MORNING MARKET REVIEW

26 February 2024, 10:43

EUR/USD

The EUR/USD pair shows a slight decline, holding at 1.0820. Today, investors will pay attention to the speech of the President of the European Central Bank (ECB), Christine Lagarde, and January statistics on the dynamics of New Home Sales will be published in the United States. In the EU, February data on inflation dynamics will be presented at the end of the week: the Consumer Price Index is expected to slow down from 2.8% to 2.5% in annual terms, and the Core CPI – from 3.3% to 2.9%. Traders continue to weigh data from Germany on Gross Domestic Product (GDP) and business optimism released on Friday. The German economy in the fourth quarter of 2023 lost another 0.3% quarterly and 0.4% annualized. The Business Optimism Index from the Institute for Economic Research (IFO) adjusted from 85.2 points to 85.5 points in February, which coincided with analysts’ forecasts; the indicator for assessing the Current Situation remained at 86.9 points, with expectations at 86.7 points. and the index of Economic Expectations rose from 83.5 points to 84.1 points, while experts expected 84.0 points.

GBP/USD

The GBP/USD pair is consolidating around 1.2660 after last week's moderate upward dynamics, while trading participants continue to assess the prospects for a change in the US Federal Reserve's monetary policy amid the publication of the minutes of the January meeting. Officials reiterated their cautious stance regarding lower borrowing costs and, moreover, expressed concern about the possibility of switching to "dovish" rhetoric too early. The minutes strengthened investor confidence that the adjustment of parameters could be postponed until the second half of the year, which strengthens the US dollar’s position against its main competitors: at the moment, more and more investors are counting on the first adjustment to borrowing costs in June, but these expectations are also regularly revised. Macroeconomic statistics from the UK published on Friday put slight pressure on the pound. The Consumer Confidence index from the Gfk Group analytical portal dropped from -19.0 points to -21.0 points in February, demonstrating negative dynamics for the first time in four months, while analysts expected -18.0 points. At the beginning of the week there will be speeches from representatives of the Bank of England, including Huw Pill and David Ramsden. On Tuesday, February 27, the US will release February statistics on Durable Goods Orders and Consumer Confidence. Forecasts suggest a slowdown in the dynamics of orders for Durable Goods Orders excluding Transportation from 0.5% to 0.2%.

NZD/USD

The NZD/USD pair is showing a fairly active decline, correcting sharply after the "bullish" end of last week’s trading, which was marked by the renewal of local highs from January 15. The instrument is testing 0.6165 for a breakdown amid the absence of key macroeconomic statistics. Today, January data on New Home Sales in the US will be published, and on Wednesday the Reserve Bank of New Zealand (RBNZ) will hold a meeting, at which the interest rate is expected to remain at 5.50%, although a small number of analysts also admit the possibility of its increase if it strengthens concerns about the rate of inflation growth in the country. Macroeconomic statistics from New Zealand published on Friday also put downward pressure on the instrument: Retail Sales volumes in the fourth quarter of 2023 lost 1.9%, which was twice as bad as the data of the previous period (-0.8%), and the figure excluding Autos decreased by 1.7% after an increase of 0.4%.

USD/JPY

The USD/JPY pair is consolidating near 150.50. Trading participants are in no hurry to open new positions at the beginning of the week, while the news background probably will not lead to increased volatility in the market. In the US, the publication of January statistics on the dynamics of New Home Sales is expected during the day: in the previous period, the figure increased by 8.0% month-on-month to 0.644 million units. Data presented in Japan did not support the yen's position, as they again reflected the risks of a further slowdown in inflationary pressures in the country. Thus, the January Corporate Service Price Index slowed down from 2.4% to 2.1%. Tomorrow, the focus of investors' attention will be on the National Consumer Price Index in Japan. Forecasts suggest a noticeable reduction in the CPI excluding Fresh Food prices in January from 2.3% to 1.8%. In the US on Tuesday, statistics on Durable Goods Orders will be published, as well as February data on Consumer Confidence and business activity indices from the Federal Reserve Banks (FRB) of Richmond and Dallas.

XAU/USD

The XAU/USD pair is consolidating near 2030.00, waiting for new drivers to appear. The instrument ended last week's trading with moderate growth, which allowed gold to update local highs from February 7. Investors are focused on the prospects for the American regulator to reduce borrowing costs in the near future. Last week, the minutes of the Fed's January meeting were published, which, as expected, reflected a more neutral position of officials: in their opinion, a premature transition to easing monetary policy could cause more damage to the economy than a long period of high interest rates. The regulator also doubts that the current rate of decline in inflation will continue until prices reach the target range of 2.0-3.0%, so more and more of its representatives are calling not only to focus on formal compliance with the designated levels, but also to assess the situation in the national economy more comprehensive. Tomorrow the US will publish statistics on the dynamics of Durable Goods Orders, which will allow one to assess the level of domestic demand. It is predicted that the indicator excluding transportation may slow down from 0.5% to 0.2%, and the overall Durable Goods Orders may decline from 0.0% to -4.8%. On Wednesday, February 28, investors will focus on an important indicator for the US Federal Reserve in assessing inflation, Core Personal Consumption Expenditures.