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Futures Up, Dollar Down after Mixed Durable Goods Data, Sterling Flexing Muscles

US futures climbed following the release of mixed durable goods orders data, leading to a decline in Dollar, which reverses some of last week’s gains. However, the positive sentiment is not bolstering the commodity currencies, with New Zealand and Australian Dollars performing the worst for the day. Meanwhile, Sterling is showing strength, followed by Yen and then Swiss Franc. Euro is mixed, albeit slightly weaker.

Technically, EUR/GBP declined after being previously rejected by 55 day EMA. This suggests that the drop from 0.8977 may be ready to continue. If the temporary low of 0.8782 is broken, it will confirm the resumption of the decline, with the next target being the 0.8270 support level. If this occurs, it could coincide with a rise in the value of Sterling against other currencies. In particular, GBP/JPY may break through its temporary top at 163.73.

In Europe, at the time of writing, FTSE is up 0.79%. DAX is up 1.75%. CAC is up 1.85%. Germany 10-year yield is up 0.0239 at 2.573. Earlier in Asia, Nikkei dropped -0.11%. Hong Kong HSI dropped -0.33%. China Shanghai SSE dropped -0.28%. Singapore Strait Times dropped -0.58%. Japan 10-year JGB yield dropped -0.0008 to 0.505.

US durable goods orders down -4.5% mom in Jan, but ex-transport rose 0.7% mom

US durable goods orders dropped -4.5% mom to USD 272.3B in January, worse than expectation of -4.0% mom. But ex-transport orders rose 0.7% mom to 179.4B. above expectation of 0.0% mom. Ex-defense orders dropped -5.1% mom to USD 253.9B. Transportation equipment dropped -13.3% mom to USD 92.8B.

Eurozone economic sentiment ticked down to 99.7 in Feb

Eurozone Economic Sentiment Indicator ticked down from 99.8 to 99.7 in February. Employment Expectation Indicator dropped from 109.7 to 109.4. Economic Uncertainty Indicator dropped from 26.2 to 23.3. Industry confidence dropped from 1.2 to 0.5. Services confidence dropped form 10.4 to 9.5. Consumer confidence improved from -20.7 to -19.0. Retail trade confidence rose from -0.7 to -0.1.

EU Economic Sentiment Indicator was unchanged at 97.8. Employment Expectation Indicator dropped from 108.1 to 107.7. Economic Uncertainty Indicator dropped from 25.8 to 23.3. Amongst the largest EU economies, the ESI decreased in Spain (-2.0) and France (-1.5), while it increased in the Netherlands (+2.9) and stayed broadly flat in Germany (+0.1), Italy (±0.0) and Poland (-0.2).

ECB Lagarde: After March, we will see. We are data dependent

ECB President Christine Lagarde said in an interview, “Interest rates are the most efficient tool in the present circumstances. There is every reason to believe that we will do another 50 basis points in March. After that, we will see. We are data dependent.”

“We will do more hikes if necessary to return inflation to our target of 2% in a timely manner. It will take what it will take,” She added.

“I don’t have a timeline. I have an objective, which is our target. We need to raise interest rates to a level that is sufficiently restrictive to return inflation to 2%, and to keep rates there for as long as necessary to be confident that inflation returns to 2% in a timely manner. That’s the mantra.” She said.

“Hiking rates inevitably dampens demand. And what we’re trying to do is to adjust demand. That’s the mechanical impact that we expect from what we are doing.”

BoJ Ueda: Benefits of current policy exceed the costs

Incoming BoJ Governor Kazuo Ueda told the upper house of parliament today, “there’s still some distance for Japan to see inflation sustainably and stably meet the BoJ’s 2% target.”

“Big improvements must be made in Japan’s trend inflation for the BoJ to shift towards monetary tightening,” he said.”It’s not that I have no ideas on how to tweak the BoJ’s current policy. But the desirable tweak will vary depending on economic changes at the time.”

“In guiding monetary policy, central banks must weigh the benefits and costs of each step,” Ueda said. “At present, the benefits of the BoJ’s current policy exceed the costs.”

“There are various side-effects emerging, but the BoJ’s current policy is necessary and appropriate” to achieve its 2% inflation target, he said.

NZ retail sales volume dropped -0.6% qoq in Q4, value up 1.7% qoq

New Zealand retail sales volume dropped -0.6% qoq in Q4, below expectation of 0.2% qoq rise. Retail sales value rose 1.7% qoq.

By industry, the largest movements in sales volume were: electrical and electronic goods retailing (down -9.7%), motor vehicle and parts retailing (up 2.3%), food and beverage services (up 2.4%), fuel retailing (up 2.6%), furniture, floor coverings, houseware, and textile goods (down -5.2%).

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1899; (P) 1.1971; (R1) 1.2012; More

GBP/SUD recovered ahead of 1.1914 and intraday bias is turned neutral first. Another fall is in favor with 1.2146 resistance intact. Break of 1.1914 will resume the decline from 1.2446 for 1.1840 support and possibly below. On the upside, break of 1.2146 resistance will turn bias back to the upside for further rebound to 1.2269 and above.

In the bigger picture,as long as 1.1840 support holds, rise from 1.0351 medium term bottom (2022 low) should still continue to 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. However, decisive break of 1.1840 will complete a double top pattern (1.2445, 1.2446) after rejection by 55 week EMA (now at 1.2251). Deeper decline should be seen back to 38.2% retracement of 1.0351 to 1.2445 at 1.1645.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:45 NZD Retail Sales Q/Q Q4 -0.60% 0.20% 0.40% 0.60%
21:45 NZD Retail Sales ex Autos Q/Q Q4 -1.30% 0.30% 0.40% 0.50%
00:30 AUD Company Gross Operating Profits Q/Q Q4 10.60% 1.50% -12.40% -11.50%
09:00 EUR Eurozone M3 Money Supply Y/Y Jan 3.50% 3.90% 4.10%
10:00 EUR Eurozone Economic Sentiment Indicator Feb 99.7 101 99.9 99.8
10:00 EUR Eurozone Industrial Confidence Feb 0.5 2 1.3 1.2
10:00 EUR Eurozone Services Sentiment Feb 9.5 12.4 10.7 1.4
10:00 EUR Eurozone Consumer Confidence Feb F -19 -19 -19
13:30 CAD Current Account (CAD) Q4 -10.6B -11.0B -11.1B -8.4B
13:30 USD Durable Goods Orders Jan -4.50% -4.00% 5.60%
13:30 USD Durable Goods Orders ex Transportation Jan 0.70% 0.00% -0.20%
15:00 USD Pending Home Sales M/M Jan 0.90% 2.50%

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