Fed Updates: Unchanged Rates and Focus on Inflation

Fed updates: unchanged rates and focus on inflation with insights on currency, gold, and oil in this fundamental forecast.

US Session Highlights: Declining Inflationary Pressures and Dollar Index Consolidation

In the recent US session, the Producer Price Index (PPI), a measure of wholesale inflation, continued to reflect diminishing inflationary pressures in the sector. As reflected in PMI readings, headline and core PPI readings have eased significantly over the last 18 months, indicating weak demand for manufacturing activity. This inadequate inflation data will likely influence the Federal Reserve to adopt a more neutral stance on monetary policy, potentially exerting downward pressure on the dollar.

Asia Session: Dollar Index Consolidation Continues

During the US session last Friday, the Dollar Index consolidated, maintaining prices above the support level of 102.14. The Dollar Index opened at 102.54 today, reflecting a steady trend.

Key News Events Today: Martin Luther King Day (US Holiday)

As markets observe Martin Luther King Jr. Day, stock and bond markets in the US are closed, along with the early closure of US index and commodity futures. Later in the US session, we anticipate lower trading volume.

Fed Updates: Unchanged Rates and Focus on Inflation

Central Bank Insights: Federal Reserve Maintains Rates and Focus on Inflation

The Federal Funds Rate target range remains 5.25% to 5.50% for the third consecutive meeting. The Committee emphasizes pursuing maximum employment and a 2.0% inflation rate in the long run. The Federal Reserve continues to monitor economic indicators for implications on monetary policy. The next meeting is scheduled for 30 to January 31, 2024.

Gold (XAU): Subdued Activity Expected on Martin Luther King Day

Gold is anticipated to experience weak bearish sentiment due to the closure of US markets on Martin Luther King, Jr. Day, leading to lower trading volumes during the US session.

Australian Dollar (AUD): Testing Support Levels in the Asian Session

The Australian Dollar started the Asian session on a high at 0.6729 but struggled to maintain momentum, closing at 0.6679. The focus remains on testing the support level at 0.6669, with the Reserve Bank of Australia maintaining the cash rate target at 4.35%. The Reserve Bank of Australia has scheduled the next meeting for February 6, 2024.

New Zealand Dollar (NZD): Potential Downtrend Continuation

The Kiwi Dollar is testing the support level of 0.6222 and might continue its downtrend in the Asian session. The Reserve Bank of New Zealand has kept the OCR unchanged at 5.50%, with the next meeting scheduled for February 28, 2024.

Japanese Yen (JPY): Strengthens, USD/JPY Continues Downtrend

The Japanese yen strengthened last week, resulting in USD/JPY closing lower at 144.35. The market expects this downward trend to continue in the Asian session. The Bank of Japan has scheduled its next meeting for January 23, 2024.

Euro (EUR): Upward Trend Following Support Bounce

The Euro bounced off support at 1.08852 and is on an upward trend, opening higher at 1.09585 in the Asian session. The European Central Bank has maintained vital interest rates unchanged, with the next meeting set for January 25, 2024.

Swiss Franc (CHF): Signs of Recovery in Downtrend

The Swiss Franc shows signs of recovery from a downtrend, with USD/CHF testing the overlap resistance level at 0.85538. The Swiss National Bank’s next meeting is on March 21, 2024.

British Pound (GBP): Ascending Trend Continues

The Pound continues its ascending trend, closing higher in the last Friday session. The Bank of England’s Monetary Policy Committee voted to maintain the Official Bank Rate at 5.25%, with the next meeting scheduled for February 1, 2024.

Canadian Dollar (CAD): Bank of Canada Maintains Rates

The Bank of Canada has held its target for the overnight rate at 5.0% for the third consecutive meeting. The next meeting is scheduled for January 24, 2024.

Oil: Vigilance for Potential Disruptions in the Middle East

Oil prices declined as traders monitored potential disruptions in the Middle East’s oil supply. Concerns arose after US and British forces carried out strikes to prevent the Houthi militia in Yemen from targeting ships in the Red Sea. Crude oil fell to $72.73 a barrel, and Brent oil to $78.23 per barrel.

Overall Market Bias for the Next 24 Hours

• Dollar Index (DXY): Medium Bearish
• Gold (XAU): Weak Bearish
• Australian Dollar (AUD): Weak Bearish
• New Zealand Dollar (NZD): Medium Bearish
• Japanese Yen (JPY): Medium Bearish
• Euro (EUR): Medium Bullish
• Swiss Franc (CHF): Medium Bearish
• British Pound (GBP): Weak Bullish
• Canadian Dollar (CAD): Medium Bearish
• Oil: Weak Bearish

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