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On January 31st, OCBC strategist Christopher Wong stated that golds price action "confirms the adage a sharp rise is inevitably followed by a sharp fall." He believes that while Warshs nomination as Fed Chair was the trigger, a correction was already inevitable. "Its like one of the excuses the market has been waiting for—to liquidate those parabolic price movements." Precious metals had already paved the way for sharp fluctuations, as soaring prices and volatility put pressure on traders risk models and balance sheets. Goldman Sachs noted in a report that the record wave of call option buying also "mechanically reinforced the upward momentum," as sellers of these options hedged against rising prices by buying more metal.On January 31, Russian Deputy Foreign Minister Grushko stated that the best guarantee for Ukraines security is a concrete guarantee of Russias security, a guarantee that no one in the West has offered. He emphasized, "If we believe that Ukrainian territory will not be used as a bridgehead threatening Russias security, then Ukraines security will also be guaranteed." The Russian Foreign Ministry previously stated that any scenario involving NATO member states deploying troops in Ukraine is absolutely unacceptable to Russia and could lead to a sharp escalation of the situation. The Russian Foreign Ministry also stated that statements from Britain and other European countries regarding the possible deployment of NATO troops in Ukraine are incitement to continue the conflict.January 31st - According to Yahoo Finance, Kevin Warsh, President Trumps nominee for Federal Reserve Chairman, appeared in newly released Epstein case documents released by the US government on Friday. The documents show that Warshs name was listed in the email guest list for the "2010 St. Barths Christmas" event, alongside figures such as Russian oligarch Roman Abramovich; he also attended a dinner hosted by British aristocrat William Astor. This revelation occurred on the same day Warsh was nominated for Fed chairman. His main controversy previously stemmed from his relationship with Republican donor Ronald Lauder, who was accused of influencing Trumps interest in Greenland during his first term and holding business interests there. Warsh may now need to address his relationship with Epstein and his 2010 Christmas trip, and there is also speculation that Trumps nomination is related to their shared social circle.January 31 – With the House of Representatives in recess and unable to consider the appropriations bill, the U.S. federal government entered a technical, partial shutdown at midnight local time on January 31. Analysts point out that although the shutdown is expected to be short-lived, it once again highlights the structural predicament of U.S. fiscal politics. In recent years, temporary funding, short-term extensions, and marginal shutdowns have become the norm in congressional budget battles, with government operations frequently hampered by political disagreements. Currently, the market generally believes that the direct impact of this technical shutdown on financial markets and economic operations is limited, but if subsequent congressional negotiations are again stalled, the risk of a prolonged shutdown and a wider impact cannot be ruled out.January 31st - The US government officially began a partial shutdown early this morning local time. This followed the Senates passage of a spending bill to fund most federal government departments, which was then submitted to the House of Representatives for consideration. However, because House members were not in Washington and would not return until Monday (February 2nd), the Senate vote could not prevent a partial government shutdown.

GBP/USD regains 1.18 thanks to a weaker DXY ahead of Jackson Hole and secondary US economic data

Daniel Rogers

Aug 25, 2022 14:53

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During Thursday's Asian session, the GBP/USD retests its intraday high at 1.1815 while consolidating its weekly losses in response to a dollar decline. The most recent increases in the cable pair could also be linked to expectations that the next British government will be more organized and assertive.

 

The Resolution Foundation, a UK think tank, told Reuters on Thursday that Britain's next prime minister must implement radical ideas, such as discounted power prices, energy bill freezes, or a "solidarity" tax increase for higher incomes, to cushion the energy price shock for a significant portion of households.

 

Ex-Chancellor Rishi Sunak's support for the Bank of England (BOE) and preparations for spending cuts and power bill management kept GBP/USD buyers upbeat. Sunak's chances of becoming Prime Minister of the United Kingdom are enhanced by his moderate pro-Brexit attitude and his financial expertise, especially in the midst of fears of a recession.

 

In contrast, the US Dollar Index (DXY) opened Wednesday on a higher footing before retreating to 108.50, down 0.15 percent as equity markets reduced recent losses in the absence of exceptionally positive US data. Inconsistency in the most recent Fedspeak and market chatter on whether Fed Chair Powell will emphasize his economic concerns at the Jackson Hole Symposium or refrain from making unduly aggressive remarks added to the dollar index's decline against the six major currencies.

 

The July data for US Durable Goods Orders was 0.0%, which was below the predicted 0.6% and the significantly lowered 2.2% estimate from the previous month. However, Nondefense Capital Goods Orders excluding Aircraft above the 0.3% market consensus to achieve 0.4%, up from 0.9% earlier. In July, Pending Home Sales improved to -1.0% MoM from -4.0% expected and -8.9% before (revised down from -8.9%). Annually, the fall in Pending Home Sales was 19.9%, which was less than the prior annual decline of 20%.

 

US 10-year Treasury rates reached a two-month high of roughly 3.10%, the highest level in a week, while Wall Street benchmarks showed moderate increases, allowing S&P 500 Futures to remain somewhat bullish at around 4,150 as of the most recent update.

 

Future calendars will feature the second edition of the US GDP for the second quarter alongside the US Personal Consumption Expenditure (PCE) for the designated period. For new efforts, Jackson Hole will receive the most attention. Morgan Stanley has indicated in its study that the gloomy GDP outlook continues to weigh on the British pound. We do not predict a big decline in GBP from here, despite the fact that GDP projections are already bleak and GBP sentiment is negative.

 

Buyers need confirmation from June's low of 1.1933 to take control of the GBP/USD pair. GBP/USD bears look to be losing momentum at the multi-month bottom, but buyers need confirmation from June's low of 1.1933 to reclaim control.


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