Ichimoku Kinko Hyo CNH/JPY: The CNH/JPY pair is trading above the Kumo…
US Dollar moves lower despite inflation that comes at the highest level in 30 years
Information is not investment advice
Ichimoku Kinko Hyo
USD/JPY: The pair is trading below the cloud. A downward pressure would lead the pair to exit further the cloud, confirming a bearish outlook.
XAG/USD: Silver continuous to stand on 23.6% retracement area. Bulls have returned since yesterday.
EU Market View
U.S. bond yields fell to three-month lows and a broad gauge of Asian shares rose on Friday as investors saw enough one-off factors in U.S. consumer price data to back the Federal Reserve's conviction that rising inflation will be transitory. Some economists say the rise in CPI reflected short-term adjustments related to a reopening economy, and many investors appear to be confident that the Fed is deftly handling a rebound in economic growth - even as questions remain about how it defines "transitory". The foreign exchange market had been wary of strong inflation numbers all week, and this exceeded expectations. However, the response has been muted as the CPI release included hefty contributions from short-term rises in airline ticket prices and used cars, all of which played into the Fed narrative of the surge in inflation being a temporary phenomenon. Data overnight showed U.S. consumer price index posted its biggest year-on-year increase at 5% since August 2008, following a 4.2% rise in April. However, there were hefty contributions from short-term rises in airline ticket prices and used cars, raising some doubts about underlying inflationary pressures.
The dollar edged lower in early European trade Friday, as traders wagered that a hefty rise in U.S. consumer prices would not be enough to immediately jolt the Federal Reserve from its ultra-easy monetary policy stance. Gold was up on Friday morning in Asia and is set for a small weekly gain. The slightly faster-than-expected rise in U.S. inflation drove investor bets that price pressures will be temporary and central bank support will remain in place.
Japan's exports likely posted their largest monthly rise in four decades in May, a Reuters poll showed on Friday, but the flattering milestone was largely reflective of a rebound in shipments from last year's pandemic-driven plunge.
Globally, policymakers are keeping a close watch on the extent of underlying demand recovery as COVID-19 vaccinations have improved economic conditions in some key economies.
EU Key Point
- UK April monthly GDP +2.3% vs +2.4% m/m expected.
- Germany reports 2,440 new coronavirus cases, 102 deaths in latest update today.
- Goldman Sachs forecasting Brent crude to $80/bbl in (northern) summer.
This week, there are a few high-probability trade ideas I'd like to recommend to you. Trading these setups, be sure to implement a proper risk management approach.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.