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NZD/USD in holding pattern ahead of Reserve Bank decisionThe New Zealand dollar is almost unchanged ahead of the Reserve Bank of New Zealand (RBNZ) rate decision on Wednesday (New Zealand time). The US releases JOLTS Job Openings. NZD/USD is trading quietly at the 0.63 line in the European session. The RBNZ is widely expected to raise rates by 25 basis points, which would bring the benchmark cash rate to 5.0%. Over the past year, the RBNZ has delivered oversize hikes of 50 and even 75 basis points, marking an aggressive rate-tightening cycle in order to contain red-hot inflation. The battle with inflation has been slow, as CPI came in at 7.2% in Q4 2022, unchanged from the third quarter. The sharp rise in rates and weak global demand have battered the New Zealand economy. GDP declined by 0.6% in Q4 2022, and the cyclone in February will have a negative impact on GDP for Q1. This backdrop supports the RBNZ taking a break from its relentless rate hikes at the upcoming meeting. In February, the RBNZ projected a terminal rate of 5.50%, but with the economy showing signs of strain, the central bank might end the current cycle at 5.25%, especially if inflation heads south. We could even see a rate cut before the end of the year. In the US, the highlight of the week is nonfarm payrolls on Friday. After a better-than-expected reading of 311,000 in March, the consensus estimate stands at 240,000 which is still decent. The Fed will be looking at nonfarm payrolls as an important factor in its rate decision in May. Currently, the odds of a 25bp increase are at 59% and a pause at 39%, according to the CME Group. This week's employment releases kick off with JOLTS Job Openings later today. The estimate stands at 10.49 million, following the prior reading of 10.82 million. NZD/USD tested resistance at 0.6310 earlier in the day. Above, there is resistance at 0.6362 0.6245 and 0.6127 are providing support
by OANDA
$SPY: Breakout/drop to $395? Broadening formation's fate hangsTomorrow morning, we'll be receiving GDP data and jobless claims, which could have a significant impact on the market. Currently, $SPY is at a crucial point on the daily chart, nearing the upper limit of its broadening formation. It's showing positive trends on the daily, weekly, monthly, and quarterly charts. Keep in mind that the month and quarter will close on Friday, along with the release of PCE data. GDP results are expected to come in flat tomorrow morning, while the jobless claims at 8:30 am could potentially offset the GDP figures. If the data leans bullish, $SPY has the potential to break through the $405 price level and run like a bat outta hell. On the other hand, if the data comes in bearish, we may see a retest of the $398 level, followed by a potential drop to close the bullish gap at the $395.7 price level.
AMEX:SPY
by Solidified
🟨 SP500 based on YoY GDP ChangeVolatility in many times in the market is bad and the stock market is a mirror of the economy. When you go back prior to the Great Bull Market (1980s), you wll see that there were very wide swings in real GDP. These are the Boom and Bust cycle. Now, as the FED evolved its policies it learned how to contain the market and flatten the Boom and Bust cycle and flatten the economy. And you can see that when we have the low volatility in GDP, the market has been very much accustomed to this. However post 2020 we are more volatile then ever. This is exactly why the FED is stepping hard on the breaks until they for sure put a cap on the upside and on the inflationary side. It is again interesting to see that Volatility is just bad for the market.
SP:SPX
by TintinTrading
Canadian dollar eyes Ivey PMIThe Canadian dollar is coming off a relatively quiet week but that could change as there a host of key releases this week. Ivey PMI kicks things off later today, followed by the Bank of Canada rate decision on Wednesday and the February employment report on Friday. Canada's Ivey PMI recorded a massive rebound in January, climbing from 33.4 all the way to 60.1 points. A reading above 50.0 points to expansion. The reading is expected to remain strong in February, with an estimate of 57.7 points. Canada's economy ended 2022 in an unimpressive fashion, posting a growth rate of 0.0% y/y in the fourth quarter, compared to 2.3% in Q3. This was much lower than the market estimate of 1.5% and the Bank of Canada's projection of 1.3%. On a monthly basis, December GDP contracted by 0.1%, down from 0.0% in November and below the estimate of 0.0%. The Bank of Canada meets on Tuesday and is widely expected to hold rates at 4.50%. A non-move would be significant, as the BoC hasn't taken a pause since the current rate-tightening cycle began in January 2023. Governor Macklem has signalled to the markets that he wants to take a pause in tightening, and the weak GDP report will support the BoC easing off the rate pedal as the economy shows signs of slowing. The steep hike in rates has pushed inflation lower, as it fell to 5.9% in January, down from 6.3% a month earlier. What will the BoC do after tomorrow's rate decision? The BoC would love to pause rates throughout the year, but Macklem has made clear that a pause is dependent on supportive data. There is also the complication that the Federal Reserve is likely to continue hiking several more times this year, and the BoC does not want to fall too far out of sync with rate levels in the US. In the US, this week's key events are Fed Chair Powell's semi-annual testimony before Congress and the nonfarm payroll report, both of which could move the US dollar. If Powell provides any hints about further rate hikes, the US dollar could respond with gains. Nonfarm payrolls was red-hot in January with 517,000 new jobs, but this is expected to be a one-time bump, with the estimate for February standing at 200,000. The surprisingly resilient labour market has the Fed concerned about wage pressures, and a strong wage growth release could raise market expectations of higher rates. 1.3701 and 1.3784 are the next resistance lines 1.3571 is a weak support line, followed by 1.3478
by OANDA
AUD/USD jumps on inflation, China PMIsThe Australian dollar is showing strong gains for the first time in a week. AUD/USD is trading at 0.6764 in Europe, up 0.53%. Australia's inflation fell to 7.4% in January, down from 8.4% in December and below the estimate of 8.0%. Australian Treasurer Jim Chalmers said that he was "cautiously hopeful" that inflation has peaked, but inflation still remained the economy's biggest challenge. The GDP report was not as positive, with a gain of 0.5% q/q in Q4, below the Q3 gain of 0.7% and the forecast of 0.8%. On an annualized basis, GDP slowed to 2.7% in Q4, down sharply from 5.9% in the third quarter. The RBA's rate-hike cycle has slowed economic activity and is responsible for the drop in inflation as well as the soft GDP. The central bank will have to consider how aggressive it should be with regard to future rate increases. Inflation needs to come down much further, but further rate hikes raise the risk of the economy tipping into a recession. The RBA is expected to raise rates by 25 basis points next week but may pause at the April meeting if the data, particularly inflation, allows the Bank to take to a breather. The Aussie received a boost today from strong Chinese PMIs. Manufacturing and Non-manufacturing PMIs improved in February and beat expectations, with readings of 52.6 and 56.3, respectively. A reading above 50.0 indicates expansion. China is Australia's largest trading partner and a stronger Chinese economy means greater demand for Australian exports, which is bullish for the Australian dollar. China's transition from zero-Covid to reopening the economy has gone well so far and a rebound in China is important not just for China and the region but for the global economy as well. AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858
by OANDA
AUD/USD eyes CPI, GDPThe Australian dollar remains under pressure and has edged lower on Tuesday. AUD/USD dropped below the 0.67 line on Monday for the first time since Jan. 3. Australian retail sales jumped 1.9% m/m in January, following an upwardly revised 4% decline in December and beating the consensus of 1.5%. The data indicates that consumer demand remains resilient despite rising interest rates and higher inflation. For the RBA, the upswing in consumer spending is a sign that the economy can continue to bear higher rates. The central bank has hiked some 325 basis points since May 2022 in a bid to curb inflation. The cash rate is currently at 3.35% and the markets have priced in a peak rate of 4.3%, with four rate hikes expected before the end of the year - one more than what is expected for the Fed. The RBA meets on March 7 and is widely expected to raise rates by 25 basis points. Wednesday could be a busy day for the Australian dollar, as Australia releases inflation and GDP reports. Inflation for January is expected to ease to 7.9% y/y, following an 8.4% gain in December. GDP for the fourth quarter is projected to slow to 2.7% y/y, after a robust gain of 5.9% in Q3. A decline in inflation and in GDP would indicate that high interest rates are having their intended effect and slowing economic activity. The question is whether the RBA will be able to guide the slowing economy to a soft landing and avoid a recession. In the US, a recent string of strong numbers has raised speculation that the Fed could raise interest rates as high as 6%. The unseasonably warm weather in January may have played a part in the better-than-expected numbers and we'll have to see if the positive data repeats itself in February. The markets have shifted their stance from a final rate hike in March with rate cuts late in the year to pricing in three more rate hikes in 2023. If upcoming inflation, employment and consumer spending reports point to a weaker economy, we can expect the markets to revert to pricing in a dovish pivot by the Federal Reserve. AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858
by OANDA
NQ Power Range Report with FIB Ext - 2/23/2023 SessionCME_MINI:NQH2023 - PR High: 12180.00 - PR Low: 12151.75 - NZ Spread: 63.25 Evening Stats (As of 12:55 AM) - Weekend Gap: N/A - 8/19 Session Gap: -0.04% (open > 13237) - Session Open ATR: 265.72 - Volume: 25K - Open Int: 261K - Trend Grade: Bear - From ATH: -27.4% (Rounded) Key Levels (Rounded - Think of these as ranges) - Long: 12959 - Mid: 12392 - Short: 11820 Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
CME_MINI:NQH2023Long
by mv3trader5
EUR/USD dips to 1-month lowThe euro has fallen for three straight sessions and has extended its losses on Tuesday. Earlier in the day, EUR/USD fell below the 1.07 line for the first time since Jan. 23. German and eurozone numbers have been soft this week, adding to the euro's woes. Eurozone retail sales fell 2.7% in December, worse than the estimate of -2.5% and well off the November read of 1.2%. German Industrial Production came in at -3.2% in December, down from 0.4% in November and below the expectation of -0.6%. Germany is the locomotive of the bloc but the engine is stuttering, which is bad news for the rest of the eurozone. GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The US dollar received a much-needed boost from the January nonfarm payroll report, as the 517,000 gain crushed expectations. There are no major releases out of the US today, but Fed Chair Powell will participate in a panel discussion. If Powell strikes a hawkish tone, the US dollar could extend its gains. There are a host of Fed members speaking this week, and if they reiterate the "higher for longer" stance that the Fed continues to embrace, the US dollar could continue to move north. How will the Fed react to the stellar employment report?  Fed member Mary Daly called the employment release a "wow number" and said that the Fed's December forecast of a peak rate of 5.1% was a "good indicator" of Fed policy. With the benchmark rate currently at 4.5%-4.75%, we're likely looking at two more rate hikes, exactly what Jerome Powell said at the FOMC meeting last week. The spike in job creation has raised hopes that the Fed can pull off a "soft landing" and there is even talk on Wall Street of a "no landing" which would mean that a recession could be avoided. 1.0758 is a weak support line, followed by 1.0633 There is resistance at 1.0873 and 1.0954
by OANDA
USD/JPY dips as Tokyo Core CPI risesThe Japanese yen is in positive territory on Friday. In the European session, USD/JPY is trading at 129.76, down 0.33%. Inflation indicators in Japan continue to head northwards. Tokyo Core CPI rose to 4.3% y/y in January, up from 3.9% in December and ahead of the consensus of 4.2%. This is the highest level in 42 years, but what is more worrying for the Bank of Japan is that the indicator has exceeded the central bank's target of 2% for the eighth straight month. The increase was broad-based, with food and fuel prices the main contributors to the increase. The Tokyo Core CPI reading follows other inflation indicators which have hit decades-high levels, adding pressure on the BoJ to exit its stimulus programme. The BoJ insists that inflation will peak at 3% in March. but this view seems over-optimistic, given the trend we're seeing from inflation data. BOJ Governor Kuroda has said he will maintain the Bank's ultra-loose policy until wages increase, which would indicate that inflation is driven by domestic demand rather than cost-push factors. Kuroda winds up his term in April, and the new Governor could decide to tighten policy, which would boost the yen. US GDP climbed 2.9% y/y in Q4, down from 3.2% in Q3 but still a respectable clip. Will the US be able to avoid a recession? The answer isn't clear, as the economic data shows a mixed picture. The employment market remains robust and overall growth has been positive. Manufacturing and Services PMIs continue to show that these sectors are contracting and housing has been especially weak, as lowered Q4 GDP by about 1.3%. Much will depend on the strength of consumer spending, which accounts for some 68% of GDP. Consumer spending rose 2.1% in Q4, down slightly from 2.3% in the third quarter. However, the December release is worrying, as consumer spending declined by 1.1%. If this trend continues, it seems likely that the US economy will tip into a recession. There is resistance at 130.89 and 131.69 129.46 and 128.40 are providing support
by OANDA
DXY Forecast ahead of Core PCE Price Index ReleaseHello guys, Currently DXY is resting on a strong support area at 101.773. Just a quick recap. We had the advanced GDP news release which saw a 2.1% growth in 2022 despite challenges like recession fears and high prices. The job market remained strong and people were optimistic about the future. If the Core PCE Price Index m/m data release yields are better than expected, price can possibly break the descending trend line before heading towards the overlap resistance at 102.821. Alternatively, if the yields are below expectations, expect DXY to head towards the previous weekly swing low at 101.297. Stay safe trading guys! :) Regards, Chen Yongjin
TVC:DXY
by DogeStonks
AUD/USD rises as inflation jumpsThe Australian dollar has extended its rally with solid gains on Wednesday. In the North American session, AUD/USD is trading at 0.7080, up 0.51%. RBA policy makers are no doubt having a bad day at the office, as Australia's inflation climbed sharply in the fourth quarter. CPI rose to 8.4%, up from 7.3% in Q3 and above the consensus of 7.7%. The hot inflation report will douse hopes that inflation has peaked and there's little doubt that the RBA will have to continue raising rates. The markets had priced in a peak rate of 3.6%, but with the cash rate currently at 3.1% and more rate hikes on the way, it appears that the market is underestimating the terminal rate. The inflation release boosted the Australian dollar around 1% and to a five-month high after the CPI report, but the Aussie has pared much of those gains. The outlook for the Aussie is looking brighter for several reasons. The RBA will almost certainly continue raising rates over the next several months, commodity prices are strong and China's reopening will increase demand for Australian exports. There were no major releases out of the US today, but Thursday has a crowded data calendar, with GDP, durable goods and new home sales. GDP is expected to slow to 2.8%, down from 3.2% in Q3 but still respectable. On Wednesday, US PMIs pointed to a decline in the manufacturing and services sectors, pointing to cracks in the US economy as high rates have dampened economic growth. The US dollar has been under pressure as soft US numbers have increased expectations that the Fed will ease up on rate policy due to the slowing economy. A stronger-than-expected GDP would likely provide the US dollar with a much-needed boost, while a soft GDP reading should send the US dollar lower. AUD/USD is testing resistance at 0.7064. Above, there is resistance at 0.7160 0.6968 and 0.6872 are providing support
by OANDA
USD/CAD eyes retail salesThe Canadian dollar is unchanged on Friday, trading at 1.3466 in the European session. We could see some volatility in the North American session, as Canada releases retail sales. The markets are bracing for a downturn in retail sales for November, with a forecast of -0.5% m/m for the headline figure and -0.4% for the core rate. This follows a strong report in October, as the headline reading was 1.4% and core retail sales at 1.7%. If the releases are as expected or lower, it could be a rough day for the Canadian dollar. Today's retail sales release is the final major event prior to the Bank of Canada's meeting on January 25th. The markets have priced in a 25-bp increase, but a hold is also a possibility, especially with December inflation falling to 6.3%, down from 6.8%. The BoC has raised rates by some 400 basis points in the current rate-tightening cycle, which began in March 2022. Similar to the market outlook on the Fed's rate policy, there is significant speculation that the BoC could wind up its tightening at the first meeting of 2023 and then keep rates on hold. The BoC has said that future hikes will be determined by economic data, and there are signs of strength in the economy despite the Bank's aggressive rate policy. GDP expanded by 2.9% in Q3 which was stronger than expected and job growth sparkled in December, with over 100,000 new jobs. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. 1.3455 is a weak support line, followed by 1.3328 1.3582 and 1.3707 are the next resistance lines
by OANDA
Canadian dollar shrugs as CPI declinesIt has been a quiet day in the currency markets, and the Canadian dollar has followed suit. In the North American session, USD/CAD is trading at 1.3386, down 0.15%. Inflation in Canada slowed to 6.3% y/y in December, down from 6.8% a month earlier and matching the consensus. On monthly basis, the decline was noticeable at -0.6%, compared to 0.0% in November and the forecast of -0.1%. Core CPI fell to 5.4% y/y, down from 5.8% in November and below the forecast of 6.1%. The driver of the drop in inflation was a sharp decline in gasoline prices. Food prices, however, remain high and rose by 11% in December, a slight improvement over the November read of 11.4%. The Canadian dollar shrugged off the drop in inflation and remains close to the 1.34 round-figure mark. The drop in inflation suggests that the Bank of Canada's aggressive rate cycle is having the desired effect, although inflation remains much higher than the BoC's target of 2%. The BoC holds its rate meeting next week, and the markets have priced in a 25- basis point hike, which would bring the cash rate to 4.50%. If inflation continues to downtrend, the expected hike next week could signal the end of the current rate-tightening cycle. The BoC has said that future hikes would be determined by economic data, and there are signs of economic strength despite the rate hikes. GDP is expected to rise 1.2% y/y in Q4 and job growth sparkled in December, with over 100,000 new jobs. The markets are expecting a 25-bp hike next week, but it's uncertain what the central bank has planned after that. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. USD/CAD is testing support at 1.3389. Below, there is support at 1.3328 1.3455 and 1.3546 are the next resistance lines
by OANDA
GBP/USD edges higher as GDP outperformsThe British pound is slightly higher on Friday. GBP/USD is trading at 1.2234, up 0.24%. The pound has enjoyed a solid week, with gains of 1.2%. US inflation continues to decline and slowed for a sixth straight month in December. Headline CPI fell to 6.5%, down from 7.1% and matching the estimate. The drop was driven by lower prices for gasoline as well as new and used vehicles. Core CPI showed a similar trend, dropping from 6.0% to 5.7%, which matched the forecast. Inflation is coming down slowly and remains much higher than the Fed's 2% target, as any Fed member will be quick to point out. Still, it's clear that inflation is on the right path as the impact of the Fed's aggressive tightening cycle is being felt in the economy. The inflation data came in as expected, but the markets were nonetheless delighted and the US dollar sustained losses across the board on Thursday. The Fed was also pleased that inflation continues to downtrend. After the inflation release, Fed member Harkins said he supports a 25-basis point hike at the February meeting and expects rates to rise "a few more times this year", with a 25-bp pace being appropriate. This sounds like an acknowledgment that inflation has peaked, although we won't be hearing the "P" word from any Fed official, for fear of the markets going overboard and loosening conditions, which would complicate the fight against inflation. Other Fed members have come out in support of a 25-bp hike in February and the CME's FedWatch has pegged the odds of a 25-bp increase at 93%. Barring some unforeseen event, a 25-bp hike looks like a done deal. In the UK, GDP for November outperformed, with a 0.1%, gain, above the forecast of -0.2% but weaker than the October read of 0.5%. The broader picture is not pretty, with GDP falling by -0.3% in the three months to November. The UK economy is sputtering and the Bank of England has its work cut out as it must continue raising rates, despite the weak economy, in order to curb high inflation. The BoE meets next on February 2nd. GBP/USD tested support at 1.2192 earlier in the day. The next support level is 1.2017 There is resistance at 1.2290 and 1.2366
by OANDA
equity to gdp at extremesquarterly momo is bearish in spy, and equity to gdp ratio is at or near a vertex, or local minimum. if you look at the volume based oscillations there is mixed indication. if you anchor vwap at the breakout level jan 2014 you can see were sitting right on the top band exploring the idea of a monthly higher low. if that breaks things like equity/gdp, market cap/gdp, the buffet indicator (aggregate value or price to share to gdp) will need to converge more bearishly on the price. if we confirm weekly trend reversal then ill be much more confident in an spx broader recovery and maybe all time highs, but if we head toward 52 week lows i expect equity over gdp to test 1999 highs, and spy to test corona highs. its not unthinkable that spy is at 500 soon, but its also not impossible that we see 300 first. this shows that valuations are completely detatched from fundamentals, and thats not necessarily bullish or bearish but instead shows why things have been unravelling for a little more than a year. im sure a lot of that is coronavirus, and im sure a lot of it is just prices trending toward equillibrium.
AMEX:SPY
by cerealpatterns
GBP/USD drifting, UK GDP nextThe British pound is drifting for a third straight day. In the European session, GBP/USD is trading at 1.2161, down 0.09%. We could see stronger volatility from the pound before the weekend, with the release of the US inflation report and UK GDP on Friday, both of which are market movers. There is guarded optimism ahead of the US inflation report. Inflation is projected to drop in December, which would be music to the market's ears. The forecast for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate, which is more important, is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. The inflation release should result in volatility from the US dollar. If inflation, particularly the core rate, falls as expected or more, the US dollar will likely lose ground, as speculation will increase that the Fed may have to pivot from its hawkish stance and ease up on the pace of rates. Conversely, if inflation does not fall as much as expected, it would vindicate the Fed's hawkish position, which the markets may have to grudgingly accept. There remains a dissonance between the Fed and the markets, despite warnings by the Fed that the markets are underestimating Fed rate policy. The Fed has insisted that further rate hikes are coming, while there have been market players who are expecting a "one and done" hike in February which will wrap up the current rate cycle. The markets have priced in a peak terminal rate below 5% as well as rate cuts late in the year, while the Fed has been signalling a peak rate of 5-5.25% or even higher. In the UK, there are no major releases on Thursday, but Friday will be busy, highlighted by monthly GDP and Manufacturing Production. The markets are braced for soft numbers, which could send the pound lower. GDP for November is expected to contract by 0.2% m/m, following a gain of 0.5% in October. Manufacturing Production for November is forecast to come in at -4.8% y/y, after a -4.6% reading in October. GBP/USD is putting pressure on 1.1832 and could test this line today. The next support level is 1.1726 There is resistance at 1.1913 and 1.2026
by OANDA
How to use ECONOMIC INDICATORS for informed trading decisionsHello everyone! Here you have some information that I consider useful on how to interpret and use economic indicators and data to make informed trading decisions in the foreign exchange market: GDP (Gross Domestic Product) - GDP is a measure of a country's economic output and is considered to be one of the most important indicators of economic growth. A higher GDP indicates a stronger economy, which can lead to an increase in demand for the country's currency. Unemployment Rates - Unemployment rates measure the percentage of the workforce that is currently without a job. A low unemployment rate indicates a strong economy, which can lead to an increase in demand for the country's currency. Inflation - Inflation measures the rate at which the average price level of a basket of goods and services in an economy is increasing. High inflation can lead to a decrease in demand for the country's currency, while low inflation can lead to an increase in demand. Interest Rates - Interest rates are the cost of borrowing money and are set by central banks. High interest rates can attract foreign investment, leading to an increase in demand for the country's currency. Trade Balance - The trade balance measures the difference between a country's exports and imports. A positive trade balance indicates that a country is exporting more than it is importing, which can lead to an increase in demand for the country's currency. Political Stability - Political stability is an important factor to consider when trading in the foreign exchange market. A stable political environment can lead to an increase in demand for a country's currency, while political instability can lead to a decrease in demand. In summary, GDP, unemployment rates, inflation, interest rates, trade balance and political stability are important economic indicators to keep an eye on when making trading decisions in the foreign exchange market. By considering these indicators, along with other market conditions, traders can make more informed decisions about when to buy or sell a particular currency. Please note that the above information is not a financial advice and only for educational purpose, Economic indicators are important but not the only factor to consider while making trading decisions and It's always important to do your own research and consider your own risk tolerance before making any trades.
Education
by m_maia14
GBP/USD pushes above 1.20The British pound has bounced back on Wednesday and recorded sharp gains. In the European session, GBP/USD is trading at 1.2055, up 0.74%. Ask any British consumer, and they'll tell you that food prices have been going through the roof. The BRC provided data in that regard, stating that food inflation hit a record 13.3% in December, up from 12.4% in November. The BRC put the blame on the Ukraine war, which has resulted in higher prices for energy and raw materials. With the war dragging on and no end in sight, we're unlikely to see a drop in food prices anytime soon. High inflation and more expensive mortgage payments have squeezed British households, which have been hit by the worst cost-of-living crisis the UK has experienced in years. The OBR projected in November that real household disposable income would fall by 4.3% in 2022-2023. The rise in inflation has been accompanied by weak growth, and the UK is likely already in a recession. Goldman Sachs has forecasted the GDP will contract by 1.2% in 2023, the worst among the G-10 major economies. This is only marginally better than the forecast for Russia, with GDP expected to decline by 1.3%. The Bank of England has been focussed on inflation and raised rates by 50 basis points to 3.5% in December. Inflation eased to 10.7% in December, down from 11.1% in November, which marked a 41-year high. The BoE would prefer not to tighten in such a weak economic environment but has argued that it would be worse to allow inflation to remain at high levels. All signs indicate that the BoE will continue to raise rates in early 2023, starting at the February 2nd meeting. In the US, investors will have two key events to digest later today. ISM Manufacturing PMI fell into contraction territory in November for the first time since May 2020, with a reading of 49.0 points. Another weak reading is expected for December, with a forecast of 48.5 points. The 50.0 threshold separates contraction from expansion. The Federal Reserve will release the minutes from its December meeting. At the meeting, Fed Chair Powell sent a hawkish message that interest rates could continue to rise and poured cold water on a dovish pivot. Investors will be looking for clues as to interest rate policy in 2023 and its outlook for the US economy. GBP/USD has support at 1.1949 and 1.1846 There is resistance at 1.2095 and 1.2198
by OANDA
1
GBP/USD under pressure, UK GDP nextGBP/USD is sharply lower on Wednesday. In the North American session, the pound is trading at 1.2093, down 0.74%. There was an unexpected surprise from the UK CBI Realized Sales today. December sales volumes showed a strong rebound, rising 11 points. This easily beat the November reading of -19 and the consensus of -21. However, retailers expect the rebound to be short-lived and are predicting a decline in January, with a forecast of -17. The UK releases Final GDP for Q3 on Tuesday. The consensus stands at -0.2%, after an identical release from GDP in the second quarter. Two consecutive quarters of negative growth would technically mean that the UK economy is in recession, but it's clear that there is a recession even without this definition. The Office for Budget Responsibility (OBR) is projecting that the UK is in a recession that will last more than one year and cause a massive 7% drop in household incomes over the next two years. Households have been hit by a double punch of high inflation and rising interest rates, and wages have failed to keep pace with inflation. Tens of thousands of ambulance workers went on strike today in England and Wales, and more public sector workers are expected to follow suit this winter. This sets up the specter of a wage-price spiral, which would complicate the Bank of England's struggle to curb inflation, which remains in double digits. We'll also get a look on Tuesday at UK Revised Business Investment for Q3. A weak release of -0.5% is expected, after an identical reading in the second quarter. GBP/USD is testing support at 1.2106. Next, there is support at 1.2023 There is resistance at 1.2234 and 1.2349
by OANDA