To a relatively quiet last week, on Thursday, February 10 after the latest US inflation data was published, consumer prices grew by 7.5%, while core inflation reached 6.0% (against 5.5% a month earlier). Both values are the highest for the last 40 years, and this has not been observed since 1982. And it scared the markets.
Traders are worried that the US Central bank would act even more aggressively than expected to reduce inflation. The probability that the Federal Open Market Committee will raise interest rates by 50 basis points in March has jumped to 80%. There have also been rumors that the rate could be raised as many as seven times in 2022. Market analysts at Goldman Sachs predict that federal borrowing costs could rise to 2.0% by early 2023.
Looking forward for next week, Eurozone GDP data will be published on Tuesday, February 15. Elevated volatility can be expected due to the release of the next portion of data on the US consumer market the next day, on Wednesday, February 16. The publication of the February FOMC meeting minutes will also cause unconditional interest on this day.
Major Currencies Performance and Signals
EUR/USD
Euro weakened last week due to hawkish Fed and geopolitical tensions with the Russia-Ukraine situation, EURUSD is at risk to escalation. Eyes on US data too, FOMC minutes in focus amid hawkish Fed
FORECAST: NEUTRAL
Resistance: 1.1350, 1.1400, 1.1450
Support: 1.1300, 1.1250, 1.1200
GBP/USD
The Pound rose by 0.24% to end the week at 1.3560. It’s a busy week ahead on the economic calendar. On Tuesday, claimant counts, and the UK’s unemployment rate will be key ahead of retail sales figures due out on Friday.
FORECAST: BUY
Resistance: 1.3600, 1.3650, 1.3700
Support: 1.3550, 1.3500, 1.3450
AUD/USD
The Aussie Dollar rose by 0.92% to 0.7137. It’s a quiet week ahead and the markets will need to wait for employment figures on Thursday. With the RBA holding back from any talk of rate hikes, positive numbers would be needed to force the RBA to shift its outlook. On the monetary policy front, the RBA meeting minutes on Tuesday will be key early in the week.
FORECAST: NEUTRAL
Resistance: 0.7150, 0.7200, 0.7250
Support: 0.7100, 0.7050, 0.7000
USD/JPY
The Japanese Yen fell by 0.14% to end the week at ¥115.420 against the US Dollar. It’s a fuller week ahead with the 4th quarter GDP, trade data, and inflation figures will be key stats in the week. Expect the GDP and trade data to have the greatest influence.
FORECAST: BUY
Resistance: 115.50, 116.00, 116.50
Support: 115.00, 114.50, 114.00
USD/CAD
The Loonie ended the week down to 1.2734 against the US Dollar. Early in the week, wholesale inflation and retail sales figures for January will draw plenty of interest and on Thursday, the focus will then shift to the weekly jobless claims and Philly FED manufacturing numbers.
Through the week, expect any FOMC member chatter to also draw interest. On the monetary policy front, the FOMC meeting minutes on Wednesday will also draw more interest than usual.
FORECAST: NEUTRAL
Resistance: 1.2750,1.2800, 1.2850
Support: 1.2700, 1.2650, 1.2600
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