Daily Analysis Report 03 Feb '2022

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EnclaveFX
Feb 03, 2022
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EUR/USD

During the Asian session, the euro fell slightly versus the dollar, retreating after a three-day run that saw the single currency hit fresh local highs on January 25. The instrument is probing 1.1300 for a breakout once more as it waits for new drivers to hit the market. Today, investors will be focused on the European Central Bank’s (ECB) interest rate decision. The regulator is not likely to adjust the monetary policy vector; nevertheless, it may highlight the possibility of tightening its criteria in the future. Given the euro area’s record 5.1 percent inflation rate, updated estimates and remarks from officials will be highly relevant. In addition, Markit Services PMI data will be released in the eurozone during the day. Analysts do not expect the indicator’s behavior to change.

GBP/USD

During the morning session, the British pound is trading in a downtrend versus the US dollar, retreating from the local highs of January 21, which were updated the day before. Traders are scrambling to lock in profits before the Bank of England’s interest rate decision is published today. According to current projections, the British regulator will likely hike the rate by 25 basis points to 0.5 percent, and the decision will be made practically unanimously. The quantitative easing (QE) program’s volume is expected to remain unchanged at 895 billion pounds. Due to decisive efforts by the government, which abandoned the practice of severe restrictions against the backdrop of the coronavirus epidemic, the UK economy was displaying a fairly active recovery and did not see a noteworthy decline in Q4 2021. Furthermore, the Bank of England is already proactive, but the US Federal Reserve is only planning a likely rate hike in March. At the same time, the British regulator’s chances of tightening monetary policy are improving.

AUD/USD

During the Asian session, the Australian dollar fell slightly against the US dollar, correcting following a significant rise since the beginning of the week, which saw the instrument reach fresh local highs on January 26. Trading investors are waiting for the conclusions of today’s meetings of the European Central Bank (ECB) and the Bank of England before opening new positions on the instrument. In addition, the final report on the job market for January will be released at the end of the week in the United States, and it is expected to be worse than average analyst projections. The instrument receives minimal support from today’s Australian macroeconomic statistics. After a 2.6 percent increase in November, building permits granted in December jumped by 8.2 percent. Analysts had predicted a 1.0 percent drop. The Business Confidence Index of the National Australia Bank climbed substantially from -2 to 18 points in Q4 2021, well ahead of market expectations of -10 points.

USD/JPY

In Asian trade, the US dollar exhibits corrective growth versus the Japanese yen, recovering from the robust “bearish” surge that began after last week. The dollar is once again challenging the level of 114.50 in search of a breakout; nevertheless, the macroeconomic backdrop in the United States remains uncertain. After gaining 776K in December, ADP Employment Change dipped dramatically by 301K the day prior. Analysts predicted a 207K increase in the number of people employed. The high incidence of coronavirus in the country is likely to blame for such a rapid drop in the indicator. Even though there are no new quarantine laws, many employees are forced to take sick leave and isolate themselves. Today, investors anticipate releasing a set of macroeconomic indicators from the ISM on company activity in the US services sector. During the day, the dynamics of Initial and Continuing Jobless Claims will be released.

XAU/USD

Gold prices are holding steady near 1800.00, awaiting the release of critical macroeconomic reports. The minutes of the European Central Bank (ECB) and the Bank of England’s interest rate meetings will be released today. The ECB is not expected to change its monetary policy vector at this time, but the Bank of England is projected to hike interest rates by 25 basis points. In the United States, data on the dynamics of Initial and Continuing Jobless Claims will be revealed today, ahead of the final labor market report for January, issued on Friday. According to current projections, the unemployment rate will remain at 3.9 percent, with nonfarm payrolls increasing by only 150K. Given ADP’s poor Employment Change report the day before, fundamental dynamics are likely to be worse than market expectations, although this is unlikely to impact the US Federal Reserve’s policies significantly.