AUD/USD drops to new yearly lows near 0.6450. The US CPI-led bounce in the greenback weighed on spot. Consumer Confidence in Australia improved in February. The Australian dollar encountered renewed selling pressure amidst the sudden and strong rebound in the US Dollar (USD), which was particularly exacerbated after US inflation figures rose more than expected in January. On the latter, the intense buying pressure lifted the USD Index (DXY) to fresh tops near the 105.00 barrier for the first time since mid-November, along with an equally robust bounce in US yields, all in response to investors' repricing of a potential rate cut by the Federal Reserve (Fed) later than anticipated (maybe June?). Back to the domestic front, Tuesday's strong retracement now leaves the door open to extra weakness in the Aussie dollar, which appears so far underpinned by USD dynamics, the yearly downtrend in prices of copper and iron ore, and the omnipresent uncertainty surrounding the Chinese economy. On the positive side, the latest hawkish hold by the RBA in combination with the tight labour market and solid fundamentals should somehow maintain the downside pressure in the Australian currency. Regarding the Reserve Bank of Australia (RBA), market participants continued to evaluate the recent interest rate decision after the central bank matched consensus and kept rates at 4.35% while suggesting a potential future rate hike. In its Statement on Monetary Policy (SoMP), the RBA slightly revised downward its inflation forecasts, projecting both indicators to stay below 3% by the fourth quarter of 2025. Additionally, the RBA lowered its GDP growth projections, reflecting a less optimistic outlook for short-term consumer spending and housing investments. AUD/USD daily chart AUD/USD short-term technical outlook The revival of the selling tendency may cause AUD/USD to initially challenge its 2024 bottom of 0.6452. (February 13). The loss of the latter might bring a probable test of the 2023 bottom of 0.6270 (October 26) back on the radar, ahead of the round level of 0.6200 and the 2022 low of 0.6169 (October 13). On the upswing, the key 200-day SMA at 0.6567 looms as the next objective to watch before the intermediate 55-day SMA at 0.6638. The breakout of this zone may lead the pair to attempt the December 2023 top of 0.6871 (December 28), seconded by the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), all just before the key 0.7000 threshold. It is worth reiterating that AUD/USD needs to clear the key 200-day SMA on quite a convincing fashion to allow for extra gain in the short-term horizon. The 4-hour chart suggests extra retracements in the near term. Meanwhile, clearing 0.6452 will result in a dip to 0.6347 ahead of 0.6338. On the bullish side, 0.6610 is an immediate hurdle ahead of the 200-SMA at 0.6624. The surpass of this zone indicates a possible progress to 0.6728. The MACD is approaching the positive zone, while the RSI approached the 30 yardstick.

XAU/USD Current price: 1,993.79 United States inflation rose by more than anticipated in January, spurring risk-off. US CPI figures backed the Federal Reserve's wait-and-see stance. XAU/USD trades at fresh two-month lows and has room to extend its slump. Spot gold collapsed on Wednesday following the release of United States (US) inflation figures. XAU/USD  traded as low as $1,989.97, its lowest in two months, and currently changes hands at around $1,993 a troy ounce. The US Dollar traded with a weak tone throughout the first half of the day but drastically changed course following the release of the US Consumer Price Index (CPI). The US Bureau of Labor Statistics (BLS) reported that the CPI rose 0.3% MoM in January, while the core reading in the same period printed  0.4%, surpassing the market's expectations. Compared to a year earlier, inflation rose 3.1%, better than the previous 3.4% but above the 2.9% expected. Finally, the core annual CPI rose 3.9%, matching December's reading but surpassing the market's forecast of 3.7%. Stronger than anticipated inflation figures confirmed the Federal Reserve´s (Fed) stance of extending the waiting period before shifting to tighten the monetary policy through rate cuts. As a result, financial markets turned risk-averse, with stocks plummeting, government bond yields soaring and the US Dollar making the most out of it, strengthening against all major rivals. XAU/USD short-term technical outlook From a technical perspective, the case for an XAU/USD continued decline has become stronger. The pair met sellers around a bearish 20 Simple Moving Average (SMA) in the daily chart, bottoming at around a bullish 100 SMA, with the latter providing dynamic support at $1,990. 0. Technical indicators, in the meantime, offer firmly bearish slopes within negative levels, reflecting the strong selling interest. The 4-hour chart shows technical indicators keep heading south despite developing in oversold territory, warning of potential downward exhaustion. Still, it could mean some consolidation before the next directional move as there are no other signs of a possible recovery. Finally, XAU/USD develops far below all its moving averages, with the 20 SMA accelerating its slide below the longer ones, at around $2,022. Support levels: 1,989.90 1,976.50 1,962.70 Resistance levels: 2,005.90 2,018.50 2,032.10

EUR/USD struggles to find direction and continues to trade below 1.0800. Annual inflation in the US is forecast to soften to 2.9% in January. The USD could come under selling pressure on a weaker-than-expected CPI print. EUR/USD continues to move up and down in a tight channel below 1.0800 early Tuesday after closing the first day of the week marginally lower. January Consumer Price Index (CPI) data from the US could help the pair break out of its range in the second half of the day. Inflation in the US, as measured by the changed in the CPI, is forecast to soften to 2.9% in January from 3.4% in December. The Core CPI is seen rising 3.7% in the same period, down from the 3.9% increase recorded in December. On a monthly basis, the CPI and the Core CPI are expected to increase 0.2% and 0.3%, respectively. Inflation figures are unlikely to alter the market view about the Federal Reserve's (Fed) policy decisions in March. The CME Group FedWatch Tool shows that markets are pricing in a nearly 90% probability of the Fed staying on hold at the next meeting. However, investors are still undecided about whether there will be a policy pivot in May. Although investors could opt to wait and see more employment and inflation data before positioning themselves for a Fed rate cut in May, a softer-than-expected monthly Core CPI print, close to 0%, could trigger a short-term selloff in the US Dollar (USD) and help EUR/USD push higher. On the other hand, an upside surprise could have the opposite impact on the USD's valuation and force the pair to stay on the back foot. EUR/USD Technical Analysis The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD closed the last 5 4-hour candles below the 20-period and the 50-period Simple Moving Averages (SMA), highlighting the lack of buyer interest. On the downside, 1.0730 (end-point of the latest downtrend) aligns as first support before 1.0700 (psychological level). Looking north, first resistance is located at 1.0800 (psychological level, static level) ahead of 1.0820-1.0830 (100-period SMA, Fibonacci 23.6% retracement) and 1.0900 (Fibonacci 38.2% retracement, 200-period SMA).

GBP/USD rose toward 1.2650 in the European session on Tuesday. The pair could face stiff resistance at 1.2670. US January inflation data will be watched closely by market participants. GBP/USD gained traction and touched its highest level in more than 10 days above 1.2650 in the European session on Tuesday. Although the pair's near-term technical outlook points to a bullish tilt, buyers could refrain from betting on a steady advance unless 1.2670 resistance is cleared. The UK's Office for National Statistics reported early Tuesday that the ILO Unemployment Rate declined to 3.8% in the three months to December from 4.2%. This reading came in below analysts' estimate of 4%. Other details of the report showed that wage inflation, as measured by the change in the Average Earnings Excluding Bonus, softened to 6.7% from 6.2%. Although both of these prints could be welcoming news for the Bank of England (BoE), wage inflation is arguably still strong enough for policymakers to avoid cutting rates prematurely.

The S&P 500 saw a modest decline on Monday after achieving record highs last week, culminating in a historic close above 5000 for the first time on Friday. Investors appeared to exercise caution by reducing some risk ahead of the release of potentially market-moving US inflation data scheduled for Tuesday. It's a common market phenomenon for the dominant trend to revert ahead of significant risk events. Considering the remarkable rally in the S&P 500 (SPX) this year, it's reasonable to anticipate a pullback in the SPX as investors adjust their portfolios accordingly to mitigate potential risks associated with the upcoming event. However, there could be more than just meets the eye. Both markets and investors are clearly well caffeinated, pushing the S&P 500 benchmark to record heights in 2024, driven by a robust U.S. economy and the possibility of rate relief later this year. The S&P 500 has crossed the 5000 mark for the first time, up by 5% this year and a remarkable 21% above the recent dip in late October (just three months ago) Not all are in demand on the Fed dovish pivot; however, the bond market is feeling the weight of ongoing supply, with 10-year yields holding close to a 2-month high of 4.17-18, up 30 basis points in the past seven sessions. Meanwhile, the US CPI release should confirm that the disinflation trend continues. But with absentee foreign bond buyers shunning US bonds, that's probably not enough for bond markets, as a consensus month-on-month core outcome would still be too hot for comfort at the Fed. Indeed, the year-on-year inflation rates are expected to decline with a high degree of certainty. This phenomenon is primarily due to the base effect. In January 2023, there was a 0.5% increase compared to the previous month. Therefore, any figure lower than this will naturally decrease the year-on-year inflation rate for both headline and core metrics. While a 0.2% reading for the headline figure is anticipated and should be absorbed favourably, the core inflation figure at 0.3% is somewhat ambiguous. The concern is that this figure could potentially lead to a higher annualized rate, which may not be favourable. Hence, in a highly overcaffeinated market, a downside miss on the core is likely needed for doves to take flight, bond yields to rally, and probably stocks too. So if we get the anticipated 0.3%, which is well baked into market sentiment, we will unlikely get anything close to an ebullient cross-market reaction. A 0.4% outcome would be a huge negative surprise in the worst-case scenario. Unfortunately, then all bets are off — figuratively and in this context quite literally, as there is a lot of money backing the disinflation trend. The dreaded top side beat would throw ice water on the easing inflation story, send May cut probability tumbling south of 50% and upend a stock market rally looking for more boost juice from a dovish Fed. The US isn't out of the woods yet on the inflation front, even if markets are keen to pretend otherwise.

US CPI, the biggest market mover, may spark another rally.  A deep dive into American consumption and inflation in the UK serve as additional major market movers.  The absence of Chinese traders from markets will likely have a positive impact on markets. More fireworks than usual – that was the conclusion after the blockbuster US Nonfarm Payrolls report. The release of the Consumer Price Index (CPI) report could be even bigger, as all eyes remain on inflation.  While China is on holiday (the Lunar New Year also impacts markets) the release of consumer data from the US and UK inflation data add spice to an intense week.  1) Chinese holiday may boost markets The world's second-largest economy has a week off – but even a non-event can move markets. The lack of any big news coming out of Beijing is positive, as recent figures from China have been worrying. A break from concerns about demand would benefit Oil and also stocks. The only risk is a report suggesting fewer people are traveling and consuming around the Lunar New Year, but that is unlikely to be the case. The bad news will likely wait for next week.  2) US CPI inflation – Core CPI MoM and headline YoY are eyed Tuesday, 13:30 GMT: After Nonfarm Payrolls surprised with bigger fireworks than expected, the release of US Consumer Price Index (CPI) data could be even greater. There are fewer nuances here: inflation is falling faster or slower than expected. Softer inflation would boost Gold and Oil, while hurting the US Dollar. Ongoing stubborn inflation would hurt equities and the precious metal, sending the Greenback higher.  The most important figure to watch is Core CPI MoM – as it represents the latest development in the figure the Federal Reserve cares about. The Fed has a limited impact on energy and food prices set in global markets and more on everything else, such as housing and investment. With higher interest rates, people are encouraged to save more and take fewer loans. It is expected to rise by 0.3%, a relatively high level. A 0.2% would be meaningful.  The second figure to watch is the headline CPI YoY. That is the figure most watched by the media. A slide from 3.4% to 3.0% is expected, and it would be good news for stocks and Gold, hurting the US Dollar. However, a small rise to 3.1%, or higher would somewhat ruin the party. Seeing a 2% handle would also boost consumer confidence while seeing it stubbornly above 3% would be disappointing. As Nonfarm Payrolls showed, when all figures go in the same direction, the impact on markets is much stronger than when the data is mixed. Nevertheless, I expect a mixed report to boost stocks, as that is the trend eventually. The picture would be choppy and eventually sideways for Gold and the US Dollar.  3) UK inflation set to build a global narrative Wednesday, 7:00 GMT. Contrary to the US and the eurozone, price rises in the UK are still elevated at 4%. Is the UK unique, or just lagging behind? A small rise is on the cards, and that would boost the Pound. A surprising drop below 3.9% would send it down. A bigger shock in either direction would also impact the Euro, as the economies are well-correlated. To impact the US Dollar, the surprise in UK inflation would have to be aligned with the one in American inflation trends. If both fall more than expected, Britain's report will strengthen the notion that global inflation is coming down, sending the Greenback down while boosting Gold and stocks. Another disappointing report shows inflation is stubborn, which would hurt markets.  4) US Retail Sales – will shoppers take a break? Thursday, 13:30 GMT. Never underestimate the relentless US consumer – non-stop shopping. However, the economic calendar points to a small drop in headline sales following months of gains. Another month of gains would boost the US Dollar and hurt Gold, while a bigger slide would do the opposite. What would happen with stocks? Here, there is room for a more mixed reaction. While better sales imply higher interest rates, they also indicate healthy consumption and robust company profits. As consumption is roughly two-thirds of the US economy, the release has a large impact – but relatively short-lived, as big surprises are often accompanied by significant revisions to the other direction. Overall, this report could be an opportunity to go against the initial reaction.  5) US Consumer Sentiment Friday, 15:00 GMT, The last word of the week belongs to the forward-looking survey from the University of Michigan. Shoppers seemed depressed due to higher gasoline prices and inflation in general, but the recent report for January showed a big leap in confidence. A similar outcome is on the cards...

XAU/USD Current price: 2,015.77 Federal Reserve's speakers repeat the well-known message of wait and see. The United States will publish the January Consumer Price Index on Tuesday. XAU/USD nears the $2,000 mark with a solid bearish stance in the near term. Gold eased throughout the first half of the day, finding some buyers ahead of Wall Street's opening but resuming its slump afterwards. XAU/USD trades near a fresh February low of $2,011.97 despite subdued US Dollar demand. In the absence of relevant macroeconomic data and ahead of first-tier figures scheduled for later in the week, the focus was on Federal Reserve (Fed) officials' words. Board members have been downplaying the odds for a soon-to-come rate hike following the latest monetary policy meeting, generally pointing out that inflation still needs to come closer to their 2% goal and that they need more data before trimming rates. Fed Board of Governors member Michelle Bowman was on the wires on Monday and repeated the current rate is in the rate place, adding it's too soon "to predict" when rates will come down. Finally, she said that she doesn't expect cuts to be appropriate in the immediate future. Thomas Barkin and Neel Kashkari will speak at different events throughout the American afternoon, but no surprises are expected from that side. Meanwhile, the positive tone of equities weighs on the precious metal. US indexes trade in the green, with the S&P 500 extending gains beyond the 5,000 mark and reaching fresh record highs.   Market players are now waiting for a United States (US) inflation update. The country will release the January Consumer Price Index (CPI) on Tuesday, which is seen at 0.2% MoM and 3% YoY. The annual core reading is foreseen at 3.8%, slightly below the 3.9% posted in December. Softer-than-anticipated readings could revive hopes for soon-to-come rate cuts in the US. XAU/USD short-term technical outlook The daily chart for XAU/USD suggests it has more room to go. The pair met intraday sellers around a bearish 20 Simple Moving Average (SMA), currently at around $2,028. The longer moving averages remain far below the current level but have turned directionless. Finally, technical indicators gain downward traction, crossing their midlines into negative territory and reflecting increased selling interest. In the near term, and according to the 4-hour chart, the bearish case is clearer. The XAU/USD pair develops below all its moving averages, and the 20 SMA gains is currently accelerating below a flat 100 SMA, both around $2,030. At the same time, technical indicators head firmly lower, approaching oversold readings but far from suggesting a potential downward exhaustion. Support levels: 2,009.10 1,988.90 1,976.50 Resistance levels: 2,028.00 2,044.70 2,065.50 

EUR/USD Current Price: 1.0769 ECB and Fed speakers flooding the macroeconomic calendar at the beginning of the week. Investors await the United States January Consumer Price Index before jumping in. EUR/USD trades with a softer tone after failing to advance beyond 1.0800. The EUR/USD pair retreated after reaching a one-week high of 1.0805 and trades around 1.0770 ahead of the United States (US) opening. Financial markets kick-started the week cautiously, awaiting the release of fresh US inflation data. The country will publish the January Consumer Price Index (CPI) a critical guidance for future Federal Reserve's (Fed) decisions. Adding to the market's quiet stance, major Asian markets were closed amid local holidays at the beginning of the week. Meanwhile, easing US Treasury bond yields undermine demand for the US Dollar. The 10-year note currently offers 4.16%, down 3 basis points (bps) from its previous close. Wall Street, on the other hand, reflects a better mood. The tech sector leads the advance, with the S&P 500 trading at record levels ahead of the opening. Further gains there will likely maintain the USD at check. Data-wise, the macroeconomic calendar has little to offer, although multiple central banks' officials will be on the wires. European Central Bank (ECB) Governing Council member Pablo Hernandez de Cos said the ECB's March economic projections will be pivotal for deciding when to start cutting interest rates. Executive Board member Philip Lane will be next to hit the wires, followed by a row of Fed speakers in the American session. EUR/USD short-term technical outlook The EUR/USD pair trades in the red after advancing in the previous four days, and the technical picture suggests bears will maintain the pressure. Technical indicators in the daily chart develop below their midlines with neutral to bearish slopes, reflecting increased selling interest. At the same time, a directionless 100 Simple Moving Average (SMA) provides resistance at around 1.0790, with spikes beyond the level being quickly reverted. Finally, the 20 SMA keeps heading south above the longer one, in line with the bearish tone. The 4-hour chart shows EUR/USD has pierced a flat 20 SMA and is currently developing below it, as the longer moving averages head south far above the shorter one. At the same time, technical indicators rotated south and break through their midlines, although their directional strength seems limited. Sellers will be looking for a slide through 1.0720 to confirm the bearish bias and add to their shorts. Support levels: 1.0720 1.0695 1.0650 Resistance levels: 1.0790 1.0840 1.0880

EUR/USD continues to move sideways near 1.0800 on Monday. Strong resistance seems to have formed at around 1.0830. The pair could struggle to find direction ahead of US inflation data on Tuesday. EUR/USD closed the fourth consecutive day in positive territory on Friday but was virtually unchanged for the week. The pair holds steady at around 1.0800 to start the new week. The US Dollar (USD) edged lower ahead of the weekend as the Bureau of Labor Statistics (BLS) announced that it revised the monthly Consumer Price Index (CPI) increase for December lower to 0.2% from 0.3%. On Tuesday, the BLS will release CPI figures for January and investors could refrain from taking large positions ahead of the inflation report.  Over the weekend, European Central Bank ECB Governing Council member Fabio Panetta argued that the time for an interest rate cut was fast approaching. "Any speculation on the exact timing of monetary easing would be a sterile exercise," Panetta added. These comments, however, failed to trigger a noticeable reaction in EUR/USD during the weekly opening. The US economic docket will not feature high-impact data releases on Monday. Meanwhile, US stock index futures trade flat in the early European session, pointing to a neutral risk mood.  Later in the day, several Federal Reserve (Fed) policymakers are scheduled to speak. At this point, markets are convinced that there won't be a rate reduction in March and comments from officials are unlikely to influence the market positioning in a significant way. EUR/USD Technical Analysis The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 50, pointing to a bullish tilt in the short-term outlook. EUR/USD, however, could have a difficult time clearing 1.0830, where the Fibonacci 23.6% retracement level of the latest downtrend and the 200-day Simple Moving Average (SMA) align. A daily close above that level could attract technical buyers and open the door for an extended recovery toward 1.0880 (Fibonacci 38.2% retracement) and 1.0900 (psychological level, 200-period SMA on the 4-hour chart). On the downside, interim support is located at 1.0770 (20-period SMA) before 1.0730 (end-point of the downtrend) and 1.0700 (psychological level).

Gold price trades on the wrong footing at the start of the new week. Markets stay cautious amid holiday-thinned trade, ahead of Tuesday's US CPI data. Gold price test critical daily support line at $2,023, as RSI flips bearish. Gold price is looking to extend the previous week's downtrend at the start of the new week on Monday. Gold price is testing the $2,020 level even though the US Dollar (USD) and the US Treasury bond yields remain on the back foot amid holiday-thinned trading conditions. Most of the major Asian markets are closed on Monday, in observance of the Lunar New Year holiday. Gold price stays vulnerable, with eyes on US CPI data Markets are also sensing a calm before Tuesday's US Consumer Price Index (CPI) data storm, as they refrain from placing any fresh directional bets on the US Dollar, as well as, the Gold price. Investors are resorting to adjusting their positions on the US Dollar, keeping the Greenback on the back foot so far this Monday. Last week, the US Dollar managed to find its feet against its major rivals, despite markets paring back aggressive US Federal Reserve (Fed) interest rate cut bets, as a batch of strong US data affirmed the economic resilience. Markets are now pricing only a 16% chance of a March Fed rate cut. Meanwhile, the odds of a rate cut by the Fed for the May meeting stand at about 60%. Additionally, renewed concerns over China's economic slowdown also helped revive the safe-haven demand for the US Dollar. However, further gains in the Greenback remained capped due to the risk-rally on global stocks on encouraging corporate results. Looking ahead, Gold price is likely to maintain its bearish momentum amid pre-US CPI data-led caution trading and easing Israel-Hamas geopolitical tensions. The Israeli military said on Monday it had conducted a "series of strikes" on southern Gaza that has now "concluded," days after Israeli Prime Minister Benjamin Netanyahu rejected a ceasefire proposal from Hamas. Speeches from Fed policymakers, however, will grab some attention ahead of the critical US inflation report for January, as it could pave the way for a dovish Fed pivot. On Friday, the Labor Department's Bureau of Labor Statistics (BLS) unveiled the annual revisions to the CPI data. The CPI rose 0.2% in December instead of 0.3% as reported last month. But data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated. The CPI gained 0.1% in October vs. 0% reported previously. Upward revisions to the US CPI figures briefly propelled US Treasury bond yields but surging Wall Street indices dulled the attractiveness of the yields and the safe-haven Gold price. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price is teasing a downside break of the rising trendline support at $2,023. A daily candlestick close below that level will trigger a fresh downside toward the $2,000 mark. Ahead of that, the $2,010 round figure will test bullish commitments. The last line of defense for Gold buyers is envisioned at the ascending 100-day Simple Moving Average (SMA) at $1,990. The 14-day Relative Strength Index (RSI) is pointing south below the 50 level, suggesting that there is more room for Gold sellers to flex their muscles. Meanwhile, the 21-day and 50-day SMAs Bear Cross also remains in play.   On the flip side, if the trendline support at $2,023 holds, Gold buyers will challenge the $2,030-$2,035 supply zone on an initial rebound. That zone is the confluence of the 21-day and 50-day SMAs. Further up, the $2,040 level will offer stiff resistance. Acceptance above the latter is needed to take on the $2,050 psychological level.

United States macroeconomic data supports the Federal Reserve's wait-and-see stance. European Central Bank officials gave mixed signals, but rate cuts remain out of the table. EUR/USD remains under selling pressure and could fall towards the 1.0550 price zone. The EUR/USD pair remained under selling pressure throughout the week, extending its slide to a fresh 2024 low of 1.0722 on Monday. The US Dollar momentum, however, receded as days went by, resulting in EUR/USD ending the week pretty much where it started it, around 1.0780. USD rally stalls, Euro remains unattractive Major pairs traded within limited ranges amid a scarce macroeconomic calendar and as global policymakers stuck to their cautious stance on future interest rate cuts. Following a row of central banks' announcements and key economic data, market participants feel discouraged. Investors hoped central banks would speed up monetary tightening in 2024, given that inflationary pressures continued to ease, and as the risks of steeper economic setbacks pend like Damocles' sword among most countries. Yet officials made it clear that they are in no rush to change course, comfortable in the current wait-and-see stances. Eventually, interest rates will be lowered, but not before policymakers have more evidence that inflation, employment, and growth are balanced. Resilient US labor data takes its toll The absence of fresh clues was behind these days' choppy trading. But is it so? In fact, what happened is that hints were against speculative interest desire. The United States (US) reported that Initial Jobless Claims moved lower in the week ended February 2 to 218K from 220K expected, as employers retained workers. Furthermore, the ISM Services PMI jumped to 53.4 in January, much better than the 52.0 expected. Also, the ISM Services Prices Paid sub-index soared to 64.0 from 56.7 in January. Finally, the December Goods and Services Trade Balance posted a deficit of $62.2 billion, as expected. These figures indicate that the labor market remains tight, inflation risks are still high, and the economy continues to grow at an uneven pace. In two words, data supports the Federal Reserve's (Fed) decision to wait before trimming rates, as the monetary policy may not be restrictive enough. And that's not what the market wants to hear. Market players got some good news ahead of the weekly close, as the US Bureau of Labor Statistics (BLS) revised the monthly Consumer Price Index (CPI) increase for December lower to 0.2% from 0.3%, while November's CPI increase was revised higher to 0.2% from 0.1%. Eurozone weakness The situation is even more fragile in Europe. Macro data keeps suggesting the economic downturn is yet to find a bottom. The Hamburg Commercial Bank (HCOB) released the final updates of the January Services and Composite PMIs, which confirmed the Eurozone economic activity remained in contraction territory at the beginning of 2024. News coming from Germany were mixed, as Factory Orders rose 8.9% in December, beating expectations, although Industrial Production in the same month declined 1.6%. Meanwhile, the European Central Bank (ECB) published the Economic Bulletin,  which showed the Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner, adding the risks to economic growth remain tilted to the downside. Furthermore, the document acknowledged the Euro Area economy is likely to have stagnated at the end of 2023. Finally, it reiterated that the Governing Council would maintain rates at sufficiently restrictive levels for as long as necessary.  True, some officials seem to be more willing to trim interest rates, but it won't happen in the first half of the year. US inflation under the spotlight The US will release the January CPI next Tuesday, foreseen at 0.2% MoM and 3.0% YoY. The country will later unveil the Producer Price Index (PPI) for the same period, as well as Retail Sales. Softer-than-anticipated inflation readings could revive speculation of a March rate cut despite local policymakers clearly positioning against such a movement. The Eurozone will publish a revision of the Q4 Gross Domestic Product (GDP) mid-week, with no other relevant figures scheduled for the days to come. Finally, on Friday, the focus will be on the Fed Monetary Policy Report, while the US will publish the preliminary estimate of the February Michigan Consumer Sentiment Index. EUR/USD technical outlook From a technical point of view, the risk remains skewed to the downside. The weekly chart shows that EUR/USD is battling to retain ground above a directionless 20 Simple Moving Average (SMA) while developing further below an also flat 200 SMA. Technical indicators, in the meantime, gain downward traction, although they remain within neutral levels. In the daily chart, the EUR/USD pair is developing below all its moving averages, meeting sellers around a mildly bullish 100 SMA. The 20 SMA, in the meantime, keeps heading firmly lower, far above the current level, reflecting...

Pound Sterling languished near two-month lows on renewed US Dollar demand. The UK/ US inflation data set to drive GBP/USD price action in the upcoming week. The daily technical setup points to more pain ahead for GBP/USD. The Pound Sterling (GBP) extended its losing streak against the US Dollar (USD) into a fourth straight week, keeping GBP/USD undermined near two-month troughs. Pound Sterling is not out of the woods yet It was all about the market's pricing of the US Federal Reserve (Fed) interest rate cut expectations following the stellar January Nonfarm Payrolls (NFP) report, which kept the US Dollar broadly elevated. Odds for a March Fed rate cut dropped to nearly 20% this week, compared with a 68.1% probability at the start of the year. Meanwhile, the odds for a May Fed rate cut now stand at 65%. Markets now price in 115 basis points (bps) of cuts this year, compared with around 150 bps of reductions anticipated a month ago, according to CME Group's FedWatch tool. The dialing back of Fed rate cuts for this year received a fresh thrust after Fed Chair Jerome Powell, in an interview aired early Monday, dismissed a rate cut next month while pushing back against the timing of the rate cuts. US ISM Services PMI came in stronger at 53.4 in January, as new orders increased and employment rebounded. US Initial Jobless Claims decreased by 9,000 to 218,000 in the week ended Feb. 3, according to Labor Department data out Thursday. Applications for US unemployment benefits fell for the first time in three weeks. Combined with strong US economic data, hawkish Fed commentary throughout the week, convinced markets that chances of aggressive rate cuts by the Fed this year are off the table. Minneapolis Fed President Neel Kashkari argued on Monday that a possibly higher neutral rate means that the Fed can take more time before deciding whether to cut. On Tuesday, Philadelphia Fed President Patrick Harker said that the "economy is on track for a soft landing." Boston Fed President Susan Collins said on Wednesday, "for the moment, policy remains well positioned, as we carefully assess the evolving data and outlook," adding it will be "appropriate to begin easing policy restraint later this year." Richmond Fed President Thomas Barkin said Thursday that they have time to be patient on rate changes and said that he needs to see good inflation numbers being sustained and broadening.  The Greenback also capitalized on firmer US Treasury bond yields, as they remained supported by a couple of strong US government bond auctions.  Ahead of the weekly close, the US Bureau of Labor Statistics (BLS) revised the monthly Consumer Price Index (CPI) increase for December lower to 0.2% from 0.3%, while November's CPI increase was revised higher to 0.2% from 0.1%, although the news had no measurable impact on GBP/USD. On the other side, a raft of Bank of England (BoE) policymakers also took up the rostrum during the week but failed to have little to no impact on the Pound Sterling even though they retained their hawkish stance. BoE Chief Economist Huw Pill said on Monday that it's still too early to declare inflation fully suppressed – still more work to be done. Deputy Governor Sarah Breeden said on Wednesday, "My focus has shifted to thinking about how long rates need to remain at their current level." BoE policymaker Catherine Mann noted Thursday that she is not convinced that the near-term deceleration in headline inflation will continue. Meanwhile, on Friday, policymaker Jonathan Haskel said he is encouraged by signs that the UK's inflation pressures might be on the wane but he would need more evidence of a cool-down before changing his stance, per Reuters. Week ahead: It's all about inflation The week opens with BoE Governor Andrew Bailey's speech on Monday, paving the way for the Pound Sterling, as traders gear up for the all-important inflation data release from both sides of the Atlantic. The United States will report the CPI figures on Tuesday while the United Kingdom will follow it up on Wednesday. Tuesday will also see the publication of the UK's labor market report, with a focus on the wage inflation data. On Thursday, the preliminary first-quarter Gross Domestic Product (GDP) data from the UK will stand out amidst the releases of the country's trade report and factory data. In American trading that day, the Retail Sales and Jobless Claims data will entertain GBP/USD traders. Friday is also a busy one, with the UK Retail Sales dropping, followed by the US Producer Price Index (PPI), Consumer Sentiment and housing data. The bi-annual Fed Monetary Policy Report will be published later on Friday. Apart from the data, markets will pay close attention to the speeches from the BoE and the Fed policymakers for fresh...