EUR/USD Remains Vulnerable to the Downside

In the current market mindset we’ll probably get a larger reaction to downside surprises. Euro area money markets do already price in a 25 bps cut at every 2024 meeting from April on, however. First support in the German 10-y yield is located at 2.16%. EUR/USD remains vulnerable to the downside. After 1.0793, 1.0724 (December correction low) and 1.0712 (61.8% retracement) pops up as the next reference.

Major Altcoins Leading Crypto Recovery

The cryptocurrency market has added over 2% in the last 24 hours. Bitcoin gained 3% during this time, Ethereum rose 1.75%, while Solana and Cardano outperformed the market, adding 5.7% and 8.3%, respectively. The outperformance in major altcoins points to a broadening of participant interest beyond the two largest coins. But don’t expect sustained demand for smaller altcoins or meme coins this year – it usually happens after a prolonged bull market.

Aussie Shrugs Off Soft Retail Sales, Inflation Next

The Australian dollar showed little reaction to the release of Australian retail sales earlier today. In the European session, AUD/USD is trading at 0.6600, down o.15%.

Gold Is Gaining on the Stock Market Narrative

Gold rose to $2,040 per troy ounce on Tuesday morning, a two-week high. The positive momentum is being driven by risk appetite on global platforms. One of the reasons for the increase in demand for the metal could be the strength of the Chinese stock market.

British Pound Edges Lower as Shop Inflation Drops

Inflation in UK shops rose 2.9% y/y in January, compared to 4.3% in December. This was the lowest pace since May 2022. This was an encouraging sign after consumer price inflation surprised by ticking higher to 4.0% in December, up from 3.9% a month earlier. Retailers are enticing shoppers with discounts, which has helped to lower inflation. Still, The Christmas shopping season was weak as consumers are holding back on spending due to the cost-of-living crisis.

Sunset Market Commentary

Economic growth stood in the spotlights today. The IMF in its quarterly World Economic Outlook raised the global forecast from 2.9% to 3.1% this year while keeping the 2025 estimate at 3.2%. The chief economist of the Washington-based institute said “The global economy continues to display remarkable resilience, and we are now in the final descent toward a soft landing with inflation declining steadily and growth holding up”.

Chinese PMIs in the Spotlight; Australian Inflation Key for Next Week's RBA

Amidst a week monopolized by Wednesday’s Fed meeting and Friday’s US labour market statistics, which could play a crucial role in the market’s short-term performance, the calendar also includes important data releases from both Australia and China. Especially the latter remains the big elephant in the room regarding its 2024 economic growth.

Nonfarm Payrolls to Decide Dollar's Fortunes

It's been a phenomenal start to 2024 for the US dollar, which has already risen more than 2% against a basket of major currencies as a streak of encouraging economic data reinstilled confidence in the US economy, forcing traders to dial back bets of immediate Fed rate cuts.

The Final Piece Fits a Puzzle on Hold

The data flow since November has pointed in this direction, and today’s CPI release seals the deal: the RBA will keep the cash rate on hold next week, and it is unlikely to raise rates further this cycle

A Dovish Fed Guidance May Not Reverse the Rout in China and Hong Kong Stock Markets

The resurgence of the bearish tone has been the continuation of lacklustre data from China’s key leading economic indicators. Manufacturing activities have continued to hover in a contractionary mode where the NBS Manufacturing PMI remained below the 50 level for four consecutive months with the latest January’s print just inched up slightly to 49.2 from the December 2023 six-month low of 49.0.