GBPUSD cheers post-Fed US Dollar weakness with eyes on BoE

The post-Fed optimism prevails early Thursday, even as cautious mood ahead of the top-tier US data and central bank meetings from the UK and Europe prod optimists.

While the increasing odds of Fed rate cuts in early 2024 drowned the US Dollar, a slump in the Treasury bond yields offered additional help to the Greenback bears. With this, the major currencies report notable run-up versus the US Dollar while the commodities also reverse the previous fall. It should be noted that Crude oil struggles to defend the latest recovery amid fears of witnessing lesser energy demand from China while GBPUSD bulls also hesitate amid the looming economic crisis in the UK.

Further, USDJPY drops the most among the G10 currency pairs, especially amid downbeat bond coupons and hawkish concerns about the Bank of Japan (BoJ), whereas AUDUSD cheers upbeat Aussie jobs report.

That said, the US stock futures trace upbeat Wall Street while the Asia-Pacific shares grind higher despite mixed concerns about China.

On a different page, BTCUSD edges higher amid optimism surrounding spot ETF approvals while ETHUSD rises more in hopes of higher Ethereum revenue and lower mining fees.

Following are the latest moves of the key assets:

• Brent oil fades bounce from multi-month low to around $74.80 by the press time.
• Gold price edges higher, mildly bid near $2,035 at the latest, after rising the most in two months the previous day.
• USD Index licks its wounds at the lowest level in four months, indecisive near 102.75 as we write.
• Wall Street closed positive but Asia-Pacific stocks trade mixed. Further, equities in the UK and Europe remain firmer during the initial hours.
• BTCUSD and ETHUSD print mild gains to around $42,850 and $2,280 at the latest.

Fed drowns US Dollar ahead of US data, more central bank announcements…

The US Federal Open Market Committee (FOMC) matched market forecasts of keeping the monetary policy unchanged on Wednesday. However, comments from Fed Chair Jerome Powell and dot-plot bolstered dovish expectations from the US central bank, which in turn weighed on the US Dollar.

That said, the benchmark Fed Rate remains unchanged at around 5.5% while Fed Chair Powell’s speech termed keeping rates “too high for too long” as a mistake & joined the FOMC dot-plot to drown US Dollar amid rate cut expectations. It should be observed that Fed’s Powell also said that some policymakers changed their forecasts after the Producer Price Index (PPI) data, 0.9% YoY for November versus 1.0% expected and 1.2% prior.

For now, the Fed’s first rate cut in March appears fully priced in whereas the interest rate futures suggest a total of 175 bps worth of rate cuts versus 112 bps ahead of the previous day’s Fed announcement.

Japan’s Industrial Production for October (final print), rose past 1.0% initial forecasts to 1.3%, versus 0.8% prior, while Machinery Orders increased 0.7% compared to -0.5% expected and 1.4% previous readings.

Further, Australia marked a very strong jobs report for November. That said, the headline Aussie Employment Change jumped to 61.5K versus 11K expected and 55K prior while the Full-Time Employment and Participation Rate also rallied for the said month. It’s worth observing, however, that the Unemployment Rate rose to 3.9% versus the market forecasts of 3.8% and 3.7% previous readings. On the same line, Australia’s Consumer Inflation Expectations for December also eased to 4.5% from 4.9% prior and capped the AUDUSD pair’s run-up.

Additionally, New Zealand’s Q3 GDP dropped to -0.3% QoQ figures from 0.2% expected and 0.5% prior whereas the downbeat UK data dump intensified British recession concerns and prod the GBPUSD bulls even as the US Dollar weakness favored the Cable pair.

It’s worth noting that a consecutive second quarterly fall in China’s GDP Deflator, to 1.4% QoQ at the latest, challenges the market’s optimism and puts a floor under the US Dollar.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

US Retail Sales, BoE, ECB in focus…

Although the confirmation of Fed rate cuts in early 2024 drowns the US Dollar, the US Retail Sales for November will be important to determine the magnitude of the rate cuts in the future and the same can allow the Greenback to pare some of the latest losses with upbeat data.

Also, dovish halts from the European Central Bank (ECB) and the Bank of England (BoE) are mostly priced in and hence the traders may seek shelter in the US Dollar amid the soft landing concerns about the US.

May the trading luck be with you!