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Rising expectations that the Fed and the ECB interest rates divergence will narrow have given the Euro an upper hand in the meantime. The dollar edges higher ahead of New York open as traders anticipate the Fed’s decision. Investors await the US growth data for more light on the possibility of a recession in the country. Germany’s economic outlook improved in January as expected.
AUDUSD extended its 4-day rally by +0.74% following the release of Australian CPI. The Consumer Price Index in Australia jumped to 7.8% vs 7.5% expected in the fourth quarter on a yearly basis along with the quarter-on-quarter reading printing a 1.9% vs 1.6% anticipated. The stronger data could give the RBA reason to keep on the tightening path. The dollar was somewhat steady on Wednesday as traders await the US fourth quarter GDP data due on Thursday. Up from 0.7040, the pair may be challenged by 0.7140 and 0.7280 resistances although bears may revisit 0.7050 before the rally.
GBPCAD tanked by -0.26% on the day as key economic data from both countries weigh. In the UK, Producer prices fell by -1.1% vs the surveyed -0.6% in December being a headwind for the sterling. The CAD soared as the Bank of Canada will be releasing its interest rate decision today as expectations have settled at 25bps from 4.25% to 4.50%. This comes after a drop in the country`s consumer prices last week. The pair may extend its drop if the 1.6100 low fails to hold. To the upside, bulls may need to break above 1.6700 for a further rally.
EURNZD trimmed a 3-day loss by +0.23% after the German Ifo business climate. The Eurozone’s largest economy outlook improved in January settling at the anticipated 90.2, beating December’s business sentiment of 88.6. The ECB is expected to go big at their next meeting on 2 February boosting the euro against the NZD. The pair’s bears are challenged by 1.6735 while bulls are capped by 1.6825. An extended rally may be challenged by immediate resistance at 1.6870.
European stocks tumble amid corporate earnings season. The UK100 lost -0.30% after establishing a high at 7774 as 7730 remains a key low to watch. German 40 fell by -0.53% below 15115 intraday resistance and may be challenged by 14900 lows before reclaiming 14688. France40 trimmed -0.31% after poking above Tuesday’s high. The index may still need to take out 6950 for a strong downswing.
US stock futures copied the mood in Europe as corporations revealed a bleak outlook. Nasdaq 100 futures lost -1.60% from 11900 on Microsoft’s downbeat earnings report, with targets seen at 11500 on the downside. S&P 500 futures were down -0.86% after a rejection at 4023 intraday high and may be challenged by 3960 further down. The DJIA futures were down -0.53% trading between 33500 and 33750.
Furthermore, crude oil prices were under pressure as the US economy threw some signs of a recession. Later in the US session, crude oil inventories will be due and expected to drop to 971 000 barrels from 8.408 million barrels. The OPEC+ group is set to meet next week and expectations have it that there is a possibility the group may keep production unchanged. That said, Brent fell -0.18% from $86.85pb and bounced off $85.70pb. A continuation up may be capped by $89.00. US WTI was up +0.12% in a range between $79.60 and $80.60.
