US retail sales fell 0.8% in January instead of the expected 0.2% decline. Sales excluding autos fell 0.6% instead of the expected 0.2% rise. This drop took sales back to their lowest level since last July. Fuel sales last month were at their lowest level since October 2021, while building materials sales were at their lowest level since September this year. US retail sales are calculated in nominal terms (not adjusted for inflation) and are now 1.1% higher than a year ago. This is well below the 3.1% year-on-year rise in prices and could be seen as a deflation of consumer activity despite the strong labour market. Today's industrial production figures also disappointed, with a 0.1% decline in the headline index (expected +0.2% after 0.0% in the previous two months).   The American consumer is the primary driver of the economy, and industrial production, which accounts for around 10% of GDP, is often a leading indicator of the economic cycle. Both of these critical indicators have simultaneously pointed to an alarming and sudden slowdown. This should give pause to those who assume that monetary easing is imminent but are putting a new spin on it. It may no longer be a glorious victory over inflation without a recession but a concern for economic growth and an attempt to ease monetary conditions to cushion the decline. This is negative news for the dollar as it has the potential to push markets closer to the expected date of the rate cut. In the short term, equity indices may take this news as a positive. However, for the long-term investor, it is clearly a cloud on the horizon that brings the bull market in equities closer to breaking.  

Introduction In the complex world of global finance, the relationship between the US and the EU is crucial, significantly impacting the EURUSD currency market. This article explores how economic policies, geopolitical tensions, and monetary decisions affect this key currency pair, offering insight into global market dynamics. US policies and their influence on forex markets The US economy's surprising resilience positively impacted the US dollar's value in the foreign exchange market. An outstanding employment report for early 2024 showed an unexpected rise in non-farm payrolls, leading to a surge in Treasury bond yields and a stronger dollar. This surge and the increase in average hourly wages indicate a solid economic base, negating expectations of an immediate rate cut.  Economic growth of 3.3% annualized in Q4 2023, along with notable growth in consumer spending and private sector wages, has boosted consumer confidence. This synergy of real wage growth and consumer sentiment points to an optimistic outlook for the dollar, indicating solid economic conditions and the potential for tighter monetary policy to manage inflation and economic development. The Federal Reserve's policy adjustments, including raising the federal funds rate to a range of 4.5% to 4.75%, underscore efforts to stabilize inflation towards the 2% target over time, reflecting a proactive stance in economic governance​​.  Geopolitical tensions, such as conflicts in Ukraine and the Middle East, impact the dollar by driving a flight to safety among investors, elevating the currency's value amidst global uncertainties. Additionally, the dollar benefits from the US's economic outperformance and continued growth expectations, attracting cross-border investments and strengthening its position against other currencies. In addition, a rematch between Donald Trump and Joe Biden is expected ahead of the US election in 2024, with both scoring early victories in their parties' nominations.  The election cycle is centered on critical issues such as the economy, climate, social policy, and geopolitics, reflecting the complexity of the global and domestic environment. The evolving political scene, influenced by the results of the early primaries and essential issues such as immigration, will play a key role in shaping the political discourse and choices voters will face in 2024, especially considering such matters as the immigration crisis in Texas. Euro dynamics: Between domestic policy and global influence The economic outlook for the European Union is characterized by moderate growth and declining inflation amid domestic challenges and external geopolitical pressures. The gradual economic recovery is supported by projections that EU GDP will grow by 0.6% in 2023, improve slightly to 0.8% in 2024, and reach a more substantial growth rate of 1.5% in the following years. Expectations for GDP growth. Source: The European Central Bank (ECB) Inflation, an essential worry, is expected to decline from 5.4% in 2023 to 2.7% in 2024 before falling to 2.1% by 2025. The European Commission's Winter 2023 Economic Outlook contains an optimistic forecast of GDP growth of 1.6% in 2024 and a decline in inflation to 2.8% in the EU and 2.5% in the euro area, indicating the EU's resilience in the face of energy shocks and inflationary pressures and its ability to avoid recession. Inflation rate in EU and Euro area 2028. Source: statista.com Germany, Europe's largest economy, faces serious economic challenges, including stagnation and high inflation. The IMF and OECD have emphasized the financial situation in Germany, forecasting a 0.6% contraction in GDP this year amid a slowing global economy and high-interest rates that will persist into the new year. However, there are signs of a potential turnaround: the German economy is expected to recover moderately, forecasting GDP growth of 0.8% in 2024 and 1.2% in 2025. This is supported by desired improvements in domestic demand, driven by rising real wages, and a recovery in external demand despite the challenges posed by inflation and sluggish global conditions. German inflation is projected to fall to 3.1% in 2024 and 2.2% in 2025, while unemployment will stabilize at 3.2%. The EU economy and the euro's strength against the dollar are significantly influenced by the European Central Bank's monetary policy and the EU's ability to deal with foreign policy issues. These include trade relations and geopolitical tensions, affecting the economic outlook and investor sentiment towards the euro. As the EU and its member states, especially Germany, address these economic and geopolitical challenges, their success in maintaining stability and stimulating growth will play a key role in shaping EUR/USD's momentum. Fed and ECB monetary policy The Federal Reserve's approach to monetary policy has been marked by caution, focusing on achieving greater confidence that inflation will consistently trend towards the 2% target before considering rate cuts. Despite inflation easing to 3.1%, according to the Fed's preferred measure, the Fed has maintained its policy rate steady in the 5.25%-5.5% range since last July. This cautious stance suggests that while rate cuts are in view for 2024, they...

XAU/USD Current price: $1,998.69 Mixed United States macroeconomic figures weighed on the US Dollar. US Treasury yields trimmed early losses and look poised to resume their advance. XAU/USD is losing its positive momentum and struggles to retain the $2,000 mark. Gold price is up on Thursday, peaking intraday at $2,008.30 as the US Dollar came under selling pressure ahead of Wall Street's opening and following the release of mixed United States (US) figures. XAU/USD, however, lost momentum as the session went by and now struggles to retain the $2,000 mark. The country reported that Retail Sales were down 0.8% MoM in January, much worse than the 0.1% decline anticipated. Furthermore, Initial Jobless Claims for the week ended February 9 rose 212K, better than the 220K expected but still reflecting labor market tightness. On a positive note, the NY Empire State Manufacturing Index improved to -2.4 in February from -43.7 in the previous month, while the Philadelphia Fed Manufacturing Survey improved to 5.2 from -10.6 in January in the same period. The news pushed government bond yields further down, as yields eased ever since the day started. At the time being, however, the 10-year Treasury notes offer 4.25%, recovering from an intraday low of 4.187% and still down on the day. The US Dollar recovers alongside rising yields, still trading in negative territory against most major rivals. XAU/USD short-term technical outlook From a technical point of view, XAU/USD holds on to intraday gains but lacks enough momentum to extend gains. In the daily chart, the pair met intraday buyers on a test of a mildly bullish 100 Simple Moving Average (SMA) trading above it after briefly piercing it on Wednesday. The moving averages will continue to provide dynamic support, currently at around $1,990. At the same time, technical indicators ticked north but remain within negative levels, suggesting tepid buying interest. The 4-hour chart suggests the pair may ease from the current price zone. The pair peaked beyond a bearish 20 SMA, but selling interest pushed XAU/USD back below the level. At the same time, the 100 and 200 SMAs offer firmly bearish slopes well above the shorter one, in line with the bearish case. Finally, technical indicators have resumed their declines within negative levels after correcting oversold conditions. Support levels: 1,990.00 1,976.50 1,962.70   Resistance levels: 2,009.20 2,018.50 2,032.10

EUR/USD Current price: 1.0746 European Central Bank President Christine Lagarde testified before the European Parliament. The United States has a packed macroeconomic calendar on Thursday. EUR/USD extends its recovery for a second consecutive day, could approach 1.0800. The EUR/USD pair keeps advancing after briefly piercing the 1.0700 earlier in the week, currently trading at around the 1.0740 figure. Financial markets are in a better mood on Thursday, finally digesting United States (US) hotter-than-expected January inflation and the subsequent rate cut delay. Stock markets and bonds recovered, with gains led by the tech sector. That means yields ease from the peaks set this week, adding modest pressure on the US Dollar. Meanwhile, European Central Bank (ECB) President Christine Lagarde testified before the Committee on Economic and Monetary Affairs of the European Parliament. Among other things, Lagarde noted the central bank still needs more information before it can affirm inflation is heading back towards the desired 2%. "The latest data confirms the ongoing disinflation process and is expected to bring us gradually further down over 2024," Lagarde said, although adding the Governing Council needs additional data to determine whether the decline is sustainable in time. Finally, she repeated what most policymakers have signalled in their latest attempt to cool down rate-cut speculation: wage growth remains strong and could affect inflation dynamics. Other than that, the Eurozone published the December Trade Balance, which posted a seasonally adjusted surplus of €13 billion, below the  €15.1 billion surplus from November. Finally, the European Commission released the latest Economic Growth Forecasts, downgrading growth perspectives to 0.9% for the EU and 0.8% for the euro area. On a positive note, inflation is predicted to ease further: The Harmonised Index of Consumer Prices (HICP) inflation in the EU is set to decline faster from a steep 6.3% in 2023 to 3.0% in 2024, further dropping to 2.5% in 2025. The American session will bring some interesting US figures. The country will publish January Retail Sales, the February NY Empire State Manufacturing Index, weekly unemployment figures, and Industrial Production and Capacity Utilization for January. EUR/USD short-term technical outlook The EUR/USD pair is up for a second consecutive day, although a firmer advance is still out of the technical picture. In the daily chart, the pair develops below all its moving averages, with the 20 Simple Moving Average (SMA) heading firmly lower, well above the current price. Furthermore, it extends its slide below a flat 200 SMA, which usually reflects sellers' dominance. Finally, technical indicators remain within negative levels, losing their former upward strength. In the near term, however, EUR/USD seems poised to extend its corrective advance. The pair surpasses a bearish 20 SMA in the 4-hour chart while it stands far below the longer ones. Technical indicators, in the meantime, maintain their upward slopes, currently developing within neutral levels. Support levels: 1.0695 1.0650 1.0610 Resistance levels: 1.0750 1.0790 1.0840  

Japan falls into recession, with Q3 revision highlighting dour growth picture. UK GDP slumps to -0.3%, putting pressure on the BoE. Coinbase earnings in view as Bitcoin gains help boost the trading platform. European markets are on the rise in early trade today, with the FTSE 100 lagging its mainland peers after the UK slumped into a technical recession in the fourth quarter. Unfortunately, the UK wasn't the only country to fall into recession in the fourth quarter, with Japan announcing a disappointing -0.1% Q4 decline alongside a hefty downward revision that put the third quarter figure at a three-year low of -0.8%. While markets continue to expect the Bank of Japan to raise interest rates after keeping them below zero for eight years, the recent weakness in both growth and inflation data do little to help build a story of strength for the Yen. The UK economy fell into a technical recession in the fourth quarter, with today's -0.3% figure representing the worst quarterly rate of growth since early 2021. Coming hot on the heels of yesterday's inflation report that saw both headline and core CPI move sharply lower for the month of January, we are seeing a perfect storm build that puts the Bank of England in a prime position to cut rates in the coming months. Concerningly, we have also seen UK GDP per head continue to trend lower, with the tepid economic growth seen over recent years only coming about through an increase in the population rather than any improvement in the economy per se. With the UK economy growing at a mere 0.1% for 2023, tomorrows retail sales figure could further turn the heat up on the Bank of England. Coming off the back of a concerning -3.2% slump in December, any additional signs of weakness in UK consumption will further embolden dove calls for a swift pivot from the BoE. All eyes turn towards Coinbase today, with the Crypto trading platform hoping to build on the momentum being felt throughout the asset class. Bitcoin looks set for yet another bumper week, with price rising through $52,000 to bring a two-year high for the Crypto posterchild. Coinbase investors will hope to see the company's trading revenues build alongside the price of the assets being traded, with this week seeing the stock gain 24% despite Bitcoin gaining just 8% over that same period. Nonetheless, the perceived return of flows back into the Crypto space should help Coinbase turbocharge their revenues, with today's earnings report likely to show a ramp-up in trading activity in a quarter that saw Bitcoin rise 56% against the dollar.

In focus today In the US, January retail sales and industrial production data is due for release. Consensus expects some moderation in retail sales growth, even though early credit card data suggests that consumption has remained brisk at the start of the year as well. The NAHB housing market index and initial claims data will also be released today. In the euro area, the European Commission releases its economic forecasts, including GDP and inflation estimates. As the Commission and the ECB use similar models, the projections could give hints of what to expect from the ECB's staff projections at the March meeting. Additionally, ECB President Lagarde will make public remarks today. An empty Swedish Macro calendar awaits today. However, two Riksbank speakers Erik Thedéen and Anna Breman are set to speak on two different events. Thedéen will kick things off as his event starts 08.30 CET, followed by Breman at 16.20 CET. Both speeches are themed as "The economic situation and current monetary policy". Economic and market news What happened overnight? In Japan, national accounts for Q4 unexpectedly came in at -0.1% after -0.7% in Q3. The decline stems primarily from weak consumption and capital expenditure. With two consecutive GDP contractions, Japan is now in a technical recession, while Germany has surpassed Japan to become the world's third-largest economy. The print complicates the monetary policy outlook for Bank of Japan, although the policy outlook much depends on the spring wage negotiations. What happened yesterday? In Norway, mainland-GDP printed 0.2% q/q in Q4 (Danske: 0.2%, cons: 0.1%). While the print signals some recovery in Q4, we find the details weaker as strong growth in private consumption was partly due to higher electricity consumption. Additionally, mainland exports contributed to the upside, whereas investments acted as a solid drag. Growth seems a bit stronger than Norges Bank (NB) expected in the December MPR (0.0%), but we still believe that capacity utilisation is moving downwards and will allow Norges Bank to cut rates once other central banks start cutting. In the UK, inflation came in lower than expected in January at 4.0% y/y (cons: 4.1%) and core at 5.1% (cons: 5.2%). Looking at the seasonally adjusted monthly developments CPI was 0.24% m/m and core inflation was just 0.16% m/m s.a. Importantly, service inflation was just 0.03% m/m s.a., which is highlighted as an important component by the BoE. In the euro area, industrial production surprised to the upside in December, printing 2.6% m/m compared to consensus of -0.2% m/m. However, the uptick is attributed to a large increase in capital goods of 20.5% m/m, driven by a large patent in Ireland (Irish industrial production rose 44.5% y/y). Non-durable goods production saw only a muted increase of 0.2% m/m. The total euro area Q4 industrial production figure was 0.0% q/q in line with GDP. Hence, the industry ended the year on a weak footing but still better than in Q3 in a sign that the worst of the manufacturing slump is behind us.  Equities: Global equities were higher yesterday as inflation and central bank fear abated. Most visible in the small caps with Russell 2000 rising 2.4% after the massive sell-off following CPI data Tuesday. Add to that most indices ended close to day-high and futures are higher again. Hence, our conclusion yesterday that CPI should not lead to a change in the current dominating narrative seems to also be the conclusion global investors reached yesterday. In US Dow +0.4%, S&P 500 +0.96%, Nasdaq +1.3% and Russell 2000 +2.4%. Asian markets mostly higher this morning led by Japan as dollar-yen crosses 150. European futures are up almost half a percent today while US futures are in marginal gains.          FI: European yields declined after the lower-than-expected UK inflation data, and the 10Y German government bonds did not cross the 2.4% level. There was also a rebound in the US Treasury market with a decent decline in bond yields across the curve. FX: Yesterday's price action was characterised as a (part) reversal of the post US CPI price action from Tuesday: cyclically sensitive currencies gained while the USD was among the underperformers. Alongside the SEK the NOK was the biggest outperformer with the Norwegian currency showing remarkable resilience amid Brent Crude falling 2 USD/bbl. Despite the rise in equities the GBP traded on the weak side while USD/JPY remains north of the psychologically important 150-level despite verbal intervention from the Japanese authorities.