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The U.S. dollar suddenly becomes weak, and the pound takes the opportunity to counterattack? The outcome of the battle will depend on next week’s non-farm payrolls.
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Hello everyone, today XM Forex will bring you "[XM Group]: The U.S. dollar is suddenly "soft", and the pound takes the opportunity to counterattack? The outcome will depend on next week's non-farm payrolls." Hope this helps you! The original content is as follows:
During the European session on Friday, February 6, the pound against the US dollar made a technical recovery after experiencing a sharp decline the previous day, with the latest trading around 1.3580. The day before, the pound fell 0.8% against the US dollar in a single day, once hitting a two-week low. The main inducement came from the Bank of England releasing a more easing signal than expected. Although the interest rate remained unchanged at 3.75%, the decision-making vote was 5 to 4, with only a narrow majority passing the suspension of interest rate increases, which was far lower than the market's original expectation of 7 members supporting no action. The disagreement exposed clear differences among policymakers on the economic outlook and inflation trends, fueling speculation that interest rates would be cut in the short term.
In a statement, the Bank of England reiterated that interest rates are on a "gradual downward trajectory" and suggested that inflation may fall back to the 2% target earlier than expected in November last year. Although this kind of wording did not clearly announce a timetable for interest rate cuts, it significantly strengthened the market's association with the approaching easing cycle. Governor Bailey also did not confirm whether 3.25% is the final interest rate level. He only said that the interest rate neither significantly suppresses nor significantly stimulates the economy, further blurring the future path. Due to the lack of clear guidance, investors quickly adjusted their pricing models and significantly increased the probability of near-term interest rate cuts, resulting in significant pressure on the pound.
Key speeches www.xmtraders.compete with data, and market sentiment is highly sensitive
On Friday, the market's focus turns to the public speech of the Bank of England's chief economist Peel, who will attend a briefing at 20:00. As one of the five members who voted in favor of keeping interest rates unchanged on Thursday, his statement is seen as an important window into the central bank's policy preferences. The market is generally concerned about whether it will emphasize the sustainability of the fall in inflation, or whether it will emphasize wage growth and consumer demand.A gentler assessment of stress relief. If his remarks continue the tone of "gradual interest rate cuts," the current rebound in the pound is more likely to be regarded as a technical correction after the decline; on the contrary, if he expresses a cautious attitude towards the pace of future interest rate cuts, it may temporarily boost confidence in the pound.
At the same time, the dollar's own movements have also provided breathing space for the pound. The U.S. dollar index retreated slightly after a week of consecutive gains, falling 0.15% to around 97.80 on Friday. This change is closely related to the market's shift in expectations for the Fed's policy. According to interest rate futures tools, the probability that the Federal Reserve will cut interest rates by 25 basis points to 3.25%-3.50% at its March meeting has risen to 22.7%, www.xmtraders.compared with only 9.4% at the beginning of this week. This increase is due to the recent weakening of U.S. employment data: job vacancies fell to 6.542 million in December, down from 6.928 million in the previous month; only 22,000 new jobs were created in the private sector in January, less than the 37,000 in December. These signals indicate that the labor market is cooling down, bolstering market support for the Fed's early turn.
The technical aspect shows signs of stabilization, but there are many resistances above
From the perspective of the disk structure, the pound against the dollar once hit 1.3508 and then rebounded, showing that short-term selling pressure has eased. The current price is running near the 1.3580 line, and short-term resistance is concentrated in the 1.3600 area. If it cannot effectively break through and stabilize at this level, there is a high probability that this rebound will still be a technical repair rather than a trend reversal. On the contrary, once the price can continue to rise and break through this mark, it is possible to open up further upward space.
In terms of technical indicators, momentum on the 60-minute chart is improving. The MACD column shows signs of turning from weak to strong, and the RSI rebounds to 54, indicating that the buyer's power has recovered, but it has not yet entered an overbought state. This shows that although market sentiment has improved, it is still in the wait-and-see stage. As for the support level below, 1.3540 is the initial observation level. If it falls below, the key psychological level of 1.3500 may be tested again. Once this position is broken, the market may re-price the scenario of "the Bank of England cutting interest rates faster" and push the exchange rate to a lower range.
Two logics pull together, and shock may become the main theme
The pound against the dollar is currently in a fierce game between two forces. On the one hand, policy differences within the Bank of England and optimistic statements about the fall in inflation have led to rising market expectations for short-term interest rate cuts, suppressing the pound's upward potential; on the other hand, the U.S. dollar has corrected due to weak U.S. employment data and rising interest rate cut bets, objectively creating external conditions for the pound's rebound. This pattern of "one goes down and the other goes up" makes it difficult for the exchange rate to form a unilateral trend in the short term.
Next, the market will pay close attention to the performance of U.S. non-farm employment data, which will be released next Wednesday. If employment continues to weaken, it will further consolidate expectations that the Federal Reserve will turn to easing, and the dollar may continue to be under pressure, and the pound may find support; however, if the data is unexpectedly strong, it may dampen expectations of interest rate cuts and push up the dollar, which in turn suppresses the pound's rebound. Therefore, when the key data is releasedCurrently, the range oscillation around 1.3550 to 1.3650 is still a more reasonable interpretation path.
The above content is all about "[XM Group]: The US dollar is suddenly "soft", and the pound takes the opportunity to counterattack? The outcome will depend on the non-agricultural sector next week". It is carefully www.xmtraders.compiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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