Fundamental analysis GBPUSD, EURUSD, NZDUSD, AUDUSD, USDCAD, XAUUSD, Brent, WTI for 31.01.2022
The current week is full of a lot of important macroeconomic events. The Eurozone GDP data has already been published and German inflation data is expected later on. Also noteworthy is the release on the American labor market, meetings of Australian and British regulators as well as OPEC+ meeting. Thus, Investizo expects several surges of volatility during the week.
The U.S. dollar strengthened considerably against major currencies in the second half of the week following the Fed meeting. The American regulator will continue to act aggressively, despite the pandemic risks, falling stock markets, and a difficult geopolitical situation in eastern Europe. Currently, the futures market is estimating the possibility of five rounds of key rate tightening in 2022 at 67%. At the beginning of the fourth quarter of last year, analysts allowed no more than three acts of monetary restriction. The Fed is doing everything to take control of rising inflation, but it should be remembered that such an aggressive tightening of the rate will lead to a slowdown of the U.S. economy. However, the U.S. currency will keep its upside potential, as some important factors are still not accounted for in the USD quotes. In particular, Bank of America forecasts up to seven rounds of monetary tightening in 2022. Also, Rafael Bostic, a Fed official said that the central bank may raise the rate 50 basis points in March.
EUR/USD trades within the correction of the downtrend. Eurozone GDP data showed a year-on-year increase but was 0.1% lower than forecast. The monetary policy gap between the ECB and the Fed lowered the pair to its lowest level since May 2020. Under current conditions, the trading instrument will continue to decline in February.
GBP/USD has held above the strong psychological level of 1.3400 and is recovering today. The Bank of England meeting will be held on Thursday. The regulator is expected to raise the rate by 25 basis points which will support a moderate recovery of the pair. In addition, the central bank is likely to reiterate its hawkish monetary policy plans for the current year.
Pacific Rim currencies are recovering from last week's losses. However, the "bearish" trend of NZD/USD remains, while AUD/USD may go up on the results of the meeting of the Australian central bank. Market participants expect the RBA to get rid of the quantitative easing program and abandon its intention not to raise the rate until 2023. USD/CAD is trading in a limited price range today. The USD rally is limited by the possibility of a weak labor market release. In addition, the Canadian dollar gets support from high oil prices. Canadian GDP is due out tomorrow and that could be a driver for the pair in the short term.
Oil is holding its ground ahead of OPEC+ meeting. In addition, the tense geopolitical situation in the Middle East and Eastern Europe is supporting the growth of Brent and WTI. It is also worth noting the current supply shortage in the oil market.
XAU/USD trades below strong psychological level 1800.00. Unlike high-risk assets, which are recovering on expectations of weak U.S. employment data, gold is less interesting to short-term speculators, who actively traded the metal last week.