Trade Watch: Dollar Strengthens, Gold Weakens

Explore market trends: Dollar strengthens, gold weakens. BoC is expected to hold rates. U.K. economic rebound, Pound gains.

The Richmond Manufacturing Index has declined more significantly than initially projected, revealing a downturn in new orders, shipments, and employment, with the latter experiencing a notable decrease. Consequently, the manufacturing sector remains sluggish, and firms express pessimism about domestic business conditions.

Despite the gloomy economic data, the Dollar Index (DXY) surged to a six-week high 103.80. Subsequently, market participants adjusted their expectations as they realized that the Federal Reserve was not in a hurry to aggressively cut interest rates, contrary to the growing sentiment following the outcome of the December 2023 FOMC meeting.

Trade Watch: Dollar Strengthens, Gold Weakens

Asia Session Outlook: DXY Strengthens, Gold Under Pressure

As trading commenced on Wednesday, the DXY retraced from its overnight peak; however, it maintained strength due to persistent demand for the dollar. Meanwhile, gold prices, denominated in dollars, faced downward pressure and traded around $2,025 per ounce.

Key News Events Today

S&P Global Composite PMI (2:45 pm GMT)

What to Expect from DXY Today?

Given the steady growth of U.S. economic activity, particularly in the services sector, a stronger-than-expected Composite PMI could further bolster the dollar.

Central Bank Notes: Federal Reserve Holds Steady

• The Federal Funds Rate target range remains 5.25% to 5.50%.
• The committee emphasizes achieving maximum employment and 2.0% inflation in the long run.
• The next meeting is on January 30-31, 2024.

Next 24 Hours Bias: Medium Bullish

Gold (XAU): Economic Growth and Dollar Strength Weigh on Gold

Key News Events Today

S&P Global Composite PMI (2:45 pm GMT)

What to Expect from Gold Today?

Continued economic growth in the U.S., particularly in the services sector, may keep gold prices under significant pressure if the Composite PMI surpasses expectations.

Next 24 Hours Bias: Medium Bearish

The Australian Dollar (AUD): Economic Slowdown Persists

Key News Events Today

S&P Global Composite PMI (10:00 pm GMT on January 23)

What to Expect from AUD Today?

Australia’s flash Composite PMI indicates a slowdown in business activity for the fourth consecutive month, putting pressure on the Aussie.

Central Bank Notes: Reserve Bank of Australia (RBA) Keeps Rates Unchanged

• The cash rate target remains at 4.35%.
• Inflation remains high, and progress in returning to the target range is slower than anticipated.
• The next meeting is scheduled for February 6, 2024.

Next 24 Hours Bias: Medium Bearish

The Kiwi Dollar (NZD): Inflation Moderates in New Zealand

Key News Events Today

No major news events.

What to Expect from NZD Today?

New Zealand’s inflation moderates, and with a sluggish economy, the Reserve Bank of New Zealand (RBNZ) is likely to adopt a more neutral stance, keeping the Kiwi under pressure.

Central Bank Notes: RBNZ Keeps OCR Unchanged

• OCR remains unchanged at 5.50%.
• Interest rates are expected to stay restrictive for inflation control and maximum employment support.
• The next meeting is scheduled for February 28, 2024.

Next 24 Hours Bias: Medium Bearish

The Japanese Yen (JPY): Mixed Signals in Japan’s Economy

Key News Events Today

S&P Global Composite PMI (12:30 am GMT)

What to Expect from JPY Today?

Japan’s services sector grows while manufacturing contracts. The yen will likely remain weak, with USD/JPY hitting an overnight high of 148.70.

Central Bank Notes: Bank of Japan Maintains Monetary Easing Measures

• Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control (YCC) continues.
• Inflation expectations moderate, and economic recovery faces global headwinds.
• The next meeting is scheduled for March 19, 2024.

Next 24 Hours Bias: Medium Bullish

The Euro (EUR): E.U. Economic Contraction Continues

Key News Events Today

S&P Global Composite PMI (9:00 am GMT)

What to Expect from EUR Today?

Eurozone economic growth contracts and increased demand for the dollar put pressure on the Euro.

Central Bank Notes: European Central Bank (ECB) Keeps Rates Unchanged

• Three key interest rates remain steady.
• Inflation is expected to pick up temporarily.
• A data-dependent approach guides future policy decisions.
• They have scheduled the next meeting for January 25, 2024.

Next 24 Hours Bias: Medium Bearish

The Swiss Franc (CHF): USD/CHF Bullish Momentum Continues

Key News Events Today

No major news events.

What to Expect from CHF Today?

Strong demand for the dollar keeps USD/CHF elevated, with the pair likely to climb higher.

Central Bank Notes: Swiss National Bank (SNB) Maintains Policy Rate

• The policy rate remains at 1.75%.
• Inflation forecast and GDP growth remain subdued.
• The next meeting is scheduled for March 21, 2024.

Next 24 Hours Bias: Medium Bullish

The Pound (GBP): U.K. Economic Rebound

Key News Events Today

S&P Global Composite PMI (9:30 am GMT)

What to Expect from GBP Today?

The U.K.’s economic activity rebounds; a stronger-than-expected Composite PMI could boost the Pound.

Central Bank Notes: Bank of England Maintains Interest Rates

• Official Bank Rate remains at 5.25%.
• CPI inflation remains above the 2% target.
• The next meeting is scheduled for February 1, 2024.

Next 24 Hours Bias: Weak, Bullish

The Canadian Dollar (CAD): Bank of Canada (BoC) Expected to Hold Rates

Key News Events Today

BoC Monetary Policy Report (2:45 pm GMT)

BoC Press Conference (3:30 pm GMT)

What to Expect from CAD Today?

Given the backdrop of moderating inflation and a sluggish economy, the BoC is expected to keep rates on hold, which could potentially weaken the Loonie.

Central Bank Notes: BoC Maintains Overnight Rate

• Overnight rate held at 5.0%.
• Quantitative tightening policy continues.
• The next meeting is on January 24, 2024.

Next 24 Hours Bias: Medium Bullish

Oil: Inventories Drawdown Boosts Bullish Sentiment

Key News Events Today

EIA Crude Oil Inventories (3:30 pm GMT)

What to Expect from Oil Today?

Amidst a significant drawdown in API stockpiles and heightened weather-related supply concerns in the U.S., there is the potential for further amplifying bullish sentiment in the oil market.

Next 24 Hours Bias: Medium Bullish

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