HFMarkets (hfm.com): New market analysis services.

[HFM]

Date: 9th December 2024.

Stocks Cautious Amid Rate Cuts for Christmas; Geopolitical Unrest.


Investors entered the week with caution as geopolitical unrest, spanning from Syria to South Korea, cast a shadow over the global economic outlook. This cautious tone comes as investors prepare for a week shaped by central bank announcements, a pivotal Chinese policy meeting, and US inflation data.

Asia & European Sessions:

• The global market impact of Syrian President Bashar al-Assad’s overthrow remained uncertain. Assad’s removal has created a power vacuum, further destabilizing an already volatile region. Assad, whose family ruled Syria for five decades, fled to Moscow after rebels toppled his regime. Meanwhile, oil prices showed mixed movement, and US stock futures inched downward.
• South Korea: political tensions escalated as reports emerged that authorities were considering restricting President Yoon Suk Yeol’s international travel. This development followed his brief declaration of martial law during a budget dispute, which he later rescinded.
• Asian shares were largely down on Monday, with South Korea’s index tumbling 2.6% and the Asian equity index dropping 0.3% overall, following a record-breaking performance in US markets last week.
• Chinese markets also weakened after data highlighted sluggish demand recovery in the world’s second-largest economy. The CPI in November decelerated to 0.2%, the lowest since June, while factory deflation extended into a 26th straight month painting a mixed picture of the effects of recent stimulus efforts on the economy.
• This week: A much anticipated ECB meeting headlines this week with another -25 bp cut widely expected. Additionally, the SNB is seen delivering a -25 bp reduction. And the BoC is in easing mode too, with increased odds for another -50 bps, while RBA is likely to hold rates steady as the country’s economy shows signs of cooling. In the US a solid jobs report did not dissuade expectations for a quarter point reduction next week, though the CPI will help solidify outlooks.

Financial Markets Performance:

• Currency markets reflected the geopolitical unease and the resilient US economy, with the USDindex strengthening as a safe-haven asset, at 106.50.
• The Euro and Turkish lira slid, partly influenced by the upheaval in Syria, expectations of further monetary easing by the ECB and the broader risk-off sentiment.
• Oil climbed to $67.60 as traders reacted to Saudi Arabia’s deeper-than-expected cuts to crude prices for Asia and speculated on the potential economic fallout from the collapse of Syria’s Assad regime.
• Gold gapped up this morning, ending a 6-month hiatus and signaling renewed interest in diversifying reserves. Gold rose after China’s central bank added bullion to its reserves for the first time in seven months, and the rapid fall of the Syrian government further destabilized the Middle East. It is currently traded at $2650.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Andria Pichidi
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 17th December 2024.

GBPUSD: Strong UK Data Fuels Expectations of BoE Hawkishness!

• UK salaries increased to 5.2%, up from 4.3% the previous month and significantly higher than analysts’ expectations.
• Analysts expect the Bank of England to keep interest rates unchanged on Thursday. Higher UK salaries to prompt a hawkish BoE.
• The Great British Pound Index trades 0.13% higher this morning as the UK only adds 300 unemployment claims.
• The Australian Dollar loses gains from Monday’s trading session. The AUD and NZD are the day’s worst performing currencies so far.
• Traders continue to expect 0.25% by the Federal Reserve. The USD remains pressured while stocks rise.

GBPUSD - Strong Employment Data for the UK Boosts GBP Demand!
The GBPUSD is trading 0.21% higher as we edge closer to the London open. Traders should note that the price of the GBPUSD rose almost 0.30% as the UK’s employment data was made public. Prior to this the exchange rate was trading 0.10% lower. The upward price movement this week is primarily related to the upcoming Bank of England interest rate decision where investors believe the BoE will vote for a pause.

After the release of the UK’s employment data for November the chances of a pause have increased. The UK’s Unemployment Claimant Count Change saw only 300 more unemployed individuals making claims. This is the lowest Claimant Count Change since June 2023. In addition to this, the UK’s Quarterly Average Salary Index rose to 5.2%, 0.6% higher than the previous month. The announcement will further prompt the BoE to take a more hawkish stance and less adjustments in the upcoming quarter.
The hawkishness of the Bank of England is one of the reasons the GBP has performed well in the past 24 hours. Although, the expected upcoming Federal Reserve 0.25% cut is also supporting the GBPUSD. However, if the Federal Reserve decides to make a shock decision and not cut interest rates, the GBPUSD could quickly decline. Most analysts believe the Federal Reserve will adjust 0.25%, but most have not completely withdrawn the possibility of a pause after the US increase rose to 2.7%.

GBPUSD - Technical Analysis and Upcoming News
On a 2-hour timeframe, the GBPUSD is trading with a slight bullish bias as the price is trading above the 75-Bar EMA and the RSI’s neutral level but below the 100-Bar SMA. In order for the GBPUSD to witness strong bullish signals ideally today’s US Retail Sales data will read lower than expected and the Fed will announce its 0.25% cut. If the Federal Reserve does not cut interest rates, the GBPUSD could correct back down to 1.26075. Otherwise, the Cable could rise to the previous price rate which saw an average price at 1.27464.

The significant economic release for the next 24-hours will be the US Retail Sales this afternoon. Analysts expect Retail Sales for the US to rise 0.6% MoM and the Core Retail Sales 0.4%. Tomorrow morning traders' attention will turn to the UK’s inflation rate. Analysts expect the UK inflation rate to increase from 2.3% to 2.6%, the highest since April 2024 but not significantly higher than the BoE’s target of 2.00%.

Gold and the US Dollar
Gold's price has also significantly declined over the past 2 days which may give the interpretation of a hawkish Fed. Individuals trading the GBPUSD are also closely monitoring the price of Gold and the US Dollar Index for clarity and confirmation of their signals.
However, the market is undergoing a local correction: according to the US Commodity Futures Trading Commission (CFTC) report, net speculative positions in gold rose significantly last week, reaching 275.6 thousand compared to 259.7 thousand the previous week. Investors are actively increasing long positions, anticipating further price growth. Therefore, order flow analysts in Gold are also potentially indicating a 0.25% cut in interest rates.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 18th December 2024.

UK Inflation Climbs: All Eyes on the Fed’s Next Move!

• US Retail Sales increase by 0.7% in November surpassing expectations of +0.6%.
• The US Dollar Index rose in value on Tuesday after starting the day with a bearish price gap. This week the US Dollar Index trades sideways as traders await the Fed’s rate decision.
• The Federal Reserve will confirm their rate decision this evening with most experts expecting a 0.25% adjustment.
• The UK’s inflation rate increases from 2.3% to 2.6% meeting the market’s previous expectations. The GBP quickly increases in value against all currencies.
• Analysts expect the Bank of England to pause but expect at least 2 monetary policy members to vote for a rate cut.

GBPUSD - Both The Fed and BoE Are Scheduled To Announce Their Interest Rate Decisions!​

The GBPUSD rose up to 0.40% in value on Tuesday before slightly retracing and closing the day with a 0.21% gain. The increase in value is primarily due to the UK’s employment data which shows signs of stability and salary growth. The Bank of England is concerned the growth in salaries will continue to provide support for inflation. As a result, the BoE will likely pause in today’s rate decision.

During this morning's Asian session, the GBP saw a sudden bullish spike after the UK made public its inflation rate. The UK’s inflation rate increased from 2.3% to 2.6% which is an 8 month high. The higher rate of inflation along with high salary growth is likely to prompt the Bank of England to keep the rate unchanged at tomorrow’s meeting and for the upcoming months thereafter.
During this morning's Asian session, the GBP saw a sudden bullish spike after the UK made public its inflation rate. The UK’s inflation rate increased from 2.3% to 2.6% which is an 8 month high. The higher rate of inflation along with high salary growth is likely to prompt the Bank of England to keep the rate unchanged at tomorrow’s meeting and for the upcoming months thereafter.
October's labor market data, which came in positive, continues to improve sentiment towards the Pound and UK. The unemployment rate held steady at 4.3%, employment rose by 173,000 instead of the expected drop of 12,000. Average wages, both with and without bonuses, grew by 5.2%, beating forecasts of 4.6% and 5.0%, respectively.
On Tuesday, the GBP rose in value against the US Dollar, Swiss Franc and the Euro, but fell in value against the JPY. During this morning’s Asian session, the GBP is increasing in value against all currencies except against the Euro. However, traders will monitor if the GBP is able to maintain momentum against the US Dollar.

Bank of England Supporting The GBP!​

As inflation in the UK over the past 3 years rose to a level substantially higher than the US and the Eurozone, the Bank of England is aiming to cut interest rates at a slower pace. The UK’s inflation peak was at 11.1%, the US inflation peak was 2% lower and the EU 0.5% lower. As a result, the GBP is maintaining its value and has been supported by this factor over the past 2 days.
All experts currently believe the Bank of England will keep its base rate at 4.75% and cut rates at a slower pace than the Federal Reserve. However, investors believe that of the 9 members within the Monetary Policy Committee, 2 will vote for a rate cut. If more than 2 vote to cut rates, the Pound may come under short term pressure.

Federal Reserve​

The Federal Reserve is due to make a decision on the Federal Fund Rate. Currently, the market believes the FOMC will vote to adjust rates by 0.25%. The CME FedWatch Tool indicates there is a 95% chance of the Federal Reserve opting to cut to 4.25-4.50% and the slightly lower bond yields also indicate a cut.
However, when taking into consideration the rise in consumer and producer inflation, resilient employment sector and yesterday’s strong retail sales data, the possibility of a pause remains. The US Retail Sales increased by 0.7% in November surpassing expectations of +0.6%. The increase was the strongest in 4 months, however, Core Retail Sales only rose by 0.2%.
One of the main elements which traders will be monitoring is if the Fed will indicate 2 or 3 cuts. Currently, the market is pricing in another 2 rate cuts. If the Chairman, Mr Powell, indicates the central bank could cut up to 3 times, the US Dollar is likely to come under pressure.
Some traders fear that the Fed may suggest a full pause in the easing cycle or a significant slowdown in 2025. This concern has arisen because of inflation and newly elected US President Donald Trump's trade tariff policies on imports. If traders sense this hawkish tone within the Chairman’s Press Conference this evening, the US Dollar could see significant gains. Particularly as this will trigger higher bond yields which are already trading close to 6 month highs.
For further information on the Federal Reserve and Bank of England’s rate decision traders can join HFM’s Live Analysis on YouTube (Today at 12:00 GMT).

GBPUSD - Technical Analysis​

In terms of technical analysis, the GBPUSD maintains its slightly bullish bias as per yesterday’s market analysis article. However, even though the price has risen since yesterday, the GBPUSD has yet to hit the 1.27464 level mentioned earlier. The price movement will depend strongly on the Federal Reserve’s rate decision and the guidance they provide for the upcoming 1-2 quarters.
If the GBPUSD is able to maintain bullish price movement and rise again back up to the day’s high (1.27264), the exchange rate may maintain its buy indications from Moving Averages, RSI and price action.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 19th December 2024.

Federal Reserve Sparks NASDAQ’s Sharpest Selloff of 2024!

The NASDAQ fell more than 3.60% after the Federal Reserve cut interest rates, but gave hawkish comments. The stock market saw its largest decline witnessed in 2024 so far, as investors opted to cash in profits and not risk in the short-medium term. What did Chairman Powell reveal, and how does it impact the NASDAQ?
The NASDAQ Falls To December Lows After Fed Guidance!
The NASDAQ and US stock market in general saw a considerable decline after the press conference of the Federal Reserve. The USA100 ended the day 3.60% lower and saw only 1 of its 100 stocks avoid a decline. Of the most influential stocks the worst performers were Tesla (-8.28%), Broadcom (-6.91%) and Amazon (-4.60%).

When monitoring the broader stock market, similar conditions are seen confirming the investor sentiment is significantly lower and not solely related to the tech industry. The worst performing sectors are the housing and banking sectors. However, investors should also note that the decline was partially due to a build-up of profits over the past months. As a result, investors could easily sell and reduce exposure to cash in profits and lower their risk appetite.
Analysts note that despite the Federal Reserve's hawkish stance, the Chairman provided a positive outlook. He highlighted optimism for the economy and the employment sector. Therefore, many analysts continue to believe that investors will buy the dip, even if it’s not imminent.
A Hawkish Federal Reserve And Powell’s Guidance
Even though traditional economics suggests a rate cut benefits the stock market, the market had already priced in the cut. As a result, the rate cut could no longer influence prices. Investors are now focusing on how the Federal Reserve plans to cut in 2025. This is what triggered the selloff and the decline.
Investors were looking for indications of 3-4 rate cuts by the Federal Reserve in 2025 and for the first cut to be in March. However, analysts advise that the forward guidance by the Chairman, Jerome Powell, clearly indicates 2 rate adjustments. In addition to this, analysts believe the Fed will now cut next in May 2025.
The average expectation now is that the Federal Reserve will cut 0.25% on two occasions in 2025. The Fed also advised that it is too early to know the effect of tariffs and “when the path is uncertain, you go slower”. This added to the hawkish tone of the central bank. However, surveys indicate that 15% of analysts believe the Federal Reserve will be forced into cutting rates at a faster pace.
As a result, the US Dollar Index rose 1.25% and Bond Yields to a 7-month high. For investors, this makes other investment categories more attractive and stocks more expensive for foreign investors. However, the average decline the NASDAQ has seen before investors buy the dip is 13% ($19,320). This will also be a key level for investors if the NASDAQ continues to decline.
NASDAQ - Technical Analysis
Due to the bearish volatility, the price of the NASDAQ is trading below all major Moving Averages and Oscillators on the 2-Hour chart. After retracement the oscillators are no longer indicating an oversold price and continue to point to a bearish bias. Sell indications are likely to strengthen if the price declines below $21,222.60 in the short-term.

Key Takeaways:

• A hawkish Federal Reserve cut interest rates by 0.25% and indicates only 2 rate cuts in 2025!
• The stock market witnesses its worst day of 2024 due to the Fed’s hawkish forward guidance. Economists do not expect a rate cut before May 2025.
• Housing and bank stocks fell more than 4%. Investors are cashing in their gains and not looking to risk while the Fed is unlikely to cut again until May 2025.
• The US Dollar Index rises close to its highest level since November 2022. US Bond Yields also rise to their highest since May 2024.
• The NASDAQ’s average decline in 2024 before investors opt to purchase the dip is 13%.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 20th December 2024.

BOE Sees More Support For Rate Cuts As USD Strengthens!

The US Dollar continues to rise in value after obtaining further support from positive economic and employment data. However, the hawkish Federal Reserve continues to support the currency. On the other hand, the Great British Pound comes under significant strain. Why is the GBPUSD declining?

GBPUSD - Why is the GBPUSD Declining?​

The GBPUSD is witnessing bullish price movement for three primary reasons. The first is the Federal Reserve’s Monetary Policy, the second is the positive US news releases from yesterday and the third is the votes from the Bank of England’s Monetary Policy Committee.

Even though the Bank of England chose to keep interest rates unchanged at 4.75%, the number of votes to cut indicates dovishness in the upcoming months. Previously, traders were expecting the BoE to remain cautious due to inflation rising to 2.6% and positive employment data. In addition to this, the Retail Sales data from earlier this morning only rose 0.2%, lower than expectations adding pressure to GBP.
Investors also should note that the two currencies did not conflict and price action was driven by both an increasing USD and a declining GBP. The US Dollar rose in value against all currencies, except for the Swiss Franc, against which it saw a slight decline. The GBP fell against all currencies, except for the GBPJPY, which ended higher solely due to earlier gains.

US Monetary Policy and Macroeconomics​

The bullish price movement seen within the US Dollar Index continues to partially be due to its hawkish monetary policy. Particularly, indications from Jerome Powell that the Fed will only cut on two occasions and the first cut will take place in May.
However, in addition to this the economic data from yesterday continues to illustrate a resilient and growing economy. This also supports the Fed’s approach to monetary policy and its efforts to push inflation back to the 2% target. The US GDP rose 3.1% over the past quarter beating expectations of 2.8%. The GDP rate of 3.1% is also higher than the first two quarters of 2024 (1.4% & 3.0%). In addition to this, the US Weekly Unemployment Claims fell from 242,000 to 220,000 and existing home sales rose to 4.15 million. Home sales in the latest month rose to an 8-month high.
For this reason, the US Dollar rose in value against most currencies throughout the day. Analysts believe the US Dollar will continue to perform well due to less frequent rate cuts and tariffs. The US Dollar Index trades 1.65% higher this week.

Bank of England Sees Increased Support for Rate Cuts!​

The Bank of England kept interest rates unchanged as per market’s previous expectations. The decision is determined by a committee of nine members and at least five of them must vote for a cut for the central bank to proceed. Analysts anticipated only two members voting for a cut, but three did. This signals a dovish tone and increases the likelihood of earlier rate cuts in 2025.
The three members that voted for a rate cut were Dave Ramsden, Swati Dhingra, and Alan Taylor. Advocates for lower rates believe the current policy is too restrictive and risks pushing inflation well below the 2.0% target in the medium term. Meanwhile, supporters of keeping the current monetary policy argue that it's unclear if rising business costs will increase consumer prices, reduce jobs, or slow wage growth.
However, if markets continue to expect a more dovish Bank of England in 2025, the GBP could come under further pressure. In 2024, the GBP was the best performing currency after the US Dollar and outperformed the Euro, Yen and Swiss Franc. This was due to the Bank of England’s reluctance to adjust rates at a similar pace to other central banks.

GBPUSD - Technical Analysis​

In terms of the price of the exchange, most analysts believe the GBPUSD will continue to decline so long as the Federal Reserve retains their hawkish tone. The exchange rate continues to form lower swing lows and lower highs. The price trades below most moving averages on the 2-hour timeframe and below the neutral level on oscillators. On the 5-minute timeframe, the price moves back towards the 200-bar SMA, but sell signals may materialise if the price falls back below 1.24894.

Key Takeaways:​

• The US Dollar increases in value for a third consecutive day and increases its monthly rise to 2.32%.
• The US Dollar Index was the best performing currency of Thursday’s session, along with the Swiss Franc.
• US Gross Domestic Product rises to 3.1% beating economist’s expectations of 2.8%.
• US Weekly Unemployment Claims read 220,000, 22,000 less than the previous week and lower than expectations.
• The NASDAQ declines further and trades 5.00% lower than the previous lows.
• The GBPUSD ends the day 0.56% lower and falls more than 1% after the Bank of England’s rate decision. Three Members of the BoE vote to cut interest rates.
• The GBP was the worst performing currency of the day along with the Japanese Yen.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 2nd January 2025.

The USD Retraces But Can The AUDUSD Correct To 0.62320?

The AUDUSD trades at a 27-month low as the Australian Dollar struggled to maintain momentum in December and the Dollar has risen since the US elections. However, the Australian Dollar is increasing in value during this morning’s Asian Session due to positive Chinese Manufacturing data. Will the AUDUSD hold its bullish momentum to the mean (0.62340) of the most recent price range?
AUDUSD - The Australian Dollar continues to struggle for sustained momentum!
The primary reason for the increase in the Australian Dollar is the positive Manufacturing Data from China. The performance of China is known to be closely linked to the performance of Asian currencies such as the JPY but also the AUD and NZD. The Australian Dollar is the best performing currency of the day and is increasing in value against all currencies except against the JPY where it moves sideways.

The US Dollar on the other hand is performing relatively poorly, and is retracing after yesterday’s gains. However, traders should note that the bearish price movement is relatively weak compared to the recent Dollar trend. The US Dollar Index rose in value for 4 consecutive weeks before retracing this morning. Therefore traders need to be cautious that the Dollar potentially may regain momentum. However, if the Dollar continues to decline a potential target may be seen at the average price of the previous range. The previous range formed between the 19th to the 30th December with an average price of 0.62320.
The US Dollar Index reached its highest level since November 6th, 2022
Experts anticipate that Trump will reinforce protectionist policies, potentially reigniting active trade wars as he has done in the past. He previously announced plans to raise import tariffs on goods from China, Mexico, and Canada, while excluding European imports. Shifts in foreign trade are also expected to influence the US Federal Reserve's rhetoric. The December median interest rate forecasts indicate only two 25 basis point cuts in 2025, with any easing of policy not expected to begin before June.
The hawkish Federal Reserve is able to support the US Dollar in the longer term and potentially tariffs may trigger a lower risk sentiment. The lower risk sentiment also may trigger a higher demand for the US Dollar. However, this would depend on the upcoming Trump policies.
In the short-term, the US Dollar will also be influenced by this afternoon’s US Weekly Unemployment Claims release and the Final Manufacturing PMI. However, higher volatility is not likely to return until tomorrow’s trading sessions.
AUDUSD - Technical Analysis
In terms of technical analysis, the price of the AUDUSD is trading within a retracement of the day’s impulse wave. However, the price continues to remain at a lower high and lower low. In addition to this, the AUDUSD is also trading below the main Moving Averages and below the neutral level on most oscillators. Therefore, if bullish momentum is regained, traders potentially may focus on a correction to 0.62320 at first. If the price rises above 0.62142, the price will see stronger signals indicating a correction to this level.

Conclusion:

• The US Dollar Index rose to its highest price since November 6th 2022 before the markets closed for New Years Day.
• The Australian Dollar is the top-performing currency in this morning's Asian session, recovering from its decline in December.
• Positive Chinese Manufacturing data boosts Asian currencies including the AUD, NZD
• If the price rises above 0.62142, it will signal a stronger correction to this level.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 3rd January 2025.

NASDAQ Falls as Tesla Misses Delivery Targets: What’s Next for January?

The NASDAQ fell in value for a fifth consecutive day, declining during the US trading session. The index recorded gains during the morning session, but these were erased as US traders shorted the NASDAQ, resulting in a 0.17% decline by the end of the day. The NASDAQ trades at a 5% discount and found support at the previous support level. What can traders expect from the NASDAQ in January?

NASDAQ - Why did the NASDAQ Decline For A Fifth Day?
The main reason for the decline on Monday was Tesla stocks which fell more than 6.00% due to the company failing to meet delivery expectations. Investors had projected 510,000 vehicle deliveries for Tesla in the fourth quarter of 2024, with analysts emphasizing the importance of achieving at least 500,000. However, Tesla's final delivery count reached 495,570, falling short of both targets. Consequently, the stock dropped over 6.00%, adding pressure to the NASDAQ, where Tesla holds a 3.79% weight. Tesla is the NASDAQ’s 7th most influential stock.

In addition to this, investors also note that the weakness of the NASDAQ was also partially due to the lack of bullish momentum amongst stock which did increase in value. Of the most influential stocks, only 8 stocks rose in value with an average increase of 0.79%. The average decline was 1.15%.

The decline is also partially due to the rise in the US Dollar making the US stock market less attractive to foreign investors. As a result, the stock market can potentially come under further pressure taking into account the bullish Dollar, hawkish Federal Reserve and upcoming tariffs across multiple industries. According to the CME FedWatch Tool, there is a 50% chance that the Federal Reserve will not adjust interest rates until May 2025.

Earnings Season
Given a hawkish Federal Reserve, a strong Dollar, and the potential for upcoming trade wars, a 5% dip from recent highs might appear modest for the NASDAQ. Traders should remember that during the last trade war triggered by Trump, the NASDAQ experienced a sharper decline of 16-17%. However, company earnings could be a lifeline for the NASDAQ if quarterly earnings reports read higher than previous expectations and guidance.

Earnings season will officially start on the 15th of January, however, for the technology sectors, earnings will gain momentum from the 21st onwards. On the 21st Netflix will release their quarterly earnings report for the 4th quarter, and on the 22nd Tesla. The two companies hold a weight of 6.21% between them.

NASDAQ - Technical Analysis
On Monday, the NASDAQ rose during the Asian and European Session. Buy signals were also backed by the VIX index and Bond Yields which were trading lower. However, the NASDAQ was and still is trading below the 75-bar EMA and 100-bar SMA. In addition to this, oscillators were also priced below the neutral level adding to the bearish bias. The bearish bias continues even as the NASDAQ increases during today’s Asian session. Traders should note that the price action can quickly change as the US session approaches.

Wave analysis currently continues to show lower lows and lower highs. The current retracement measures 1.29% and retracements over the past days have on average measured 1.43%. The only concern for investors is the support level at $20,794.47 and if this afternoon’s ISM Manufacturing PMI may potentially trigger a different type of volatility. If not, indicators continue to point to a potential downward bias in the short-term. Sell signals are likely to intensify if the price falls below $20,967.30 and $20,902.50.

Summary:

• The NASDAQ declines for a fifth consecutive day due to a bullish Dollar, hawkish Fed and Tesla’s miss.
• Tesla misses its 4th quarter deliveries expectations triggering a 6% decline. All US Indices decline after the opening of the US trading session.
• Tesla's final delivery count reached 495,570, falling short of all targets.
• Earnings season kicks off on January 15, with tech sector momentum starting January 21, led by Netflix and Tesla.
• NASDAQ’s bullish price movement forms a retracement similar to recent days. Traders focus on the US session and prices lower than $20,967.30.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 6th January 2025.

The NASDAQ Rebounds As Investors Get Ready For Earnings Season!

The NASDAQ jumped more than 1.65% on Friday after 5 days of consecutive declines. The decline was primarily due to investors opting to take advantage of the discounted price ahead of this week’s earnings season. Earnings season is due to start this Friday with the banking sector. However, is there still downside risk to the NASDAQ’s bullish trend?

NASDAQ - Bullish Signals With The Risk of Corrections!​

Due to the NASDAQ’s considerable rise on Friday, the index is obtaining bullish signals from technical indicators and price action, although other factors continue to signal risk of a potential further downslide. With inflation on the rise again and economic data beating expectations, the hawkishness of the Federal Reserve is likely to remain.
On Thursday and Friday, the US Final Manufacturing PMI, ISM PMI and ISM Manufacturing Prices all rose above expectations. The ISM Manufacturing PMI rose from 48.4 to 49.3 and the Manufacturing Prices Index from 50.3 to 52.5. Friday’s strong economic data did trigger a 40-minute decline, but the bullish trend continued thereafter. Nonetheless, the positive economic data adds to the Federal Reserve’s current bullish tone. A hawkish Fed in the long-term can dim upward price movement or even trigger a larger correction.
In addition to this, President-elect Trump will take office on January 20th and most political experts predict his administration will pursue tariffs on imports. Previously, this triggered a lower sentiment towards the stock market and a strong US Dollar. The US Dollar over the past 2 months has appreciated by almost 5.00%, but stocks have yet to experience a significant, lasting decline. A strong factor for the performance in January and February will be earnings season.
Traders will be monitoring whether institutions increase their exposure to the NASDAQ as earnings season approaches. However, the market’s decision will also depend on the upcoming employment data. The US is set to release its JOLTS Job Vacancies tomorrow, ADP Employment Change on Wednesday, NFP Employment Change and Unemployment Rate on Friday. Analysts expect the US Unemployment Rate to remain at 4.2%. If the employment data reads higher than expectations, investors may adopt a more hawkish stance on monetary policy. As a result, the positive data could have a negative short-term effect on the NASDAQ.
European stocks trade higher as the European Market opens, while Asian stocks decline. However, both the VIX Index and US bond Yields trade higher. If the VIX and Bond Yields continue to rise, traders may become cautious of further speculating the impulse wave in the short term.

NASDAQ - Earnings Season​

As mentioned above, earnings season will start on NFP Friday (Friday 10th), but none of the NASDAQ components will be included. Nonetheless, the quarterly earnings reports on Friday will provide either a stronger or weaker sentiment towards the US stock market and therefore will have a ripple effect on the technology sector.
The first NASDAQ companies which analysts will be following are Netflix and Tesla. Analysts expect revenue for Netflix to increase above $10 billion, but for their earnings per share to fall from $5.40 to $4.22. However, for Tesla, analysts expect both revenue and earnings per share to increase, despite the company failing to meet its delivery targets. Over the past 12 months, Tesla has risen by 70% and Netflix by 82%.

NASDAQ - Technical Analysis​

The price of the NASDAQ is trading above the 75-bar EMA and attempting to cross above the 100-bar SMA. On the 2-hour chart, the index is also trading in the buy zone of most oscillators. The NASDAQ also starts this week with a bullish price gap measuring 0.23%. Currently, the price movement indicates investors are increasing exposure as we approach the start of earnings season. However, this will also depend on the employment data throughout the week.

Key Takeaways:​

• Price movement indicates investors are increasing their exposure to the NASDAQ as earnings season approaches.
• Key risks remain if employment data beat expectations, which could likely trigger a prolonged hawkish stance from the Federal Reserve.
• The performance of the stock market will also depend on the potential for upcoming trade wars. Donald Trump is set to take office on January 20th.
• The price of the NASDAQ is trading above the 75-bar EMA and attempting to cross above the 100-bar SMA. Today’s trading starts with a bullish price gap.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 7th January 2025.

European Stocks Dip, Yen Hits Lows, Bitcoin Surges Over $102K Amid Market Shifts.

Asia & European Sessions:

• European stocks are set to open lower, with Euro Stoxx 50 futures down 0.5%, reflecting caution ahead of key economic releases, including eurozone inflation and US job openings data.
• US futures also edged lower, contrasting with modest gains in Asian markets driven by strength in chip-related stocks. The surge in semiconductor shares followed Nvidia CEO Jensen Huang's announcement of new products, reigniting optimism around AI demand.
• Tencent shares plunged by as much as 8%, while battery maker Contemporary Amperex Technology dropped over 6% after being labeled a military-linked entity by the Pentagon.
• Market sentiment remains clouded by geopolitical concerns. Traders are digesting rising trade tensions after Donald Trump refuted reports suggesting he would ease tariffs if he returns to the White House. Washington's decision to blacklist several Chinese companies, including tech giant Tencent Holdings, has further strained U.S.-China relations, adding pressure on China’s already slowing economy.
• Japanese Finance Minister Katsunobu Kato issued a warning about "excessive moves" in the yen, suggesting potential intervention to stabilize the currency. The Yen slumped to its weakest level since July, underperforming all major currencies, as Japanese retail investor outflows and the Tokyo benchmark fixing drove the decline. Meanwhile, the selling through the Nippon Individual Savings Account (NISA) and trend-following dollar buying could be a key factors behind the Yen’s drop.
• Justin Trudeau has announced he will resign as Canada's prime minister and as leader of the Liberal Party of Canada.

Financial Markets Performance:

• The US Dollar dip to 107.85 from 109.60 highs, after Trump’s denial.
• The EURUSD rebounded to 1.0413, the GBPUSD rallied to 1.2550.
• The USDJPY fell to 158.42 against the dollar before paring losses to 157.73 by mid-afternoon in Tokyo. The Yen’s performance could be further impacted by US data, particularly Friday’s jobs report. A stronger-than-expected figure may push back expectations for US rate cuts, potentially driving the USDJPY pair to 159.
• Oil prices steadied after dipping for the first time in 6 sessions, with technical indicators suggesting the recent rally may have been overextended.
• Bitcoin surpassed the $102,600 mark, signaling growing confidence in digital assets. A CoinShares report highlighted over $500 million in Bitcoin ETF investments in the year’s first three trading days. MicroStrategy added to the bullish momentum with its ninth consecutive Bitcoin purchase, acquiring another $100 million. The company now holds nearly $45 billion in Bitcoin, and its stock has surged alongside the crypto's rebound — potentially paving the way for further share issuances to fund additional Bitcoin buys. The macroeconomic backdrop remains a key driver for crypto markets. Rumors of a rollback on Trump-era tariffs have caused the USD to weaken, adding volatility to global markets. Bitcoin’s recent price moves reflect this, with traders watching the dollar index closely for cues.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Michalis Efthymiou
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 8th January 2025.

Global Market Update: Inflation Concerns Weigh on Stocks, Bitcoin Drops Below $100K, Gold Holds Steady.

Asia & European Sessions:

• European stocks saw an extended downturn in Asia and the US, driven by mounting inflation worries that triggered a selloff in Treasury markets.
• Fed funds futures took a hit after the stronger than expected JOLTS report, and the ISM services data that showed a pick up in activity, a solid labor market, and an acceleration in prices paid, all supporting a more cautious rate cut stance. Indeed, the implied January contract now shows just -1.7 bps in cuts this month. Earlier bets on a reduction by March have been abandoned, with rate cuts now anticipated in the latter half of the year.
• German manufacturing orders plunged -5.4% m/m in November, after already falling -1.5% m/m in the previous month. The correction was much sharper than anticipated and left the annual rate back in negative territory. There is some life in the manufacturing sector yet, even though the volatile headline numbers and negative survey readings flag ongoing weakness across the sector.
• Asian stocks saw significant losses as the MSCI index of regional equities recorded its largest single-day decline in over two weeks, erasing gains made on Tuesday. China’s primary stock index briefly dipped to its lowest point since September, reflecting investor anxiety over a potential increase in US tariffs.
• Investor sentiment across Asia remains dampened by ongoing economic uncertainty. In China, concerns about a deflationary spiral are growing, even as yield spreads in credit markets reach their lowest levels since the global financial crisis. This has challenged investor appetite amid a wave of debt issuances worldwide.
• The stronger than expected ISM services and JOLTS data weighed on Treasuries as they further eroded Fed rate cut risks, and the subsequent climb in yields and more hawkish Fed outlook hit stocks.
• The major indexes finished measurably weaker on the day with the NASDAQ dropping -1.89%, while the S&P 500 was off -1.11% and the Dow slipped -0.42%.
• Nvidia opened with a better than 2% gain to an intraday record peak of $153 after bullish news from the CES trade show, but the stock reversed in the afternoon and plunged -6% to $140.14 at the close

Financial Markets Performance:

• The US Dollar rallied to 108.65 with next immediate resistance at 108.85
• The EURUSD dipped further to 1.0325, while the GBPUSD is lower to 1.2445.
• The USDJPY is at 158.23 as the Yen remains under pressure.
• Gold is steady at $2650. Haven flows and central bank purchases helped to push gold to record highs in 2024 and central bank buying is helping to keep the price at high levels. China's central bank resumed gold purchases in November, and data released today, show that purchases continued in December.
• Oil rose for a 2nd consecutive day to $75 after industry reports indicated another drawdown in US inventories.
• Bitcoin fell more than 5%, slipping to $96,200 after the $100,000 milestone. The drop came in response to positive US economic data, which pointed to a resilient economy and reduced the likelihood of further rate cuts by the Fed.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Andria Pichidi
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 9th January 2025.

FOMC Minutes Signal Slower Rate Cuts, UK Borrowing Costs Surge, & Global Market Update.

Asia & European Sessions:

• The FOMC minutes showed that the Committee expected to be slowing the pace of rate cuts after its decision to trim rates another -25 bps. Following an unexpected emergency rate cut in September, despite there being no immediate crisis, the Fed has since shifted towards a more measured approach, indicating that a slower pace of rate reductions would be “appropriate” by December. The core strategy remains consistent: to bring inflation down. While inflation-related discussions did touch on concerns over US President-elect Trump’s trade taxes and deportation plans, these issues were not the main focus of the inflation debate.
• The Greenback was firmer overnight on reports Trump would declare a state of emergency to get his tariff plans through. It dipped on the ADP report but bounced on the tight jobless claims data. The index had firmed yesterday after Trump denied reports he would soften his tariff plans, and after the strength in the JOLTS numbers Tuesday. Solid 30-year auction results also supported in the afternoon.
• China's inflation data for December showed largely stable consumer prices, with food prices stabilizing (a notable factor given food’s significant weight in the consumer basket) and only modest increases in non-food prices, despite efforts to boost domestic consumption. Producer prices, however, continue to struggle with deflation.
• In the UK, the BRC shop price index fell more sharply than anticipated, with a significant drop in non-food item prices, likely influenced by Black Friday discounts. When combined with sales data, this suggests that UK consumers increased their real-term spending in the fourth quarter, driven by lower prices and promotions.
• Gilts remain under pressure in early trade, with the UK 10-year rate up 2.1 bp at 4.81%. UK 10-year borrowing costs surged to their highest point since the global financial crisis, while the Pound plummeted, as a deepening bond sell-off raised concerns over the Labour government’s ability to meet its self-imposed budget targets. So far in 2025, borrowing costs in the UK have increased at a faster pace than in other major economies, driven by investor fears over the government’s large borrowing requirements and the mounting risk of stagflation.
• Eurozone industrial production rose 1.5% m/m in November. Germany's jobless rate still is very low by European standards, but the overall picture remains pretty gloomy, with political uncertainty and the threat of Trump tariffs not helping.

Financial Markets Performance:

• European stock markets are mixed, with the FTSE100 outperforming and up 0.4%, while the DAX is down -0.2%, after a largely weaker close across Asia. Hang Seng and CSI 300 lost -0.3%, after Chinese inflation numbers.
• The USDIndex is up 0.2% and at 109.17, while Sterling continues to sell off. GBPUSD slumped below 1.2300 on budget angst and as the 10-year Gilt spiked.
• EURUSD slumped to 1.0273 after weak Eurozone data.
• USOIL is slightly down on the day and at USD 73.24 per barrel.
• Gold is unchanged at USD 2662.44 per ounce.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Andria Pichidi
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

[HFM]

Date: 10th January 2025.th

Why is the British Pound Declining?

The Great British Pound is the worst performing currency of 2025 so far after witnessing sharp declines for 3 consecutive days. The decline is largely being triggered by the bond selloff, lack of business confidence due to the UK Autumn budget and political uncertainty. Will the trend continue?

The GBP Index Declines 2% In 2025! Why Is The Pound Dropping?​

The Great British Pound is the worst performing currency of the week and of the year so far. Below you can see a table showing the Pound’s performance in January 2025 so far.
GBPUSD -2.25%
EURGBP +1.69%
GBPJPY -1.44%
GBPCHF -1.42%
GBPAUD -1.91%
GBPCAD -2.00%
A key reason for the GBP’s decline is the latest labor budget, which is driving a selloff in UK bonds. Bonds across the global market are declining, including in the US and Germany. However, the global decline is mainly due to monetary policy. The decline in UK bond yields is due to concerns regarding the UK budget, higher costs for business and investor confidence. As a result, investors are selling UK bonds, but also reducing their exposure to the Pound.
Bond Selloff and Rising Yields: Higher bond yields can sometimes strengthen a currency by attracting increased investor demand. However, this effect is unlikely when rising yields result from a bond selloff driven by declining investor confidence.
The UK 30-Year Bond Yields are at their highest level since 1998 and the 10-Year Bond Yields are up to the highest level since the banking crisis of 2008. Investors’ concerns are that the higher costs for business will be passed onto consumers, triggering higher stickier inflation. As a result, the Bank of England will struggle to reduce the cost of borrowing in 2025 and foreign investors will become more cautious of operations in the UK.
The short-term impact is that the UK Chancellor may struggle to meet her fiscal rules. Her budget margin of £9.9bn to avoid overshooting borrowing has likely shrunk to about £1 billion due to market shifts, even before the OBR updates its forecasts. This uncertainty may force the Treasury to cut future spending plans, but the full picture won’t emerge until the OBR's March forecast. According to reports, the UK Chancellor cannot risk higher increases in taxes and will be forced to cut public spending.

The GBPUSD Falls To A 60-Week Low!​

The GBP is struggling against all currencies, but the sharpest decline can be seen against the USD. The GBP’s decline is partially due to the incoming president, Donald Trump, who is expected to introduce Dollar-supporting measures, but also potentially impose tariffs on the UK.

The new White House administration is likely to impose new tariffs on imports from China, Canada, and Mexico. This is likely to potentially disrupt supply chains and prompt the Federal Reserve to adopt tighter monetary policy, thereby strengthening the national currency. Some experts believe the UK will face tariffs or be pressured to adopt more pro-American economic policies. This is also something the EU will likely experience. In addition to this, reports suggest that the UK Prime Minister, Keir Starmer, and Trump supporters are not on good terms, nor agree on much including on Geo-politics.
Therefore, the decline is also related to concerns the UK may be put into a difficult position by the new US administration. According to analysts, Dollar strength is likely to continue throughout the year due to the new administration’s measures, but also due to a hawkish Federal Reserve. In the latest FOMC meeting minutes, the committee stated it expects interest rates to decline at a slower pace. The Federal Reserve is likely to only cut 0.50% in 2025 and may not cut until May or June.

Liz Truss 2022 Or James Callaghan 1976?​

Is this the first Pound crisis? The GBP has experienced many "sterling crises” in the past. For example, Black Wednesday from 1992 and after Brexit in 2016. However, there have been similar crises in the past which are very similar to the current situation. For example, the Liz Truss Budget from 2022 which saw the GBP decline more than 23%. During the Sterling Crisis of 1976 the GBPUSD fell from 2.0231 to 1.5669.
Both sterling crises were due to the budget, inflation and rising bond yields. Today’s issues for the GBP and UK are very similar, however, the performance of the GBP will depend on if the new SI contributions triggers lower economic activity, inflation and if the Federal Reserve indeed avoids cutting interest rates in the near future. If inflation rises it will dampen consumer demand and the Bank of England will be forced to pause any rate adjustments. As a result, the economy may contract or stall further pressuring the GBP.
However, this cannot yet be certain. KPMG experts anticipate accelerated economic growth this year, supported by monetary policy and increased government spending. They project GDP to rise to 1.7%, more than doubling last year’s 0.8%. This growth, according to their estimates, will be driven by a recovery in consumer spending, expected to increase by 1.8% compared to 1.0% last year. In addition to this, if the Federal Reserve unexpectedly opts for more frequent rate cuts, the GBP and EUR are likely to benefit.
When monitoring the price movement and patterns which can be seen in the exchange rate, the decline looks similar to the price movement seen in 2022, during the Truss reign. The price has now fallen below the support level from April 2024. The next support levels can be seen at 1.20391 and 1.17992. Technical analysis for the GBP can also be viewed in HFM’s latest Live Trading Session.

Key Takeaways:​

• The Great British Pound is the worst performing currency of the year so far, having declined by more than 2.00%.
• A key reason for the GBP’s decline is the latest labor budget, which is driving a selloff in UK bonds.
• UK 30-year bond yields are at their highest since 1998, while 10-year yields have reached levels last seen during the 2008 banking crisis.
• Investors reduce exposure to the GBP as the US edges closer to a new president and pro-Dollar supportive measures.
• The UK labour government will not reconsider higher taxes but may be forced to reduce public spending.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Click HERE to access the full HFM Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

Click HERE to READ more Market news.

Andria Pichidi
HFMarkets

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.