The Pound loses confidence
- Weakness in the labour market forces the Bank of England to cut rates.
- India's near-record imports provide support for precious metals.
The partial rebound of US stock indices allowed the EUR/USD to gain ground. The main currency pair managed to stay above 1.18 and went on the counterattack thanks to lower demand for the US dollar as a safe-haven asset. Investors are eagerly awaiting the release of the minutes from the January FOMC meeting and the US third-quarter GDP statistics.
According to FOMC member Michael Barr and Chicago Fed President Austan Goolsbee, more evidence is needed that inflation is heading towards 2%. If we see that, the easing cycle could resume. San Francisco Fed President Mary Daly supported Kevin Warsh's view that rapid economic growth is possible without accelerating inflation, thanks to artificial intelligence.
This position will allow the Fed to ease monetary policy. According to 38% of asset managers surveyed by Bank of America, Kevin Warsh will achieve a weakening of the US dollar, while Treasury bond yields will rise. 21% believe that Treasury yields will fall along with the greenback under the new Fed chair.
GBP/USD quotes plummeted to a four-week low amid British unemployment growth to a five-year high and cooling wage growth. The futures market raised the probability of two rate cuts this year to 3.25% to almost 100%. Back in early February, he estimated the chances of such an outcome at approximately 50%. BBVA believes the Bank of England may go further. If derivatives start to predict a third, the pound will continue to weaken.
According to the IMF, the Bank of Japan will raise its overnight rate three times in 2026-2027 to a neutral level of 1.5%. Along with capital repatriation, this will support the bears on USD/JPY.
Precious metals were boosted by information about India's near-record demand. In January, the country imported $12 billion worth of gold and $2 billion worth of silver. Higher numbers were only seen in October, with $14.7 billion and $2.7 billion, respectively. At the same time, the main source of speculative demand, China, is absent from the market due to the Lunar New Year celebrations. This is holding back the growth of gold and silver prices.
Author
Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.
