despite Thursday's disappointing reading on nominal spending, the broader dataset suggests a contrary narrative: if anything, the growth momentum in the US appears to have gained traction early in the year, building upon the strong performance witnessed in 2023. This divergence becomes more pronounced when juxtaposed with the economic challenges faced by other major economies such as Germany, the UK, Japan, and China. These countries have grappled with recessions, deflationary pressures, and sluggish growth, starkly contrasting the relatively robust economic environment observed in the United States. The resilience of the US economy, characterized by its ability to navigate global headwinds and sustain the growth momentum, underscores its position as a key driver of global economic activity. While uncertainties persist, particularly concerning monetary policy and market dynamics, US exceptionalism remains alive.

US retail sales fell 0.8% in January instead of the expected 0.2% decline. Sales excluding autos fell 0.6% instead of the expected 0.2% rise. This drop took sales back to their lowest level since last July. Fuel sales last month were at their lowest level since October 2021, while building materials sales were at their lowest level since September this year. US retail sales are calculated in nominal terms (not adjusted for inflation) and are now 1.1% higher than a year ago. This is well below the 3.1% year-on-year rise in prices and could be seen as a deflation of consumer activity despite the strong labour market. Today's industrial production figures also disappointed, with a 0.1% decline in the headline index (expected +0.2% after 0.0% in the previous two months).   The American consumer is the primary driver of the economy, and industrial production, which accounts for around 10% of GDP, is often a leading indicator of the economic cycle. Both of these critical indicators have simultaneously pointed to an alarming and sudden slowdown. This should give pause to those who assume that monetary easing is imminent but are putting a new spin on it. It may no longer be a glorious victory over inflation without a recession but a concern for economic growth and an attempt to ease monetary conditions to cushion the decline. This is negative news for the dollar as it has the potential to push markets closer to the expected date of the rate cut. In the short term, equity indices may take this news as a positive. However, for the long-term investor, it is clearly a cloud on the horizon that brings the bull market in equities closer to breaking.  

Introduction In the complex world of global finance, the relationship between the US and the EU is crucial, significantly impacting the EURUSD currency market. This article explores how economic policies, geopolitical tensions, and monetary decisions affect this key currency pair, offering insight into global market dynamics. US policies and their influence on forex markets The US economy's surprising resilience positively impacted the US dollar's value in the foreign exchange market. An outstanding employment report for early 2024 showed an unexpected rise in non-farm payrolls, leading to a surge in Treasury bond yields and a stronger dollar. This surge and the increase in average hourly wages indicate a solid economic base, negating expectations of an immediate rate cut.  Economic growth of 3.3% annualized in Q4 2023, along with notable growth in consumer spending and private sector wages, has boosted consumer confidence. This synergy of real wage growth and consumer sentiment points to an optimistic outlook for the dollar, indicating solid economic conditions and the potential for tighter monetary policy to manage inflation and economic development. The Federal Reserve's policy adjustments, including raising the federal funds rate to a range of 4.5% to 4.75%, underscore efforts to stabilize inflation towards the 2% target over time, reflecting a proactive stance in economic governance​​.  Geopolitical tensions, such as conflicts in Ukraine and the Middle East, impact the dollar by driving a flight to safety among investors, elevating the currency's value amidst global uncertainties. Additionally, the dollar benefits from the US's economic outperformance and continued growth expectations, attracting cross-border investments and strengthening its position against other currencies. In addition, a rematch between Donald Trump and Joe Biden is expected ahead of the US election in 2024, with both scoring early victories in their parties' nominations.  The election cycle is centered on critical issues such as the economy, climate, social policy, and geopolitics, reflecting the complexity of the global and domestic environment. The evolving political scene, influenced by the results of the early primaries and essential issues such as immigration, will play a key role in shaping the political discourse and choices voters will face in 2024, especially considering such matters as the immigration crisis in Texas. Euro dynamics: Between domestic policy and global influence The economic outlook for the European Union is characterized by moderate growth and declining inflation amid domestic challenges and external geopolitical pressures. The gradual economic recovery is supported by projections that EU GDP will grow by 0.6% in 2023, improve slightly to 0.8% in 2024, and reach a more substantial growth rate of 1.5% in the following years. Expectations for GDP growth. Source: The European Central Bank (ECB) Inflation, an essential worry, is expected to decline from 5.4% in 2023 to 2.7% in 2024 before falling to 2.1% by 2025. The European Commission's Winter 2023 Economic Outlook contains an optimistic forecast of GDP growth of 1.6% in 2024 and a decline in inflation to 2.8% in the EU and 2.5% in the euro area, indicating the EU's resilience in the face of energy shocks and inflationary pressures and its ability to avoid recession. Inflation rate in EU and Euro area 2028. Source: statista.com Germany, Europe's largest economy, faces serious economic challenges, including stagnation and high inflation. The IMF and OECD have emphasized the financial situation in Germany, forecasting a 0.6% contraction in GDP this year amid a slowing global economy and high-interest rates that will persist into the new year. However, there are signs of a potential turnaround: the German economy is expected to recover moderately, forecasting GDP growth of 0.8% in 2024 and 1.2% in 2025. This is supported by desired improvements in domestic demand, driven by rising real wages, and a recovery in external demand despite the challenges posed by inflation and sluggish global conditions. German inflation is projected to fall to 3.1% in 2024 and 2.2% in 2025, while unemployment will stabilize at 3.2%. The EU economy and the euro's strength against the dollar are significantly influenced by the European Central Bank's monetary policy and the EU's ability to deal with foreign policy issues. These include trade relations and geopolitical tensions, affecting the economic outlook and investor sentiment towards the euro. As the EU and its member states, especially Germany, address these economic and geopolitical challenges, their success in maintaining stability and stimulating growth will play a key role in shaping EUR/USD's momentum. Fed and ECB monetary policy The Federal Reserve's approach to monetary policy has been marked by caution, focusing on achieving greater confidence that inflation will consistently trend towards the 2% target before considering rate cuts. Despite inflation easing to 3.1%, according to the Fed's preferred measure, the Fed has maintained its policy rate steady in the 5.25%-5.5% range since last July. This cautious stance suggests that while rate cuts are in view for 2024, they...

XAU/USD Current price: $1,998.69 Mixed United States macroeconomic figures weighed on the US Dollar. US Treasury yields trimmed early losses and look poised to resume their advance. XAU/USD is losing its positive momentum and struggles to retain the $2,000 mark. Gold price is up on Thursday, peaking intraday at $2,008.30 as the US Dollar came under selling pressure ahead of Wall Street's opening and following the release of mixed United States (US) figures. XAU/USD, however, lost momentum as the session went by and now struggles to retain the $2,000 mark. The country reported that Retail Sales were down 0.8% MoM in January, much worse than the 0.1% decline anticipated. Furthermore, Initial Jobless Claims for the week ended February 9 rose 212K, better than the 220K expected but still reflecting labor market tightness. On a positive note, the NY Empire State Manufacturing Index improved to -2.4 in February from -43.7 in the previous month, while the Philadelphia Fed Manufacturing Survey improved to 5.2 from -10.6 in January in the same period. The news pushed government bond yields further down, as yields eased ever since the day started. At the time being, however, the 10-year Treasury notes offer 4.25%, recovering from an intraday low of 4.187% and still down on the day. The US Dollar recovers alongside rising yields, still trading in negative territory against most major rivals. XAU/USD short-term technical outlook From a technical point of view, XAU/USD holds on to intraday gains but lacks enough momentum to extend gains. In the daily chart, the pair met intraday buyers on a test of a mildly bullish 100 Simple Moving Average (SMA) trading above it after briefly piercing it on Wednesday. The moving averages will continue to provide dynamic support, currently at around $1,990. At the same time, technical indicators ticked north but remain within negative levels, suggesting tepid buying interest. The 4-hour chart suggests the pair may ease from the current price zone. The pair peaked beyond a bearish 20 SMA, but selling interest pushed XAU/USD back below the level. At the same time, the 100 and 200 SMAs offer firmly bearish slopes well above the shorter one, in line with the bearish case. Finally, technical indicators have resumed their declines within negative levels after correcting oversold conditions. Support levels: 1,990.00 1,976.50 1,962.70   Resistance levels: 2,009.20 2,018.50 2,032.10

EUR/USD Current price: 1.0746 European Central Bank President Christine Lagarde testified before the European Parliament. The United States has a packed macroeconomic calendar on Thursday. EUR/USD extends its recovery for a second consecutive day, could approach 1.0800. The EUR/USD pair keeps advancing after briefly piercing the 1.0700 earlier in the week, currently trading at around the 1.0740 figure. Financial markets are in a better mood on Thursday, finally digesting United States (US) hotter-than-expected January inflation and the subsequent rate cut delay. Stock markets and bonds recovered, with gains led by the tech sector. That means yields ease from the peaks set this week, adding modest pressure on the US Dollar. Meanwhile, European Central Bank (ECB) President Christine Lagarde testified before the Committee on Economic and Monetary Affairs of the European Parliament. Among other things, Lagarde noted the central bank still needs more information before it can affirm inflation is heading back towards the desired 2%. "The latest data confirms the ongoing disinflation process and is expected to bring us gradually further down over 2024," Lagarde said, although adding the Governing Council needs additional data to determine whether the decline is sustainable in time. Finally, she repeated what most policymakers have signalled in their latest attempt to cool down rate-cut speculation: wage growth remains strong and could affect inflation dynamics. Other than that, the Eurozone published the December Trade Balance, which posted a seasonally adjusted surplus of €13 billion, below the  €15.1 billion surplus from November. Finally, the European Commission released the latest Economic Growth Forecasts, downgrading growth perspectives to 0.9% for the EU and 0.8% for the euro area. On a positive note, inflation is predicted to ease further: The Harmonised Index of Consumer Prices (HICP) inflation in the EU is set to decline faster from a steep 6.3% in 2023 to 3.0% in 2024, further dropping to 2.5% in 2025. The American session will bring some interesting US figures. The country will publish January Retail Sales, the February NY Empire State Manufacturing Index, weekly unemployment figures, and Industrial Production and Capacity Utilization for January. EUR/USD short-term technical outlook The EUR/USD pair is up for a second consecutive day, although a firmer advance is still out of the technical picture. In the daily chart, the pair develops below all its moving averages, with the 20 Simple Moving Average (SMA) heading firmly lower, well above the current price. Furthermore, it extends its slide below a flat 200 SMA, which usually reflects sellers' dominance. Finally, technical indicators remain within negative levels, losing their former upward strength. In the near term, however, EUR/USD seems poised to extend its corrective advance. The pair surpasses a bearish 20 SMA in the 4-hour chart while it stands far below the longer ones. Technical indicators, in the meantime, maintain their upward slopes, currently developing within neutral levels. Support levels: 1.0695 1.0650 1.0610 Resistance levels: 1.0750 1.0790 1.0840  

Japan falls into recession, with Q3 revision highlighting dour growth picture. UK GDP slumps to -0.3%, putting pressure on the BoE. Coinbase earnings in view as Bitcoin gains help boost the trading platform. European markets are on the rise in early trade today, with the FTSE 100 lagging its mainland peers after the UK slumped into a technical recession in the fourth quarter. Unfortunately, the UK wasn't the only country to fall into recession in the fourth quarter, with Japan announcing a disappointing -0.1% Q4 decline alongside a hefty downward revision that put the third quarter figure at a three-year low of -0.8%. While markets continue to expect the Bank of Japan to raise interest rates after keeping them below zero for eight years, the recent weakness in both growth and inflation data do little to help build a story of strength for the Yen. The UK economy fell into a technical recession in the fourth quarter, with today's -0.3% figure representing the worst quarterly rate of growth since early 2021. Coming hot on the heels of yesterday's inflation report that saw both headline and core CPI move sharply lower for the month of January, we are seeing a perfect storm build that puts the Bank of England in a prime position to cut rates in the coming months. Concerningly, we have also seen UK GDP per head continue to trend lower, with the tepid economic growth seen over recent years only coming about through an increase in the population rather than any improvement in the economy per se. With the UK economy growing at a mere 0.1% for 2023, tomorrows retail sales figure could further turn the heat up on the Bank of England. Coming off the back of a concerning -3.2% slump in December, any additional signs of weakness in UK consumption will further embolden dove calls for a swift pivot from the BoE. All eyes turn towards Coinbase today, with the Crypto trading platform hoping to build on the momentum being felt throughout the asset class. Bitcoin looks set for yet another bumper week, with price rising through $52,000 to bring a two-year high for the Crypto posterchild. Coinbase investors will hope to see the company's trading revenues build alongside the price of the assets being traded, with this week seeing the stock gain 24% despite Bitcoin gaining just 8% over that same period. Nonetheless, the perceived return of flows back into the Crypto space should help Coinbase turbocharge their revenues, with today's earnings report likely to show a ramp-up in trading activity in a quarter that saw Bitcoin rise 56% against the dollar.

In focus today In the US, January retail sales and industrial production data is due for release. Consensus expects some moderation in retail sales growth, even though early credit card data suggests that consumption has remained brisk at the start of the year as well. The NAHB housing market index and initial claims data will also be released today. In the euro area, the European Commission releases its economic forecasts, including GDP and inflation estimates. As the Commission and the ECB use similar models, the projections could give hints of what to expect from the ECB's staff projections at the March meeting. Additionally, ECB President Lagarde will make public remarks today. An empty Swedish Macro calendar awaits today. However, two Riksbank speakers Erik Thedéen and Anna Breman are set to speak on two different events. Thedéen will kick things off as his event starts 08.30 CET, followed by Breman at 16.20 CET. Both speeches are themed as "The economic situation and current monetary policy". Economic and market news What happened overnight? In Japan, national accounts for Q4 unexpectedly came in at -0.1% after -0.7% in Q3. The decline stems primarily from weak consumption and capital expenditure. With two consecutive GDP contractions, Japan is now in a technical recession, while Germany has surpassed Japan to become the world's third-largest economy. The print complicates the monetary policy outlook for Bank of Japan, although the policy outlook much depends on the spring wage negotiations. What happened yesterday? In Norway, mainland-GDP printed 0.2% q/q in Q4 (Danske: 0.2%, cons: 0.1%). While the print signals some recovery in Q4, we find the details weaker as strong growth in private consumption was partly due to higher electricity consumption. Additionally, mainland exports contributed to the upside, whereas investments acted as a solid drag. Growth seems a bit stronger than Norges Bank (NB) expected in the December MPR (0.0%), but we still believe that capacity utilisation is moving downwards and will allow Norges Bank to cut rates once other central banks start cutting. In the UK, inflation came in lower than expected in January at 4.0% y/y (cons: 4.1%) and core at 5.1% (cons: 5.2%). Looking at the seasonally adjusted monthly developments CPI was 0.24% m/m and core inflation was just 0.16% m/m s.a. Importantly, service inflation was just 0.03% m/m s.a., which is highlighted as an important component by the BoE. In the euro area, industrial production surprised to the upside in December, printing 2.6% m/m compared to consensus of -0.2% m/m. However, the uptick is attributed to a large increase in capital goods of 20.5% m/m, driven by a large patent in Ireland (Irish industrial production rose 44.5% y/y). Non-durable goods production saw only a muted increase of 0.2% m/m. The total euro area Q4 industrial production figure was 0.0% q/q in line with GDP. Hence, the industry ended the year on a weak footing but still better than in Q3 in a sign that the worst of the manufacturing slump is behind us.  Equities: Global equities were higher yesterday as inflation and central bank fear abated. Most visible in the small caps with Russell 2000 rising 2.4% after the massive sell-off following CPI data Tuesday. Add to that most indices ended close to day-high and futures are higher again. Hence, our conclusion yesterday that CPI should not lead to a change in the current dominating narrative seems to also be the conclusion global investors reached yesterday. In US Dow +0.4%, S&P 500 +0.96%, Nasdaq +1.3% and Russell 2000 +2.4%. Asian markets mostly higher this morning led by Japan as dollar-yen crosses 150. European futures are up almost half a percent today while US futures are in marginal gains.          FI: European yields declined after the lower-than-expected UK inflation data, and the 10Y German government bonds did not cross the 2.4% level. There was also a rebound in the US Treasury market with a decent decline in bond yields across the curve. FX: Yesterday's price action was characterised as a (part) reversal of the post US CPI price action from Tuesday: cyclically sensitive currencies gained while the USD was among the underperformers. Alongside the SEK the NOK was the biggest outperformer with the Norwegian currency showing remarkable resilience amid Brent Crude falling 2 USD/bbl. Despite the rise in equities the GBP traded on the weak side while USD/JPY remains north of the psychologically important 150-level despite verbal intervention from the Japanese authorities.