The financial market’s movements have demonstrated a relatively stable trend at the outset of European trading on Wednesday (February 12, 2024), indicating that investors are awaiting the inflation data release (Consumer Price Index/CPI) from the United States later tonight.
This data could incite significant market fluctuations, especially concerning the likelihood of the Federal Reserve lowering interest rates.
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Below are the details from Trading Central:
- U.S. CPI (year-on-year/January) at 20:30 WIB; forecast 2.9% vs previous 2.9%
- Core U.S. CPI (year-on-year/January) at 20:30 WIB; forecast 3.1% vs previous 3.2%
GOLD
Gold prices (XAUUSD) experienced a decline at the beginning of European trading, reaching a daily low of $2,883.50 per troy ounce. Compared to Tuesday’s closing, Gold fell by $13.59, equivalent to 135.9 pips.
The decrease in Gold prices was attributed to profit-taking activities, especially as Gold has been on an upward trajectory since the start of the year, frequently setting new all-time highs. The latest record was noted at $2,942 per troy ounce achieved yesterday. In comparison to the 2024 trading closure up to this record high, Gold has surged over $318 or 3,180 pips.
With uncertainties about the future global economic conditions, particularly due to trade war risks, Gold’s demand as a safe haven has been a driving force for its price increase. This suggests that Gold currently enjoys a positive sentiment that could intensify if the U.S. CPI data released tonight comes in lower than the forecast. Consequently, the chances for the Federal Reserve to lower interest rates would widen.
OIL
Oil prices (CLS10) declined during early European trading, touching a daily low of $72.39 per barrel. When compared to Tuesday’s close, Oil dropped by $0.78.
The decrease in Oil, following two consecutive days of increase, indicates a tug-of-war sentiment. The potential reduction in supply from Iran and Russia adds a positive sentiment, yet the trade war risks cast a negative shadow.
As a result, Oil remains volatile and may face pressure during the evening trading session.
EURUSD
EURUSD managed to hold onto its gains as the European trading session began, moving close to its daily peak of 1.03799. EURUSD rose in response to Federal Reserve Chairman Jerome Powell’s testimony, which suggested a patient approach to rate cuts.
This statement aligns with market expectations and does not indicate that the Fed is increasingly worried about inflation rising due to Trump’s import tariff policies that would necessitate keeping interest rates higher for longer.
Thus, if the U.S. inflation data released tonight is lower than the forecast, EURUSD may receive additional positive sentiment.
GBPUSD
GBPUSD fluctuated within the range of 1.24346 – 1.24654 as European trading commenced. Mirroring EURUSD, this currency pair also benefits from Powell’s statements. If the actual U.S. inflation figures come in lower than the forecast, GBPUSD could also gain positive sentiment.
USDJPY
USDJPY trimmed its earlier gains after surging 1.424 points (142.4 pips) to 153.882. This sharp rise followed comments from Bank of Japan (BoJ) Governor Kazuo Ueda, who offered no clear guidance on when interest rates might be raised again. The potential for a significant interest rate differential between the Fed and BoJ may persist for a considerable time.
However, if the actual U.S. inflation data released tonight is lower than the forecast, USDJPY might see a correction.
Nasdaq
Market participants waiting for the U.S. CPI data have kept the Nasdaq trading within a narrow range of 21,735 – 21,830 as the European session began.
Volatility could rise sharply tonight following the data release, and if it comes in lower than the forecast, the Nasdaq may benefit from positive sentiment. This is because a larger prospect for the Fed to cut interest rates will have favorable implications for the stock index.
