2024-07-26 09:59

Markets are fully pricing in two BoE rate cuts by December. Data on Thursday revealed a bigger-than-expected expansion in the US economy. All eyes are on the US core PCE report. The GBP/USD price analysis highlights a bearish trend despite a slight recovery ahead of the US inflation data. The pound fell as investors increased expectations for Bank of England rate cuts in the previous session. At the same time, the dollar was steady amid signs the US economy remains resilient. This week, the Bank of England and the Fed have raised their rate cut expectations. The US central bank’s policy outlook significantly impacts other major central banks. Most of them remained cautious for a long time since US inflation remained high. Moreover, diverging from the Fed’s policy would mean a weaker currency. Therefore, policymakers prefer to let the Fed lead the way. Although rates have started coming down in Canada and the Eurozone, there was caution due to the Fed’s more hawkish tone. However, recent US inflation figures have boosted expectations for a cut in September. As a result, investors are more confident that BoE policymakers will cut rates this year. Notably, markets are fully pricing in two BoE rate cuts by December. Meanwhile, there is a 50% likelihood of a cut next week. Elsewhere, the dollar got a boost after Thursday’s data revealed a bigger-than-expected expansion in the US economy. The GDP grew by 2.8% in the second quarter, well above estimates for a 2.0% expansion. However, the report also revealed softer inflation, keeping bets for a September Fed cut intact. All eyes are now on the core PCE report, which might show an increase from 0.1% to 0.2%. GBP/USD key events today US core PCE price index m/m GBP/USD technical price analysis: Price hovers near 30-SMA in a shallow bearish trend On the technical side, the GBP/USD price is in a shallow bearish trend close to the 30-SMA. Meanwhile, the RSI trades in bearish territory but is not reaching the oversold region. This is a sign that bears are holding back or bulls are preventing strong bearish swings. This slow trend might continue to the 1.2800 support level. However, bulls might take over with a break above the 30-SMA if bears do not gain momentum. Consequently, the price would get a chance to revisit the 1.3050 key level. https://www.forexcrunch.com/blog/2024/07/26/gbp-usd-price-analysis-weak-upside-ahead-of-us-inflation/

2024-07-26 09:18

The yen has gained 2.4% this week. The BoJ’s odds of a rate hike are above 67%. The BoJ might announce plans to reduce bond purchases. The USD/JPY outlook is slightly bullish, with the yen retreating from a 2-month high. This shift comes as the dollar strengthens on the back of upbeat GDP data, indicating a robust economic landscape. At the same time, investors look forward to next week’s Bank of Japan policy meeting. The yen has gained 2.4% this week amid an increase in BoJ rate hike expectations. When the week began, investors were pricing a 40% chance of a 10bps cut next week. However, the likelihood has risen to 67.2% as the week winds down. Notably, there is more pressure on Japan’s central bank to hike rates as a weak yen hurts the economy. Furthermore, the BoJ might announce plans to reduce bond purchases. A rate hike and reduced economic stimulus could lead to a rally in the yen. Investors are also optimistic that the Fed will start cutting rates soon, reducing the rate gap between Japan and the US. Meanwhile, after upbeat US data, the US dollar extended gains made on Thursday. Notably, the US economy expanded by 2.8% in the second quarter, beating forecasts of 2.0%. The report had little impact on expectations for a September Fed cut as inflation eased despite resilient demand. Moreover, US jobless claims fell to 235,000 last week, missing forecasts for 238,000, indicating a still-tight labor market. These reports could keep policymakers cautious at next week’s policy meeting. Investors are eagerly awaiting the core PCE price index that will give more clues on what the Fed might do in September. USD/JPY key events today US core PCE Price Index m/m USD/JPY technical outlook: Price climbs after Morning Star candlestick pattern On the technical side, the USD/JPY price is bouncing higher after finding support at the 152.01 key level. However, the bearish trend remains intact since the price is below the 30-SMA. At the same time, the RSI is in bearish territory. Still, there are signs bulls might be ready to take charge. Notably, the price has formed a Morning Star candlestick pattern, indicating a possible bullish reversal. The price must break above the 30-SMA and 156.02 resistance to confirm this bullish signal. https://www.forexcrunch.com/blog/2024/07/26/usd-jpy-outlook-yen-retreats-from-2-month-top-after-us-gdp/

2024-07-25 10:24

The Bank of Canada lowered borrowing costs by 25 basis points to 4.5%. Canadian factory sales fell by 2.6% in June. The US composite PMI index rose to 55.0, indicating robust business activity. The USD/CAD outlook shows strong bullish sentiment as the Canadian dollar wallows near a 3-month low after a second Bank of Canada rate cut. Moreover, the central bank signaled further easing if inflation continues cooling. On Wednesday, the Bank of Canada lowered borrowing costs by 25 basis points to 4.5%. This was the second rate cut after it became the first major central bank to cut in June. The last inflation figures were softer than expected, weakening the economy. Therefore, Canada’s central bank had every reason to cut rates. If this trend continues, there will be another rate cut soon. Notably, there is a 50% chance the BoC will lower borrowing costs in September. Elsewhere, data revealed that Canadian factory sales fell by 2.6% in June. This is another sign of weak demand that will encourage policymakers to continue the rate-cutting cycle. Meanwhile, in the US, investors still expect the first rate cut in September. However, economic reports continue showing resilience that might keep policymakers cautious. Data on Wednesday showed the US composite PMI index rose to 55.0, indicating robust business activity. This followed another upbeat report last week, which showed better-than-expected sales. The next economic indicator is the GDP estimate for the second quarter. Economists expect a bigger expansion in Q2 than in Q1, further highlighting economic resilience. After that, the core PCE report will show the state of inflation on Friday. USD/CAD key events today US advance GDP q/q US unemployment claims USD/CAD technical outlook: Bulls charge ahead with the 1.3850 level in sight On the technical side, the USD/CAD price has continued its rally, breaking past the 1.3800 resistance level. Bulls are now eyeing the 1.3850 key level. However, the price has gone far above the 30-SMA without pulling back. At the same time, the RSI trades in the overbought region, an extreme for bullish momentum. Therefore, USD/CAD might soon pause or pull back to retest the 30-SMA before continuing the uptrend. However, if bulls are still strong, they will break past the 1.3850 level without pausing. https://www.forexcrunch.com/blog/2024/07/25/usd-cad-outlook-posts-3-month-top-following-2nd-boc-rate-cut/

2024-07-25 09:02

Data on Wednesday showed a decline in Eurozone business activity in July. The composite PMI rose to 55.0, indicating an increase in business activity. Forecasts show that the economy expanded by 2.0% in Q2. The EUR/USD forecast is pessimistic as the euro remains fragile following disappointing PMI data from the Eurozone. In contrast, business activity in the US improved. Data on Wednesday showed a decline in Eurozone business activity in July. The composite PMI fell from 50.9 in June to 50.1. According to experts, the decline indicates that the recovery in the Eurozone economy has stalled. Furthermore, the manufacturing sector performed poorly, especially in Germany. In the bloc, the manufacturing PMI hit a 7-month low of 45.6 in July. Moreover, economists predict the economy will grow an average of 0.7% in 2024 and 1.4% in 2025. Ideally, a weak economy would increase European Central Bank rate cut bets. However, the outlook remains unclear because policymakers have said inflation remains high. Still, economists expect another ECB cut in September. Meanwhile, the composite PMI rose to 55.0 in the US, indicating increased business activity. Although markets are fully pricing a cut in September, economists have warned policymakers might maintain caution. Notably, the US economy remains resilient, meaning demand remains high. Therefore, if the Fed cuts too early, inflation might spike. Investors will watch the first Q2 GDP estimate later for more clues on the Fed’s rate cut outlook. Forecasts show that the US economy expanded by 2.0%. This would be an improvement from the first quarter growth of 1.4%. EUR/USD key events today US advance GDP q/q US unemployment claims EUR/USD technical forecast: Bulls resurface in the downtrend to retest the 30-SMA On the technical side, the EUR/USD price is in a new bearish trend after breaking below the 30-SMA. At the same time, the RSI has broken below 50 to support bearish momentum. Notably, bears took over when the price neared the 1.0950 resistance level. However, the decline was initially weak, with the price making small-bodied candles. Additionally, it was sticking close to the SMA. Now, the price has found its footing below the SMA, but it is pulling back. It might retest the SMA before continuing to the 1.0800 support level. The downtrend will continue if the price stays below the SMA and the RSI below 50. https://www.forexcrunch.com/blog/2024/07/25/eur-usd-forecast-bears-intensify-after-downbeat-eu-pmi/

2024-07-24 10:07

Business activity in Britain’s manufacturing sector improved more than expected. Last week, the pound reached a one-year high due to a decline in BoE rate cut bets. Economists expect the US economy to expand by 2.0% in the second quarter. The GBP/USD forecast points south, although the pair recovered slightly after better-than-expected PMI data. At the same time, the dollar held steady ahead of US GDP and inflation data. Data on Wednesday revealed that business activity in Britain’s manufacturing sector improved more than expected. The PMI rose from 50.9 to 51.8, showing continued expansion, better than the forecast of 51.1. Meanwhile, service sector activity also improved from 52.1 to 52.4. However, the figure slightly missed estimates of 52.5. The expansion in the manufacturing and services sectors could further challenge the outlook for Bank of England rate cuts. Notably, bets for a cut in August have fallen since the last inflation report showed high service price pressures. If the Bank of England keeps delaying cuts, the pound will continue to have an edge over other major currencies, including the dollar. The decline in BoE rate cuts saw the pound reach a one-year high last week. Meanwhile, the outlook for Fed rate cuts has become clearer, with investors fully pricing in a rate cut in September. Therefore, the US central bank will likely start lowering borrowing costs ahead of the Bank of England. However, before that, investors will watch data on GDP and inflation. Economists expect the economy to expand by 2.0% in the second quarter, bigger than the 1.4% expansion in the first quarter. Meanwhile, the core PCE might ease from 2.6% to 2.5% in June. GBP/USD key events today US flash manufacturing PMI US flash services PMI GBP/USD technical forecast: Bears weaken soon after taking charge On the technical side, the GBP/USD price has broken below the 1.2900 support level. However, the break is weak because price action shows fading bearish momentum. The price is making small-bodied candles. At the same time, it is staying close to the 30-SMA, a sign that bears are not strong enough to make big swings. Notably, the trend recently reversed when the price broke below the 30-SMA. Continuing this trend would allow the price to revisit the 1.2800 key level. However, if bears are not strong enough to find their footing below 1.2900, bulls might resurface and push above the SMA. https://www.forexcrunch.com/blog/2024/07/24/gbp-usd-forecast-pound-crawls-higher-amid-positive-pmi-data/

2024-07-24 09:25

BoC policymakers are more pressured to lower rates than other major central banks. Economists forecast two rate cuts in the US this year. The loonie was pressured when oil prices reached a six-week low in the previous session. The USD/CAD price analysis shows more upside potential as the Canadian dollar weakens ahead of the Bank of Canada policy meeting. At the same time, the currency fell amid a decline in oil prices. Meanwhile, the dollar firmed as investors awaited economic reports from the US. Markets are gearing up for the Bank of Canada policy meeting, which is due later in the day. Investors expect the central bank to implement its second rate cut. Meanwhile, the Fed has yet to start lowering interest rates. BoC policymakers are more pressured to lower rates than other major central banks. Inflation in Canada has eased faster than expected and is currently within the central bank’s target of 1%- 3%. At the same time, the economy is quickly declining, with the latest retail sales report showing consumer spending is weaker than expected. Consequently, high rates are weighing on economic activity and must come down. This is not the case in the US. Inflation has taken its time to drop, and the economy remains resilient. Retail sales figures came in better than expected, indicating strong consumer spending. Although economists forecast two rate cuts in the US this year, they have noted that policymakers might remain cautious. Meanwhile, the loonie was pressured when oil prices reached a six-week low in the previous session amid a higher likelihood of a ceasefire in Gaza. Furthermore, China’s economy has performed poorly in the second quarter, dimming the demand outlook for oil. USD/CAD key events today BOC monetary policy report BOC rate statement US flash manufacturing PMI US flash services PMI BOC press conference USD/CAD technical price analysis: Uptrend intensifies above 1.3750 barrier On the technical side, the USD/CAD price has continued its bullish move, breaking above the 1.3750 resistance level. The move has now paused near the 1.3800 key psychological level. However, the bullish bias remains strong, with the price far above the 30-SMA. At the same time, the RSI is in the overbought region, indicating solid bullish momentum. Therefore, USD/CAD may only pause briefly before breaking above 1.3800. Even if it pulls back, it might not go below the 30-SMA. https://www.forexcrunch.com/blog/2024/07/24/usd-cad-price-analysis-bocs-rate-cut-hopes-trigger-buying/