Market news 02/02/24

According to economists at ING, the EUR/USD may retreat to the 1.0875/1.0900 area following a negative Non-Farm Payrolls (NFP) report. The pair briefly fell below the 1.0800 level on Thursday. Inflation indicators for the Euro-Zone's Consumer Price Index (CPI) are supporting short-term interest rates, as they suggest that core inflation has not fallen as much as expected. The European Central Bank (ECB) may delay any interest rate cuts until June in anticipation of wage data. The EUR/USD could retest the 1.0875/1.0900 level if the United States releases a weak NFP report. Realized volatility remains low and investors do not expect volatility to increase in the near future.

Amid active selling of the US dollar, the USD index fell 0.5% following a drop in US bond yields. Currently, the markets remain calm, but attention is focused on the U.S. employment report for January. Employment and wage inflation data are expected to be key. Thursday's negative employment data pushed 10-year yields to their lowest level since late December. Non-farm payrolls are expected to have increased by 180,000, the unemployment rate is expected to have risen to 3.8%, and average wages are expected to have increased by 0.3%.

This week, the US Dollar is showing vulnerability against the Japanese Yen. The Bank of England lowered its inflation forecast for 2024, while keeping the base rate at 5.25%. The GBP/USD fell temporarily, but recovered to close Thursday at around 1.2700. While the EUR/USD rate rose above 1.0850 after a brief dip, the USD/JPY rate fell and remained near the 146.50 level.

The head of the Bank of Canada, Tiff Macklem, warned of potential obstacles to achieving the inflation target due to budget spending. In his speech to the national parliament, Macklem expressed concern about possible spending increases in the upcoming federal budget, noting that this could slow the central bank's efforts to reduce inflation. He also did not rule out the possibility of raising interest rates in response to unexpected events, such as supply chain disruptions. Currently, the Bank of Canada is focused on deciding when to start cutting interest rates in anticipation of easing price pressures and a decline in core inflation.

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The information contained in this material should not be construed as trading recommendation. The analytical forecast is the subjective opinion of the author and cannot guarantee income.