Bank of England Eyeing May for First Rate Cut Amidst Trimmed Expectations.
GBP: Bank of England Eyeing May for First Rate Cut Amidst Trimmed Expectations
Financial analysts have shifted their projections for the first UK interest rate cut, now eyeing the May 9th meeting as the potential kickoff for monetary easing by the Bank of England (BoE). Contrary to the earlier fervor that predicted five quarter-point reductions at the end of last year, markets are currently pricing in a more moderate total of 116 basis points of cuts for the year. This adjustment has contributed to the resilience of the British Pound against the US dollar and the Euro. Notable events this week, including a discussion with BoE governor Andrew Bailey, may further influence GBP/USD in the upcoming weeks. Additionally, the US inflation report on Thursday and the UK GDP data release on Friday are anticipated to impact market dynamics.
USD: Dollar Dips as Attention Turns to Economic Data and Inflation Report
The US dollar, gauged by the DXY index, experienced a decline on Monday, retracing from its robust performance the previous week. This retreat is attributed to the pullback in Treasury yields ahead of crucial economic data releases, particularly the US Consumer Price Index (CPI) survey scheduled for Thursday. With the Federal Reserve’s commitment to data-driven decision-making, the December inflation report holds significant weight in shaping future monetary policies. Traders are advised to closely monitor consumer price data as markets currently project five rate cuts in 2024, contrasting with the Fed’s forecast of a more modest 75 basis points of easing. The upcoming CPI reading is expected to play a pivotal role in shaping expectations for the central bank’s future moves.
EUR: Euro Faces Consolidation Amidst Technical Indicators
EUR/USD is in a consolidation phase after recent losses, hovering around 1.0930 during the Asian session on Wednesday. While the pair could encounter resistance at the major level of 1.0950 and the psychological barrier of 1.1000, indicators suggest a bearish momentum. The 14-day Relative Strength Index (RSI) has dropped below 50, signaling potential downward pressure. The Moving Average Convergence Divergence (MACD) line, although still above the centerline, shows divergence below the signal line, hinting at a possible shift to a downward trend. Traders are advised to exercise caution and await confirmation before making decisions. On the downside, immediate support lies at the psychological level of 1.0900, with further potential support at the 50-day Exponential Moving Average (EMA), the 38.2% Fibonacci retracement level, and a significant level at 1.0850. These levels merit close monitoring for potential price movements.