GBP/USD hit fresh two-week highs, booking the first weekly gain of 2024. The focus shifts to top-tier UK employment and inflation data in the week ahead. Pound Sterling buyers are likely to face stiff resistance near 1.2900. The Pound Sterling (GBP) regained the upper hand against the US Dollar (USD) following a muted close to the first week of the new trading year. GBP/USD buyers jumped back into the game, as the monetary policy divergence between the US Federal Reserve (Fed) and the Bank of England (BoE) widened and checked the US Dollar recovery. US Dollar resumed downtrend, perked up Pound Sterling The US Dollar demand reduced, as markets continued to price in about a 70% probability that the Fed will cut the interest rate in March even after higher-than-expected US Consumer Price Index (CPI) data in December. Data showed headline CPI rose 0.3% last month, for an annual gain of 3.4%, higher than the expected 0.2% and 3.2%, respectively. Markets are also wagering about 140 pips of Fed rate cuts in 2024. On the other hand, money markets show traders are close to pricing in four rate cuts by the BoE this year, potentially as early as May, but definitely by June. Speaking before  lawmakers in parliament at a Treasury Committee hearing on Wednesday, BoE Governor Andrew Bailey said that he did not wish to comment on the monetary policy "but let's just take the market for a moment - obviously that is feeding through into mortgage costs and I hope that is something that continues." Additionally, discouraging developments on the plans to prevent a US government shutdown next week weighed on the US Dollar alongside the US Treasury bond yields. A revolt over spending brewed among hard-right House Republicans and Congress heading out of Washington on Thursday for the long holiday weekend negatively affected the sentiment around the Greenback. However, the upside in the GBP/USD pair was likely capped by escalating geopolitical tensions between the West and Iran-backed Houthi rebels. Following weeks of attacks on ships in the Red Sea by the Iranian-backed Houthi rebels, disrupting global shipping, the US and UK launched airstrikes late Thursday on Houthi targets in Yemen, hitting radar installations, storage sites and missile launchers. Further, slowing Chinese demand, portrayed by the 2023 exports slump and sustained disinflation in December, sapped investors' confidence in high beta currencies such as the Pound Sterling. Furthermore, traders digested the upbeat UK Gross Domestic Product (GDP) data for November and the industrial figures, providing a temporary reprieve to Pound Sterling sellers. Industrial output in the UK rose 0.3% MoM in November 2023, the Office for National Statistics (ONS) showed on Friday. On an annual basis, the reading slipped 0.1%. Meanwhile, the British economy returned to expansion in November, rising 0.3% after contracting 0.3% in October, the latest data published by the Office for National Statistics (ONS) showed on Friday. The market had forecast an expansion of 0.2% in the reported period. Finally, the US Bureau of Labor Statistics reported on Friday that annual producer inflation, as measured by the change in the Producer Price Index (PPI) for final demand, edged higher to 1% in December from 1.3% in November. The Core PPI remained unchanged on a monthly basis and didn't allow the USD to stay resilient against its rivals ahead of the weekend.  The week ahead: Top-tier UK data in focus Pound Sterling traders brace for the high-impact employment and inflation data from the United Kingdom (UK) in a holiday-shortened upcoming week. The US markets are closed on Monday, in observance of Martin Luther King Jr. Day. From the United States economic docket, the first relevant data, the Retail Sales, will feature on Wednesday. The next significant release is on Friday, with the preliminary University of Michigan (UoM) Consumer Sentiment and Inflation Expectations data in the offing. Besides, speeches from the Fed officials will be closely scrutinized for fresh insights on the timing of the Fed interest rate cuts. GBP/USD: Technical Outlook GBP/USD continues to find support at the 21-day Simple Moving Average (SMA) just above 1.2700, as the 14-day Relative Strength Index (RSI) looks north above the 50 level. The 50- and 200-day SMAs Golden Cross confirmed a week ago also add credence to the Pound Sterling's bullish potential against the US Dollar. A firm break above the static resistance near 1.2830 is needed to take on the rising trendline resistance at 1.2900. Acceptance above the latter will yield a rising channel breakout, triggering a fresh uptrend toward the psychological barrier at 1.3000. If Pound Sterling buyers give in to the bearish pressures, then defending the 21-day SMA at 1.2710 will be critical. A sustained move below the latter will call for a test of the channel support at 1.2651. Daily closing below the key support could...

Gold recovered from multi-week low set below $2,020. Technical picture points to a bullish tilt in the near term outlook. Markets will scrutinize data from China and geopolitical headlines in the coming week. Gold started the week under modest bearish pressure but managed to erase its losses ahead of the weekend. Investors still see a strong probability that the Federal Reserve (Fed) will opt for a rate cut in March, not allowing US bond yields to push higher and supporting XAU/USD. Next week's calendar will not offer any high-tier data releases from the US, but Chinese growth figures and geopolitical headlines could influence the precious metal's valuation. Gold price gains traction ahead of the weekend The negative shift seen in risk appetite allowed the US Dollar (USD) to gather strength at the beginning of the week and caused Gold to push lower. Major equity indexes in Asia suffered large losses on news of Chinese wealth manager Zhongzhi Enterprise Group filing for bankruptcy liquidation after failing to repay debt. Later in the day, however, XAU/USD managed to erase a portion of its losses as the market mood improved. US stocks gained traction on growing optimism about the US government avoiding a shutdown after leaders of the House and Senate announced a broad agreement on a $1.59 trillion spending deal late Sunday. In the meantime, the Federal Reserve Bank of New York's monthly survey showed that consumers' year-ahead inflation expectation dropped to its lowest level since January 2021 at 3%, causing US Treasury bond yields to push lower and supporting the pair. In the absence of high-tier macroeconomic data releases, markets turned choppy on Tuesday. While Wall Street's main indexes corrected lower following Monday's rally, the USD started to strengthen and made it difficult for XAU/USD to gather recovery momentum. Improving risk mood limited the USD's gains mid-week and helped the pair find a foothold. Inflation in the US, as measured by the change in the Consumer Price Index (CPI), climbed to 3.4% on a yearly basis in December from 3.1% in November, the Bureau of Labor Statistics (BLS) reported on Thursday. The Core CPI, which excludes volatile food and energy prices, rose 0.3% on a monthly basis to match the market expectation and November's increase. Following some wild fluctuations with the immediate reaction, Gold touched a fresh multi-week low below $2,020 as the benchmark 10-year US Treasury bond yield advanced above 4%. Commenting on December inflation data, "the CPI report helps to underscore that the path toward inflation normalization is likely to be prolonged," said TD Securities analysts. "Barring a meaningful deterioration of the economy and the labor market, the Fed won't be easing policy until they're certain inflation is on a clear and "sustainable" path toward the 2% objective." Nevertheless, mixed inflation readings failed to convince investors that the Fed will delay the policy pivot toward the end of the second quarter. The CME FedWatch Tool's probability for a Fed rate cut in March remained virtually unchanged at around 70%. As a result, Gold recovered back above $2,040 by Friday morning. In the meantime, escalating geopolitical tensions on news of the US and UK forces carrying out attacks against multiple Houthi targets in Houthi-controlled regions of Yemen further supported Gold ahead of the weekend.  The final data release of the week from the US showed on Friday that the Producer Price Index (PPI) rose 1% on a yearly basis in December, below the market expectation of 1.3%. On a monthly basis, the Core PPI remained unchanged for the third straight month. As a result, XAU/USD advanced to a weekly top above $2,050, while the USD struggled to find demand. Gold price could react to Chinese data, geopolitical headlines Gold is likely to stay calm to start the week, with US markets remaining closed in observance of Martin Luther King, Jr. Day on Monday. Retail Sales and Industrial Production figures for December, alongside the fourth-quarter Gross Domestic Product (GDP) data from China will be watched closely by market participants in the Asian session on Wednesday. In case these data suggest that the Chinese economy ended the year on a strong note, Gold could edge higher with the first reaction. The US economic docket will offer December Retail Sales and weekly Initial Jobless Claims data on Wednesday and Thursday, respectively. Retail Sales are forecast to rise by 0.3% on a monthly basis in December. Because this data is not adjusted for price changes, investors are unlikely to react to it if it arrives near the market consensus. A negative print could, however, hurt the USD. The number of first-time applications for unemployment benefits declined to 202,000 in the week ending January 6. A reading below 200,000 next week could highlight tight labor market conditions and support the USD in the near term....

EUR/USD fluctuates above 1.0950 after Thursday's volatile trading. The technical outlook fails to turn bullish as 1.1000 resistance stays intact. Producer inflation data from the US will be watched closely by investors. After spiking to 1.1000 on Thursday, EUR/USD made a sharp U-turn and dropped below 1.0950. With the US Dollar (USD) struggling to find demand in the late American session, the pair regained its traction and closed the day flat. The pair holds steady above 1.0950 early Friday as markets await producer inflation data from the US. Mixed inflation figures from the US ramped up market volatility on Thursday. The Consumer Price Index (CPI) rose 3.4% on a yearly basis in December, the US Bureau of Labor Statistics (BLS) reported. This reading followed the 3.1% increase recorded in November and came in above the market expectation of 3.2%. The Core CPI, which excludes volatile food and energy prices, rose 0.3% on a monthly basis to match analysts' estimate. These prints failed to influence the market positioning on Federal Reserve (Fed) policy outlook in a noticeable way. The CME FedWatch Tool shows that the probability of a 25 basis points rate reduction in March stays about 70%. Commenting on the rate outlook, Cleveland Fed President Loretta Mester told Bloomberg that Fed is "not there yet on rate cuts" and added that she would want to see more evidence that the economy is progressing as expected. Inflation has to be coming down on a "sustainable basis" before rate cut conversation can happen, Mester argued. On a yearly basis, the Producer Price Index (PPI) is forecast to rise by 1.3% in December, up from 0.9% in November. A smaller-than-forecast increase could make it difficult for the USD to hold its ground ahead of the weekend. A print at or above 1.5% could revive concerns over stronger producer inflation making it difficult for the Fed to control consumer inflation and weigh on EUR/USD. EUR/USD Technical Analysis EUR/USD continues to fluctuate between the 100- and the 200-period Simple Moving Averages (SMA) on the 4-hour chart, while the Relative Strength Index (RSI) stays near 50 following Thursday's short-lasting advance, reflecting the pair's indecisiveness. 1.0990-1.1000 (100-period SMA, psychological level) stays intact as key resistance. If EUR/USD manages to flip that area into support, it could target 1.1050 (mid-point of the ascending regression trend channel) and 1.1100 (psychological level, static level) next. On the downside, 1.0930 (200-period SMA) aligns as important support before 1.0900 (psychological level, lower limit of the ascending regression trend channel) and 1.0850 (Fibonacci 38.2% retracement of the latest uptrend).

European markets struggled once again yesterday on a combination of concerns over disappointing Q4 trading updates and a hotter than expected US inflation print which could see central banks defer upcoming rate cuts until later in the year.   US markets also slipped back initially before recovering off the lows of the day and closing flat on the day. Bond yields had a rollercoaster day initially rising on the higher-than-expected CPI reading before turning tail and falling sharply, with the US 2-year yield dropping over 10bps to fall back towards the lows seen at the end of last year. After yesterday's hotter than expected CPI numbers attention now shifts to today's US PPI release where we've seen prices slow much faster than headline CPI in recent months, with November PPI falling to 0.9%, however even here we could see signs of stickier inflation. On core PPI the patterns have been much more consistent, slowing steadily over the course of 2023, and dropping to 2% in November, and the lowest level since January 2021. For December, prices here are forecast to be slightly stickier in December with headline CPI rising to 1.3%, while core prices are set to come in unchanged at 2%. While yesterday and today's US inflation numbers appear to show that inflation is becoming stickier China has no such concerns with both headline CPI and PPI in deflation in November with only slight improvements in this morning's December numbers. These modest improvements saw headline CPI coming in at -0.3% up from -0.5%, while PPI edged up from -3% to -2.7%, indicating an economy that is still struggling with weak demand. There was an improvement on the trade front as well with this morning's import and export numbers showing imports rise to 0.2%, up from -0.6%while exports also rose more than expected to 2.3%, up from 0.5% in November. The UK economy saw a big decline in economic output in October, with the economy contracting by -0.3%, more than reversing the 0.2% rise in September. All sectors of the economy struggled in October, with larger than expected falls in industrial and manufacturing production, while the wet weather impacted construction as well. Service sector activity was also disappointing sliding by -0.2%. While disappointing, the rolling 3-month GDP number came in at 0%. Despite the disappointing numbers the Bank of England gave little sign of a pivot on monetary policy noting that these monthly numbers are subject to a lot of ebb and flow. Today's November numbers are unlikely to be anywhere near as poor and should see a modest rebound of 0.2%, with the index of services expected to drive the improvement with a strong rebound from their decline in October. We already know from recent services PMI numbers that the UK economy appeared to rebound strongly in the final 2-months of 2023, which in turn could see the economy avoid a technical recession after the -0.1% contraction in Q3. November is also expected to see an improvement in industrial and manufacturing production of 0.3% after the sharp declines in October.   Asia markets saw a mixed session, as oil prices rose sharply after US and UK forces attacked Houthi targets in Yemen in retaliation for the various attacks on commercial shipping in the Red Sea, with the Nikkei 225 continuing to make new 34-year highs. Today's European session looks set to be a positive one despite the sharp rise in oil prices and the retaliation against the Houthi rebels. It's also the start of US earnings season with Q4 updates from JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup, with a great deal of attention on Citigroup after yesterday's announcement of some big charges, and disappointing investment banking performance. EUR/USD – Another choppy day for the euro saw another failure at the 1.1000 area slipping back to 1.0930. Short term support still at 1.0875 and the 200-day SMA at 1.0830. A break above 1.1030 has the potential to target the December peaks at 1.1140. GBP/USD – Failed to get above the 1.2800 area yesterday, slipping back to 1.2690 but remains in the wider uptrend with support just above the 1.2600 area. We need to get above 1.2800 to target the 1.3000 area. EUR/GBP – Ran out of steam at the 0.8620 area yesterday, although we also have resistance at the 0.8670 area. Still have support just above the 0.8570/80 area, with the main support at the December lows at 0.8545. USD/JPY – Popped above 146.00 but ran into resistance at the 50-day SMA. Support currently at the 200-day SMA and the lows this week. We need to hold above 146.00 to keep 148.00 in sight or risk a return to 140.00. FTSE 100 is expected to open 33 points higher at 7,609. DAX is expected to open 100 points higher at 16,647. CAC40 is expected...

The Houthi leadership in Yemen faced a retaliatory strike by the US and the UK, targeting at least a dozen Houthi sites, including air defences, arms depots, and logistics centers. This response was triggered by the Houthi provocations in the Red Sea, notably a recent incident in the Gulf of Aden. The situation unfolds amid rising tensions in the region, part of broader conflicts involving Iran and its allies. While this event may not constitute the "big one" — a direct threat to Iranian leaders or assets — circumstances could evolve if the current escalation jeopardizes Iran's credibility or an increasingly confident Israel expands its targets. Concerns about the risk of miscalculation are growing, as rational actors may unintentionally become entangled in an escalatory spiral. Given the inherent complexity of Middle East conflicts, achieving a stable outcome in the region appears challenging, signalling the potential for continued instability with broad global repercussions. Examining the potential implications of an escalation in growth and markets, the most significant impacts are expected to stem from energy supply disruptions. Oil prices could rise by 5% from current levels, while natural gas prices may surge by as much as 125%. In a "severe supply downside" scenario, where maritime traffic in the Strait of Hormuz is disrupted, oil prices might spike by over 20%, and natural gas prices could soar by up to 370%. The EUR might incur the greatest losses considering the potential impact on FX. Even a $10/bbl increase in oil prices could have moderate inflationary effects, potentially influencing the Fed. Investors are cautioned not to underestimate the potential impacts of the conflict on global risk assets and oil-dependent economies, where even the current low probability of a broader conflict warrants some risk premium, currently not fully priced into the markets. Looking at the broader fate of Gulf oil exporters, including the UAE, Qatar, and Saudi Arabia — recognized as economic powerhouses — these nations are expected to remain central to power and influence in the Middle East. They are viewed as formidable geopolitical forces in an increasingly complex global landscape, given their status as "geopolitical swing states." In terms of risk mitigation, allocations to safe havens, assets that may benefit from an escalating geological shock, and option hedges are suitable for various scenarios. Current strategies may involve long positions in USD and CHF, allocations to commodities, or the addition of equity puts following a significant decline in volatility observed last month. Or simply cash in, king, while parking your funds in a 5 % money market garage.

Gold price remains a 'buy-the-dip' trade, as the US Dollar weakens post-CPI. Geopolitical tensions between West and Iran-backed Houthi rebels spook markets. Gold price looks set to break above the 21-day SMA at $2,045 on a weekly closing basis. Gold price is building on the previous upswing above $2,030 early Friday, as strong support near $2,015 continues to hold the fort. Gold buyers extend control, as the US Dollar fails to capitalize on the escalating geopolitical tensions between the West and Iran-backed Houthi militants. Gold price draws support from escalating geopolitical risks Following weeks of attacks on ships in the Red Sea by the Iranian-backed Houthi rebels, disrupting global shipping, the US and UK launched airstrikes late Thursday on Houthi targets in Yemen, hitting radar installations, storage sites and missile launchers. The Western retaliation occurred even after Houthi leader Abdul Malik Al-Houthi vowed a "big" response if the US and its allies took military action against his group. US President Joe Biden said he "will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary." Japan came in support of the US and British airstrikes to secure the safe passage of vessels near the Arabian Peninsula. Intensifying geopolitical tensions infuse safe-haven flows into the traditional safety net, Gold price. Meanwhile, the US Dollar is back in the red zone, following a brief spike on higher-than-expected US Consumer Price Index (CPI) data. Data showed headline CPI rose 0.3% last month, for an annual gain of 3.4%, higher than the expected to be 0.2% and 3.2%, respectively. However, markets still price in about 70% odds for a March Federal Reserve (Fed) interest rate cut, as they believe dwindling Chinese economic recovery and mounting geopolitical risks could raise chances of a US recession, prompting the Fed to stick with the dovish pivot. China's exports fell last year for the first time since 2016, underscoring domestic economic concerns, the latest data published by China Customs showed Friday. The Greenback is also undermined by no plans to prevent a government shutdown next week, as a revolt over spending brewed among hard-right House Republicans while Congress began leaving Washington on Thursday for the long holiday weekend.   The US Treasury bond yields also remain on the defensive, with the benchmark 10-year US Treasury bond yields meandering below the 4.0% level, helping Gold price to stay afloat. Next of note for Gold price remains the US Producer Price Index (PPI) data and speeches from the Fed officials, as geopolitical developments will be the central focus heading into the extended weekend. Gold price technical analysis: Daily chart The short-term technical outlook for Gold price remains almost unchanged, so long as it remains between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,045 and $2,016 respectively. The 14-day Relative Strength Index (RSI) indicator has recaptured the midline, suggesting that Gold buyers are likely to have the upper hand. Additionally, the 100- and 200-day SMA Bull Cross confirmed last Friday also remains in play, supporting Gold price.   The immediate resistance is seen at the 21-day SMA at $2,045 should the upbeat momentum gain traction. The next bullish target for Gold price is envisioned at Friday's high of $2,054, above which doors reopen for a test of the $2,100 barrier. If Gold sellers fight back control, the initial support is seen at the $2,015 confluence, where the 50-day SMA and Monday's low coincide. A daily closing below the latter is critical to resuming the downtrend toward the $2,000 mark.