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EUR/USD steady after soft German industrial productionEUR/USD has posted slight gains on Wednesday. In the North American session, the euro is trading at 1.0773, up 0.19%. This week's German data has analysts scratching their heads. Industrial production, released today, declined 1.6% m/m in December, compared to a downwardly revised -0.2% in November and worse than the market estimate of -0.4%. It was the ninth decline in ten months. Just a day earlier, factory orders surprised with a massive gain in December of 8.9% m/m, compared to the downwardly revised 0% reading which was also the market estimate. This marked the strongest monthly gain since June 2020 as foreign and domestic orders were close to double-digit growth. Manufacturing has been in the doldrums in the eurozone's largest economy, but the red-hot factory orders report provides hope that better days lie ahead. Germany's GDP declined by 0.3% q/q in the fourth quarter, as the economy has been hampered by sticky inflation, high energy prices and weak demand for German exports. The eurozone's largest economy could tip into a technical recession, defined as two consecutive quarters of negative growth, if first quarter GDP declines as well. The eurozone is also grappling with a weak economy and retail sales fell 1.1% m/m in December, after a revised 0.3% gain in January and below the market estimate of -1%. This was the sharpest decline in a year, as consumers have been hammered by high inflation and steep borrowing costs, resulting in consumers holding the purse strings more tightly. The economic picture in Europe is grim but the European Central Bank is still hesitant to embrace rate cuts, as policy makers have voiced concern that inflation could still show a comeback if the ECB cuts rates too early. The ECB will have plenty of time to digest key economic data, with the next meeting on March 7. EUR/USD is putting pressure on support at 1.0746. Below, there is support at 1.0704 There is resistance at 1.0822 and 1.0864
by OANDA
EUR/USD gives up gains after soft German CPIEUR/USD showed little movement earlier but that changed after German CPI was softer than expected. The euro gained 0.40% in the aftermath of the inflation report but has given back about half of those gains. In the North American session, EUR/USD is trading at 1.0857, up 0.11%. Germany's inflation rate dropped to 2.9% y/y in January, down sharply from 3.7% in December and just below the market estimate of 3.0%. The reading, a preliminary estimate, was the lowest rate since June 2021. The drop was driven by a slowdown in goods inflation, with energy and food prices both decelerating. Services prices, however, rose slightly. Monthly, inflation ticked higher to 0.2%, compared to 0.1% in December and matching the market estimate of 0.2%. Inflation continues to fall in the eurozone's largest economy, as the ECB's steep hike in interest rates has dampened inflationary pressures. High interest rates have also cooled the German economy, as GDP declined by 0.2% q/q. This follows the Q3 reading of -0.3%, which means that the economy is technically in a recession with two straight quarters of negative growth. The eurozone managed to avoid a technical recession, but just barely. The economy posted zero growth in Q4 after third-quarter growth of -0.1%. The eurozone releases preliminary CPI on Thursday, with CPI expected to drop from 3.4% y/y to 3.2%. The Federal Reserve meets later today and a pause is a virtual certainty. This would mark the fourth straight time that the Fed has held rates at the target range of 5.25%-5.50%. Traders will be looking for clues about the Fed's rate path from the rate statement and Fed Chair Powell's press conference. If the statement or the press conference signals that the Fed is moving away from its "higher for longer" stance and is looking at rate cuts, the US dollar could react with volatility. EUR/USD tested resistance at 1.0866 earlier. Above, there is resistance at 1.0920 There is support at 1.0801 and 1.0747
by OANDA
USD/JPY steady after Tokyo Core CPI falls below 2%The Japanese yen is drifting on Friday. In the European session, USD/JPY is trading at 147.80, up 0.10%. Tokyo Core CPI reached a significant milestone today, falling to 1.6% y/y in January, after a December reading of 2.1%. This was the first time the indicator dropped below the Bank of Japan's 2% target since May 2022. The main driver of the decline was lower energy prices. Tokyo Core CPI excludes fresh food but includes fuel. The Tokyo core-core index, which excludes fresh food and fuel prices, rose 3.1% y/y in January, down from 3.5% in December. The drop in inflation reinforces the BoJ's view that cost pressures are gradually being replaced by rising service prices as the main driver of inflation. This is hugely significant, as it points to inflation being more sustainable, which is a requirement for the BoJ before it tightens its ultra-loose policy. Japan also released corporate service inflation for December which held steady at 2.4%, a nine-year high. That reading underscores that service prices remain high a companies continue to pass on their costs. BoJ Governor Ueda stated at this week's policy meeting that progress is being made towards the target of 2% sustainable inflation, and that has the markets speculating that the BoJ could make a major policy shift in April or June. The BoJ wants to see higher wages as evidence that inflation is sustainable and the national wage negotiations in March are expected to provide higher wages for workers. In the US, the first-estimate GDP for the fourth quarter smashed above expectations, but the US dollar didn't show much interest. GDP growth rose 3.3% y/y, below the 4.9% gain in the third quarter but well above the consensus estimate of 2.0%. The US economy continues to produce stronger-than-expected data and that has the markets paring expectations for a rate cut in March. The probability of a March cut has fallen to 48%, down sharply from 70% one month ago, according to the CME's FedWatch tool. USD/JPY tested support earlier at 147.54. Below, there is support at 146.63 There is resistance at 148.44 and 149.35
by OANDA
USD/JPY shrugs after US GDPThe Japanese yen has edged lower on Thursday. In the North American session, USD/JPY is trading at 147.62, up 0.08%. The US economy continues to surprise with stronger-than-expected data. On Wednesday, the services and manufacturing PMIs both accelerated and beat the estimates, followed by first-estimate GDP for the fourth quarter earlier today. The economy sparkled with an expansion of 3.3% q/q, blowing past the consensus estimate of 2.0%. This follows the blowout gain of 4.9% in the third quarter. Consumer spending remained strong at 2.8%, compared to 3.1% in the third quarter. The US economy expanded in 2023 at 2.5% y/y, up from 1.9% in 2022. The US dollar's reaction to the positive GDP report has been muted. There were concerns earlier this year that the economy might tip into a recession, as the Fed continued to raise interest rates to beat down inflation. However, solid consumer spending and a resilient labour market have boosted economic growth and the Fed is well on its way to achieving the tricky task of a soft landing for the economy. On the inflation front, the core personal expenditure price index was unchanged at 2% in the fourth quarter, while the headline index rose 1.7%, down sharply from 2.6 in Q3. The week wraps up with the personal consumption expenditures (PCE) price index on Friday, considered the Fed's preferred inflation gauge. The PCE price index and core PCE price index are expected to edge slightly lower in January, which would be an encouraging sign that the inflation is moving lower. Japan releases Tokyo Core CPI, a key inflation indicator, on Friday. The consensus estimate for January stands at 1.9% y/y for January, after a 2.1% gain in December. If the estimate proves correct, it would mark the first time in almost two years that it has fallen below the BoJ's target of 2%. USD/JPY is testing resistance at 147.54, followed by resistance at 148.44 There is support at 146.63 and 145.73
by OANDA
GBP/USD dips as retail sales slideThe British pound has weakened slightly on Friday. In the European session, GBP/USD is trading at 1.2682, down 0.18%. The markets were expecting a letdown from December retail sales after a strong November reading, but nobody was expecting a multi-year drop. Yet that's what happened, as retail sales plunged 3.2% m/m, the lowest level since January 2021. Considering the sharp drop, the British pound's reaction has been muted. In November, retail sales jumped a revised 1.4%, as shoppers flocked to department stores to take advantage of Black Friday sales and other discounts. This meant that much of the Christmas shopping took place in November. The massive drop of 3.2% crushed the consensus estimate of -0.5%. There is more to this story than Black Friday sales. The weak December reading reflected a UK consumer who is pessimistic about the economy and is being relentlessly squeezed by high inflation and elevated borrowing costs. December retail sales were brutal but the struggles faced by consumers are nothing new - retail sales fell by 2.8% in 2023, the lowest level since 2018. The sharp drop in retail sales will have a negative impact on December GDP, which could mean that GDP for the fourth quarter is negative. If that is the case, the UK will technically be in a recession, with two consecutive quarters of negative growth. Even if the UK manages to avoid a recession, growth will be flat. The Bank of England has kept rates unchanged for three straight times and meets on February 1. The sharp drop in retail sales supports the BoE considering a rate cut, but December inflation rose unexpectedly from 3.9% to 4.0%, and the BoE will be hesitant to chop rates before inflation is closer to the 2% target. GBP/USD is testing support at 1.2689. Next, there is support at 1.2625 There is resistance at 1.2738 and 1.2802
by OANDA
GBP/USD eyes UK wage growthThe British pound has started the week with slight losses. In the European session, GBP/USD is trading at 1.2725, down 0.21%. The UK will release employment data on Tuesday and the spotlight will be on wage growth. Over the past few months, wages have been falling and the Bank of England would like to see that trend continue as wages have been driving inflation. Average earnings including bonuses dropped to 7.2% in the three months to September, down from 7.7% in the previous release. The market estimate stands at 6.8% for the three months to October. The UK economy is in trouble, although there was some good news on Friday, as November GDP rebounded with a gain of 0.3% m/m after a 0.3% decline in October. Retail sales drove the gain as shoppers took advantage of Black Friday sales late in November. Still, the probability of a recession, which is defined as two consecutive quarters of negative growth, remains high. The economy declined by 0.1% in the third quarter and a fourth quarter of negative growth would mean that the economy is technically in a recession. Even if a recession is avoided, the economy has flatlined and isn't showing any growth. The lack of economic growth puts the Bank of England in a dilemma. The central bank has sharply raised interest rates in order to curb high inflation and significant progress has been made. A year ago, inflation was in double digits, galloping at a 10.1% clip. Inflation has fallen to 3.9%, which is still double the 2% target. Governor Bailey has pushed back against rate cuts and insisted that the BoE would maintain a 'higher for lower' rate path, but lowering rates would increase economic activity and lessen the likelihood of a recession. The BoE has maintained the cash rate at 5.25% three straight times and meets next on February 1. GBP/USD is testing support at 1.2721. Below, there is support at 1.2687 There is resistance at 1.2753 and 1.2787
by OANDA
GBP/USD yawns after strong UK GDPThe British pound is showing limited movement on Friday. In the European session, GBP/USD is trading at 1.2769, up 0.05%. The British economy grew in November by 0.3% m/m, rebounding from a 0.3% decline in October and edging above the market estimate of 0.2%. This was the sharpest GDP growth since July and was driven by stronger activity in services, retail sales and manufacturing. The news was not as good from a three-month snapshot, however. The economy contracted 0.2% in the three months to November, unchanged from the previous release and missing the market estimate of -0.1%. The December GDP release will answer the question of whether the UK economy is in a shallow recession. Third quarter GDP was revised to -0.1% and if Q4 also posts negative growth, the economy would technically be in a recession. Even if the economy manages to avoid a recession, it will likely point to stagnation. The weak UK economy presents the Bank of England with a dilemma. The BoE is under pressure to lower rates to kick-start the economy, but inflation is running at a 3.9% which is almost double the 2% target. The BoE would prefer to maintain a 'higher for longer" rate path and let restrictive rates continue to push inflation lower. The central bank is likely to keep interest rates on hold at the next meeting on February 1. In the US, inflation was higher than expected in December, with a gain of 3.4%. This was a rude surprise for the markets, which have become accustomed to inflation heading lower. The Fed won't be losing sleep over the upswing, as Core CPI, which is a better indicator of inflation trends, dipped lower to 3.9%. The rise in US inflation is a reminder that the battle to bring inflation back to the 2% target will be bumpy. The Fed has done an admirable job in lowering inflation but the final stretch is looking to be the most difficult. Services and housing inflation remains sticky and deflationary pressures from goods and energy have been fading. The markets have pared their expectations for a March rate cut to around 70% but the Fed has been pushing back against these expectations. Cleveland Fed President Mester said on Thursday after the inflation report that it was "too early" to cut rates in March because the inflation release showed that restrictive policy was needed to bring down inflation to the 2% target. GBP/USD is putting pressure on resistance at 1.2795. Above, there is resistance at 1.2826 There is support at 1.2742 and 1.2711
by OANDA
GBP/USD flat ahead of US inflation dataThe British pound is unchanged on Thursday, trading at 1.2741 in Europe. We could see some movement from the pound in the North American session following the release of the US inflation report. On Friday, the UK releases GDP, which is expected to show a 0.2% gain in November, after a 0.3% decline a month earlier. US inflation fell dramatically in 2023 and we'll get a look at the December inflation report later today. Inflation was running at a 6.5% clip a year ago and the Federal Reserve has done an admirable job in slashing the inflation rate in half. US CPI is expected to have edged up to 3.2% y/y in December, compared to 3.1% in November which marked a five-month low. Monthly, CPI is expected to have inched up to 0.2%, following a 0.1% gain in November. The Fed will be more concerned with core CPI, which is a better gauge of inflation than the headline reading. Core CPI is projected to have eased to 3.8% in December, after two straight gains of 4.0%. Monthly, Core CPI is expected to remain at 0.3%. If the inflation readings are wide of the estimates, we could see some volatility from GBP/USD. The Bank of England was in the spotlight on Wednesday, as Governor Bailey testified before a parliamentary committee regarding the country's financial stability. Bailey didn't offer any clues about monetary policy but expressed satisfaction that mortgage rates have been falling. The markets are confident that the BoE's rate-tightening cycle is over and that the central bank will start cutting interest rates in mid-2024. Bailey has stuck to a 'higher for lower' stance on rates but there is pressure on the BoE to consider rate cuts as inflation fell sharply in November to 3.9%, down from 3.6% a month earlier. Bailey may prefer to keep rates in restrictive territory until inflation falls closer to the 2% target before lowering rates. GBP/USD is testing resistance at 1.2722. Above, there is resistance at 1.2753 There is support at 1.2678 and 1.2647
by OANDA
GBP/USD shrugs after mixed UK dataThe British pound is drifting on Friday. In the European session, GBP/USD is trading at 1.2701, up 0.08%. UK retail sales jumped 1.3% in November m/m, bouncing back from 0% in October and beating the consensus estimate of 0.4%. This was the sharpest pace of growth since January and the increase was felt in all sub-sectors. Yearly, retail sales edged up 0.1%, after a downwardly revised decline of 2.5% in October and above the market consensus of -1.3%. The GDP report was less cheery, as second-estimate GDP for Q3 came in at -0.1%, compared to 0% in the preliminary estimate. This has raised concerns that the weak UK economy could tip into a recession, as negative growth in the fourth quarter would officially be considered a technical recession. GDP for the second quarter was revised downwards to no growth, compared to the initial estimate of 0.2%. The Bank of England will have to decide what to do with this mixed bag of data. The weak GDP could put pressure on the BoE to cut interest rates, but the sharp rebound in retail sales supports the central bank continuing its 'higher for longer' stance. The BoE has maintained the cash rate at 5.25% for three consecutive times. In the US, Federal Reserve members have been pushing back this week against market expectations for rate cuts next year. The markets have priced in up to six cuts in 2024, but the Fed members have said that the markets are getting ahead of themselves and Atlanta Fed President Raphael Bostic said he expected two rate cuts in the second half of 2024. On Friday, the Fed will get a look at the PCE Price Index, the central bank's preferred inflation indicator. The headline and core readings are expected to remain unchanged in November, at 0.2% and 0%, respectively. GBP/USD is putting pressure on resistance at 1.2720. The next resistance line is 1.2750 1.2636 and 1.2582 are providing support
by OANDA
USD/JPY eyes inflation, BoJ minutesThe Japanese yen is in positive territory on Thursday. In the European session, USD/JPY is trading at 142.85, down 0.61%. Later today, the US releases third-estimate GDP for the third quarter, which is expected to confirm that the economy grew at an impressive rate of 5.2% q/q. Japan's Core CPI, which excludes fresh food but includes energy, is considered the preferred inflation gauge for the Bank of Japan. The November report, which will be released on Friday, is expected to fall to 2.5% y/y, compared to 2.9% in October. Core CPI has exceeded the BoJ's 2% target for 19 straight months, putting pressure on the central bank to tighten policy. The BoJ has insisted that high inflation is a result of cost-push pressures and that higher wage growth is needed to ensure that inflation is sustainable. Still, a shift in policy from the BoJ is likely a question of when rather than if, with senior BoJ officials hinting that the central bank is considering tightening its ultra-loose policy. Japan's government expects inflation to remain well above the target and has revised upwards its inflation forecast to 2.5% for the fiscal year starting in April. The previous forecast stood at 1.9%. The government said that the upward revision was due to a weaker yen, higher oil prices and the expected reduction in subsidies for utility costs. The Bank of Japan will release on Friday the minutes from the meeting on October 31. At the meeting, the BoJ maintained policy but removed the 1% upper ceiling on its yield control curve (YCC) program, saying 1% would remain a reference level. The tweak was enough to shake up the currency markets, as the yen plunged 1.78% against the US dollar on October 31, its sharpest daily gain since February. Investors will be looking through the minutes for further details about the decision to tweak YCC and any hints about future rate policy. USD/JPY has pushed below support at 143.18 and is testing support at 142.80. Below, there is support at 142.34 There is resistance at 143.64 and 144.02
by OANDA
USDJPY Bullish Ahead of US GDP AnnouncementHi Traders! USDJPY is in an ascending channel, and there is a bullish outlook on the market. Here are the details: After the pullback from the weekly high, the market seems to have found support near the channel support line. We are now looking for a break and close above the 20 EMA for a confirmation signal to target an exit near the weekly high. Preferred Direction: Buy Entry Level: 143.250 Stop Level: 142.271 Target Level: 145.209 Technical Indicators: 20 EMA Please make sure to click on the like/boost button 🚀 as your support greatly helps. Trade safely and responsibly. BluetonaFX
Long
by BluetonaFX
2
Comparative Analysis of US and UK EconomiesDear Traders, I would like to offer my perspective on the major economic drivers for USD and GBP. Like the famous investor John Bogle says, "The market may be crazy, but it's not entirely insane. Fundamentals matter." This analysis compares key economic indicators of both countries in order to explore potential impacts on the GBP/USD currency pair in the long term. Examining GDP, growth rates, interest rates, inflation, jobless rates, government finances, external balances, and population dynamics displayed above, I intend to provide insights into the relative strengths and challenges of each economy. ECONOMIC PERSPECTIVE USD exhibits a larger GDP and higher growth rate , implying a more robust economy. They both have similar interest rates, but USD's higher growth puts it in a position of advantage. INFLATION, JOBLESS RATE, AND GOV. FINANCES GBP faces higher inflation, which affects it purchasing power against USD. Both nations show low jobless rates; the UK maintains a lower debt-to-GDP ratio (good for GBP). EXTERNAL BALANCES AND POPULATION DYNAMICS Both countries have current account deficits, but the UK's larger deficit may affect its currency negatively. USD represents a significantly larger population, influencing economic scale. MY TAKE Understanding the economic dynamics of USD and GBP is crucial for interpreting potential influences on the GBP/USD pair in the long term. From the economic data and analysis presented above, it is evident that USD shows economic strength , while GBP shows stability . In the light of this, I expect a stronger USD (DXY) in the coming weeks or months. The currency pair may see fluctuations as institutions assess these strengths and challenges, but my bias on the GBPUSD pair is BEARISH. A break below 1.2451 will likely send the pair to 1.2207 price region or even lower.
Short
by Samuel124
3
NZD/USD slips ahead of GDP, Fed meetingThe New Zealand dollar is sharply lower in Wednesday trade. In the European session, NZD/USD is trading at 0.6095, down 0.61%. US inflation ticked lower in October as expected and the release was a non-event for the markets, which slightly reduced their rate-cut pricing. Headline CPI climbed 3.1% year-on-year in November, down from 3.2% in October and in line with the market estimate of 3.1%. Core CPI, which is considered a more reliable gauge of inflation trends, climbed 4.0% year-on year in November, unchanged from October. This matched the market estimate of 4.0%. On a monthly basis, both CPI and Core CPI ticked higher. CPI came in at 0.1%, up from 0.0% in October and the core rate also rose from 0.2% to 0.3%. Both readings matched the market estimates. A decline in gasoline prices helped pull down inflation. However, a wide range of goods and services experienced price increases, suggesting that underlying inflation remains sticky. Today's FOMC meeting could provide clues as to what the Fed has in mind in the New Year. The markets have priced in a pause today at close to 100%, so the focus will be the rate statement and Jerome Powell's post-meeting press conference. If Powell is hawkish and pushes back against rate cuts, it could force the market to again reduce rate cut expectations. New Zealand releases GDP for the third quarter on Thursday, with expectations for a weak gain of 0.2% q/q, compared to a sharp gain in Q2 of 0.9%. On an annualized basis, the market consensus stands at 0.5%, following a 1.8% gain in the second quarter. An unexpected reading could have a strong impact on the direction of the New Zealand dollar. NZD/USD is putting pressure on support at 0.6076. Below, there is support at 0.6031 There is resistance at 0.6150 and 0.6195
by OANDA
GBP/USD drifting ahead of US inflationThe British pound is drifting on Tuesday. In the European session, GBP/USD is trading at 1.2551, down 0.04%. Tuesday's UK employment report was notable for the decline in wage growth. Earnings excluding bonuses rose 7.3% in the three months to October, down from 7.8% in the three months to September. This was lower than the consensus estimate of 7.4%. Wage growth is an important driver of inflation and the decline is an encouraging sign for the Bank of England. Still, earnings are rising much faster than inflation, which suggests that the BoE won't be cutting interest rates anytime soon. Inflation has fallen to 4.6%, but this is more than double the Bank's target of 2%. The BoE will announce its latest rate decision on Thursday and is widely expected to hold the cash rate at 5.25%. Governor Bailey has warned that rates could remain in restrictive territory for an extended period, but the markets are marching to a dovish tune and have priced in three rate cuts in 2024. Bailey has come out against expectations about rate cuts and we could see the BoE push back against rate cut speculation at the Thursday meeting. The US releases November CPI later today, with a consensus estimate of 3.0% y/y, compared to 3.2% in October. Monthly, CPI is expected to remain flat, unchanged from October. Core CPI, which has been running higher than the headline rate, is projected to remain unchanged at 4.0% y/y. Monthly, the core rate is expected to inch higher to 0.3%, up from 0.2% in October. The Fed is widely expected to hold rates at a range of 5%-5.25% at the Wednesday meeting, but the inflation release could be a key factor as to what the Fed does in the upcoming months. There is a major disconnect between the markets, which have priced in four rate cuts in 2024, and the Fed, which is insisting that the door remains open to further hikes. A strong inflation report could chill market expectations for rate hikes, while a soft inflation release will provide support for the market stance and could force the Fed to reconsider its hawkish position. GBP/USD is putting pressure on resistance at 1.25, followed by 1.2682 1.2484 and 1.2369 are the next support levels
by OANDA
Australian dollar on a roller-coaster, US NFP loomsThe Australian dollar is trading quietly on Friday. In the European session, AUD/USD is trading at 0.6611, up 0.14%. It has been a roller-coaster week for the Australian dollar. After declining 1.88% early in the week, the Aussie rebounded on Thursday and gained 0.80%. Today's US nonfarm payrolls report could result in further volatility from the Australian dollar in today's North American session. All eyes are on the US nonfarm payroll release later today. After falling sharply in October to 150,000 from a revised 297,000, nonfarm payrolls are expected to rebound to 180,000. If nonfarm payrolls are weaker than expected, speculation of a Fed rate cut will rise, while a hot report would undermine market confidence that a rate hike isn't too far away. Outside the headline data, average hourly earnings will be closely watched, as wage growth is a key driver of inflation. The consensus estimate for average hourly earnings in November stands at 0.3% m/m, compared to 0.2% in October. A higher-than-expected reading could generate a market reaction and give the US dollar a lift. Australia's largest trading partner is China and the slowdown in the world's second-largest economy will likely dampen Australia's economy. China's economic woes were reflected in this week's Australian GDP, which posted a weak 0.2% gain for the third quarter, compared to the 0.4% gain in Q2. Notably, exports dropped for the first time since Q1 2022. China's economic slowdown has resulted in disinflationary pressures. Chinese CPI decreased 0.1% in October and another 0.1% decline is expected in the November release on Saturday. If China's economy continues to weaken, demand for Australian exports could fall even further and that could weigh on the Australian dollar. AUD/USD is testing resistance at 0.6603. Above, there is resistance at 0.6639 0.6530 and 0.6494 are providing support
by OANDA
USD/CAD eyes Canadian job data, US PMIThe Canadian dollar continues to gain ground against a slumping US dollar. In the European session, USD/CAD is trading at 1.3529, down 0.23%. The Canadian currency is poised to post a third straight winning week against the greenback and soared 2.25% in November. It is a busy Friday, with Canada releasing the employment report, the US publishing the ISM Manufacturing PMI and Fed Chair Powell speaking at an event in Atlanta. Canada's labour market has softened but remains in good shape and has shown expansion for three straight months. The economy is expected to have added 15,000 jobs in November, slightly lower than the 17,500 reading in October. The market consensus for the unemployment rate stands at 5.8%, compared to 5.7% in October. This week's GDP report was another reminder that the economy remains weak. Third-quarter GDP declined by 0.3% q/q, below the revised o.3% gain in Q2 and the first decline since the second quarter of 2021. High interest rates have cooled the economy and exports were down in the third quarter as global demand remains weak. On an annualized basis, GDP slid 1.1% in the third quarter, compared to a revised 1.4% gain in Q2 and shy of the market consensus of 0.2%. The US wraps up the week with the ISM Manufacturing PMI. The manufacturing sector has been in a prolonged slump and the PMI has indicated contraction for twelve consecutive months. The PMI is expected to improve to 47.6 in November, compared to 46.7 in October. A reading below 50 indicates contraction. Investors will be listening closely to Jerome Powell's remarks today, looking for hints about upcoming rate decisions. Powell has stuck to his script of a 'higher for longer' rate policy, but the markets have priced in a rate cut in May at 84%. USD/CAD tested resistance at 1.3564 in the Asian session. Above, there is resistance at 1.3665 1.3494 and 1.3434 are providing support
by OANDA
EUR/USD drops ahead of eurozone CPIThe euro is in negative territory in Thursday trade. In the European session, EUR/USD is trading at 1.0940, down 0.27%. Germany's inflation rate declined sharply in November and the eurozone is up next, with the November inflation report later today. German inflation dropped to 3.2% y/y in November, down from 3.8% in October and below expectations. This was the lowest inflation rate since June 2021 and was driven by lower food and energy inflation. Will eurozone inflation follow suit? The markets are expecting a modest decline for November. Headline inflation is expected to fall to 2.7%, down from 2.9% in October, and the core is expected to ease to 3.9%, down from 4.2% in October. If inflation falls modestly as expected, it is unlikely to cause the ECB to reconsider its rate policy. The markets have priced in a rate cut in May 2024 and a softer-than-expected print would likely result in the odds of a rate cut being brought forward. The ECB has signalled a 'higher for longer policy', as have the Federal Reserve and other major central banks. Even though inflation has been dropping, it remains considerably higher than the ECB's 2% target and the central bank hasn't given any indications of a rate cut. Investors will be looking for hints about rate policy from ECB President Christine Lagarde, who will speak today at an ECB forum in Frankfurt after the eurozone inflation release. In the US, second-estimate GDP for the third quarter was revised to 5.2%, up from the initial estimate of 4.9%. The strong reading should ease fears of a recession but also provides the Fed with little reason to trim rates while inflation remains well above the 2% target. The Fed has signalled a 'higher for longer' stance on rates but the markets are more dovish and have priced in a rate hike in March 2024 at 45%, according to the CME's FedWatch tool. EUR/USD is putting pressure on support at 1.0920. Below, there is support at 1.0873 1.0986 and 1.1033 are the next resistance lines
by OANDA
EUR/USD dips as German inflation declinesThe euro is showing limited movement on Wednesday. In the North American session, EUR/USD is trading at 1.0984, down 0.11%. Gerrmany's inflation rate dropped more than expected, coming in at 3.2% y/y in November. This was down considerably from 3.8% in October and below the market consensus of 3.5%. This was the lowest inflation rate since June 2021 and was driven by lower food and energy inflation. Services inflation eased to 3.4%, down from 3.9%. Core inflation dropped to 3.8%, down from 4.3% in October. There's a lot to like in this inflation print and ECB policy makers will no doubt be pleased as German inflation continues to fall. The next text is on Thursday, with the release of eurozone inflation for November. Headline inflation is expected to fall to 2.7%, down from 2.9%, and the core is expected to ease to 3.9%, down from 4.2%. The ECB has signalled a 'higher for longer policy', as have the Federal Reserve and other major central banks. Even though inflation has been dropping, it remains higher than the ECB's 2% target, and the central bank hasn't given any indications of a rate cut. The markets are more dovish and have priced in a rate cut as early as May. If eurozone CPI follows the German release and declines more than expected, we could see the odds of a rate cut brought forward ahead of May. The US economy provided another reminder today that the economy is in strong shape. US GDP (second estimate) climbed an impressive 5.2% y/y in the third quarter, the strongest quarter since Q4 2021. The release beat the market consensus of 5.0% and was higher than the preliminary estimate of 4.9%. The economy showed marked improvement compared to the second quarter, which had growth of just 2.1%. EUR/USD is testing support at 1.0986. Below, there is support at 1.0920 1.1033 and 1.1099 are providing support
by OANDA
EUR/USD steady as German GDP contractsThe euro is almost unchanged on Friday. In the European session, EUR/USD is trading at 1.0903, down 0.03%. German GDP posted a minor drop in the third quarter, coming in at -0.1% q/q. This was down slightly from -0.1% in the second quarter and matched the market consensus. On an annualized basis, GDP declined by 0.4%, down from a revised o.1% gain in Q2 and missing the market consensus of -0.3%. The consumer spending component of GDP decelerated in the third quarter and was a key driver of the decline in GDP. German consumers remain in a sour mood and are being squeezed by rising interest rates and a high inflation rate of 3.8%. The German business sector is also pessimistic about economic conditions. The Ifo Business Climate index managed to climb to 87.3 in November, up from 86.9 in October but below the market consensus of 87.5. A reading below 100 indicates that a majority of the companies surveyed expect business conditions to deteriorate in the next six months. Earlier this week, German services and manufacturing PMIs pointed came in below 50, which points to contraction. The manufacturing sector is particularly weak and has been in decline since June 2022. It has been a relatively light week for US releases, with markets back in action after the Thanksgiving holiday. Later today, the US releases manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy. The consensus estimates for November are 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If the readings diverge significantly from the estimates, we could see some strong movement from the US dollar before the weekend. There is resistance at 1.0943 and 1.0997 1.0831 and 1.0748 are providing support
by OANDA
Understanding GDP Growth: A Key Indicator of Economic HealthIntroduction Gross Domestic Product (GDP) growth is a crucial economic indicator that provides insight into the overall health and performance of a country's economy. As a comprehensive measure of a nation's economic activity, GDP growth reflects the value of all goods and services produced within a country over a specific period. In this article, we will explore the significance of GDP growth, its components, and the impact it has on various aspects of a nation's well-being. Definition and Components of GDP GDP is the total value of all goods and services produced within a country's borders in a given time frame. It is commonly calculated quarterly and annually. There are three main ways to measure GDP: the production approach, the income approach, and the expenditure approach. Each approach provides a unique perspective on economic activity. Production Approach: This method calculates GDP by adding up all the value-added at each stage of production. It includes the value of intermediate goods and services to avoid double counting. Income Approach: GDP can also be measured by summing up all the incomes earned by individuals and businesses within a country, including wages, profits, and taxes minus subsidies. Expenditure Approach: This approach calculates GDP by summing up all the expenditures made in the economy. It includes consumption, investment, government spending, and net exports (exports minus imports). Importance Here are some of the primary reasons why GDP growth is considered important: Economic Health - GDP growth is a fundamental measure of a country's economic health. A positive growth rate indicates that the economy is expanding, producing more goods and services over time. This growth is essential for creating jobs, increasing incomes, and improving overall living standards. Job Creation - A growing economy often leads to increased employment opportunities. As businesses expand to meet rising demand for goods and services, they hire more workers, reducing unemployment rates and contributing to a more robust labor market. Income Generation - GDP growth is linked to the overall income generated within a country. As the economy expands, incomes generally rise, providing individuals and households with more financial resources. This, in turn, contributes to an improvement in the standard of living. Investment Climate - Investors and businesses often use GDP growth as a critical factor in assessing the attractiveness of a country for investment. A growing economy suggests potential opportunities for businesses to thrive, encouraging both domestic and foreign investments. Government Policy - Policymakers use GDP growth data to formulate economic policies. High GDP growth rates may lead to expansionary policies aimed at sustaining economic momentum, while low or negative growth rates may prompt policymakers to adopt measures to stimulate economic activity. Consumer and Business Confidence - Positive GDP growth contributes to increased confidence among consumers and businesses. When people perceive a growing economy, they are more likely to spend money, and businesses are more inclined to invest and expand. International Competitiveness - A country with a strong and growing economy is often viewed as more competitive on the global stage. A robust GDP growth rate enhances a nation's economic influence and can attract international trade and investment. Government Revenues - Higher GDP growth rates can lead to increased tax revenues for the government. This additional income can be used to fund public services, infrastructure projects, and social programs, contributing to the overall development of the nation. Debt Management - Economic growth can help manage a country's debt burden. A growing economy typically generates more revenue, making it easier for the government to service its debt without relying excessively on borrowing. Poverty Reduction - Sustainable GDP growth is often associated with poverty reduction. As the economy expands, opportunities for employment and income generation increase, helping to lift people out of poverty. Conclusion In conclusion, Gross Domestic Product (GDP) growth stands as a cornerstone in understanding and evaluating a nation's economic well-being. Through its comprehensive measurement of all goods and services produced within a country, GDP growth provides valuable insights into economic health, job creation, income generation, and various other facets that collectively contribute to the overall prosperity of a nation. The three approaches to measuring GDP—production, income, and expenditure—offer distinct perspectives, ensuring a holistic understanding of economic activity. The importance of GDP growth cannot be overstated, as it serves as a fundamental gauge of a country's economic trajectory and influences crucial decision-making processes at both the individual and policy levels. The positive correlation between GDP growth and job creation underscores the role of a thriving economy in fostering employment opportunities and contributing to a robust labor market. Additionally, the impact on income generation translates into an improved standard of living for individuals and households, reflecting the tangible benefits of economic expansion. Investors and businesses keenly observe GDP growth as a key indicator when evaluating the potential for investment. Government policymakers, armed with GDP data, craft strategies to either sustain economic momentum or stimulate activity, underscoring the pivotal role GDP growth plays in shaping economic policies. The ripple effects of GDP growth extend to consumer and business confidence, international competitiveness, government revenues, and effective debt management. A growing economy not only instills confidence but also attracts global trade and investment, positioning the nation favorably on the international stage. Perhaps most importantly, sustainable GDP growth is intricately linked to poverty reduction. As the economy expands, opportunities for employment and income generation increase, contributing to the uplifting of individuals and communities from poverty. In essence, the study of GDP growth goes beyond mere economic statistics; it serves as a compass guiding nations towards prosperity, inclusive development, and an improved quality of life for their citizens. Recognizing the multi-dimensional impact of GDP growth enables policymakers, businesses, and individuals to make informed decisions that foster long-term economic well-being and societal advancement.
FRED:GDPEducation
by financialflagship
MV=PQ RevisitedHistorical data can be hard to compare against modern ones. The longer back an analyst goes, the better the results of their analysis. 100 years of yield rate analysis may seem enough... 5000 years of interest rates however is a whole new story. Money has been as cheap as it has been for the past 5000 years. Incredible numbers... Source: www.trustnet.com Fun Fact: Banks have existed since the early days of humanity! Unsurprisingly, trading is not a modern invention. Many agree that yield rates have been too low and equities too high. Some go against the flow and suggest that the stock market bubble has yet to come. I have been looking here and there, trying to find the reason the .com bubble was created in the first place. With that in mind I hoped that I would find when the next one will come... Price has just skipped through the previous ceiling, and is now in a new territory. The drawn channel suggests that SPX hasn't reached the top of its channel. There are many more comparisons that may suggest that equities haven't peaked. By comparing DJA with one of its subsets (DJI) we have concluded that the DOW hasn't saturated yet. This analysis above is as classical as it gets. While many thought equities would die ... ... the Bane of Traders has trapped many of us, myself included. Big-Tech dominance inside Nasdaq Composite suggests that a .com bubble may be brewing inside IXIC, just like we saw in SPX/CPIAUCSL in 1994. Onto the basics of financial now. MV=PQ is one of the foundations of how economies function. For more information read my previous idea: For simplicity reasons, we merge PQ. I don't have financial data for each one of them. PQ for the US is considered as the GDP. Another example of GDP can be SPX, which extends beyond the limits of US soil. GDP has been slowing down... USGDP is the total cost of all products produced in the US. A slowing GDP means a slowing net-production of the US market. If productivity hasn't changed significantly in the past decade, a slowing GDP may be due to falling prices. And with yield rates nearing zero in 2020, we can safely say that inflation has turned negative in the US. A slowing GDP may also mean that equities have slowed down. This gives more importance to the incoming-equity-bubble scenario. An equity bubble may come for some, but not for all. The tide has turned in favor of NDX against IXIC, and DJI against DJA. Charting suggests wealth accumulation in a smaller part of the main idices. GDP may be breaking out. With money velocity (main chart) in record-low values, we can expect faster money flow in the years to come. That means increased productivity/inflation/GDP. As expected, long-term inflation may also be breaking out of its decreasing trend. Don't forget: High inflation may be a problem for some. An increased GDP growth caused by high inflation will certainly help the chosen big-ones. There cannot be high GDP with nobody profiting from it. To get rich you must inherit or steal. -Aristotle Onassis In the end, trading hasn't changed at all in 5000 years. There are still pirates, kings, queens, emperors and peasants. Markets will march upwards with or without us. Tread lightly, for this is hallowed ground. -Father Grigori
FRED:GDP
by akikostas
1
USD/JPY slips on soft US inflationThe Japanese yen has rebounded on Tuesday with strong gains. In the North American session, USD/JPY is trading at 150.70, down 0.67%. The yen has snapped a nasty six-day losing streak which saw the currency lose 1.5%. The US dollar is broadly lower today after the October inflation report was weaker than expected. US inflation was softer than expected in October. Headline CPI eased to 3.2% in October, down from 3.7% in September and August and lower than the market consensus of 3.3%. Much of the downswing can be attributed to lower gasoline prices. On a monthly basis, headline CPI was unchanged, compared to a 0.4% gain in September and a market consensus of 0.1%. The core rate, which excludes food and energy prices, showed a more moderate decline. Core CPI fell from 4.1% to 4.0%, shy of the market consensus of 4.1%. Monthly, core CPI dropped from 0.3% to 0.2%, below the market consensus of 0.3%. The markets have responded to the soft inflation print by repricing in a pause in December at 94%, compared to 85% a day earlier. Japan's GDP is expected to have contracted in the third quarter, with a consensus of -0.4% y/y. This would be a huge downturn from the 4.8% gain in the second quarter and could have significant ramifications on monetary policy. If the economy experienced negative growth as expected, the Bank of Japan will find support for its argument that the economy is too fragile to exit negative interest rates. There has been growing speculation that the central bank will tighten policy in the near term due to persistently high inflation and signs of wage growth. A weak GDP print will provide the BoJ with a reason to continue its ultra-loose policy until there is evidence that growth is strengthening. USD/JPY pushed below support at 151.61 and is testing support at 150.82 There is support at 150.05 and 149.29
by OANDA