USD falls while US equity markets struggle to find direction, GBP rises due to better than expected UK unemployment data

Jan 27 • Market Commentaries • 1431 Views • Comments Off on USD falls while US equity markets struggle to find direction, GBP rises due to better than expected UK unemployment data

On Tuesday, European equity markets rebounded after some impressive earnings reports combined with a positive global growth report from the IMF to improve investor sentiment. Germany’s DAX index closed out the day up 1.66% while France’s CAC was up 0.93%.

The euro experienced mixed fortunes during the day; EUR/USD traded up 0.19% at 8:30 pm UK time, EUR/CHF was flat, while EUR/GBP traded down -0.24% after initially breaching R1 the cross currency pair collapsed through S2 later in the day’s sessions to trade at 0.885.

The UK FTSE 100 ended the day 0.23% up after the unemployment rate reached a five year high at 5%. However, fewer citizens lost their jobs in the October-November period than Bloomberg and Reuters’ news agencies forecast.

The UK govt’s official pandemic death count finally breached the tragic milestone of 100K, although the ONS puts the total death count at 120K. Either figure is the worst in Europe, the fifth highest globally and the worst currently in deaths per population size.

GBP/USD traded in a wide range, oscillating between initial bearish and later bullish sentiment, as sterling and the US dollar reacted to breaking news and IMF opinion.

As the unemployment data got published GBP/USD slumped to the second level of support S2. During the New York session, the currency pair often referred to as cable recovered to push through R1 and print a daily high of 1.373 up 0.45% at 8:30 pm UK time. GBP recorded gains versus JPY and CHF on the day but traded down versus both antipodean dollars NZD and AUD.

US market equities failed to print fresh record highs, despite the IMF producing revised global GDP predictions based on an effective and efficient rollout of the COVID-19 vaccines and the vaccines working. The IMF reckon global growth will reach 5.5% in 2021 from the previous 5.1% growth forecast. The monetary fund also raised the 2020 contraction figure from -4.4% to -3.5%.

According to the latest figures available, the other notable fundamental news from the US involved house prices; according to the Case-Shiller index, prices have risen by 9.1% year on year and 1.1% in November 2020. Incredible growth considering the USA is fast approaching 500K COVID-19 related deaths.

Microsoft shares jumped ahead of the earnings report scheduled for publication on Wednesday, January 27; the stock was up over 6% at the closing bell in New York. The NASDAQ 100 ended up by 0.86% and below the 13,600 level-handle. The SPX 500 and DJIA 30 closed out flat for the day.

Crude oil traded down -0.47% on the day, maintaining position just above the $52 a barrel handle. Precious metals traded in tight ranges, silver up 0.67% at $25.45 per ounce, with gold down -0.20% at $1851, both PMs trading just above the daily pivot points.

Calendar events to be aware of during Wednesday’s trading sessions

During Wednesday’s sessions, the main focus concerns the Federal Reserve in the USA. The central bank will announce its latest interest rate decision, and there’s no expectation for the rate to get changed from 0.25%.

Investors and traders will focus on the Fed Chair Jerome Powell when he chairs a press conference after the decision gets announced.

Analysts will listen to Mr Powell for any forward guidance clues to establish if the Fed is committed to maintaining its current ultra-loose accommodative monetary policy. Any change could impact on the value of USD.

Durable goods orders in the US will also get published before the New York session opens. The forecast is for December’s metric to come in at 0.8% for November. Oil traders should watch out for the latest crude oil stock change during the day, as falling stockpiles could positively affect the price of a barrel of oil.

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