GBPUSD: UK economic outlook assessed by the government
Trading instrument GBPUSD is showing weak dynamics, trying to win back the losses of the last two sessions, in the backdrop of which the asset updated the local minimum of March 10. The pair traded around 1.2080, continuing to grow in anticipation of new stimulus for the correction.
Earlier the head of financial authorities of the Kingdom Jerem Hunt provided the national budget for parliamentarians to study in order to stabilize economic indicators. Based on estimates based on OBR calculations, given the significant stabilization of energy costs reduction on an annual basis GDP showed a correction of only -0.2% instead of the -1.5% expected the day before, and will grow 1.8% in 2024 and 2.5% in 2025. Analysts expect the index to adjust for growth of 2.1% in 2026 and 1.9% in 2027, which rules out the economy going into a technical recession this year, as expected the day before. The consumer inflation index should decline to 2.9% by early next year, which is well below its peak value of 10.1%. Moreover, the spring budget includes a bailout package for families who are prevented from returning to work by rising child-support costs. Meanwhile, a lifetime cap on tax-free retirement contributions is announced for April.
- Resistance levels: 1.2100, 1.2140, 1.2176, 1.2236.
- Support levels: 1.2054, 1.2000, 1.1933, 1.1875.
USDJPY: Bank of Japan estimates the inflation outlook for the fiscal year 2024
The trade shows a moderate decline in the downside momentum from earlier and the yen is limited upside due to weak macro statistics from Japan.
For instance, the index industrial production for January showed a decline of 3.1% from the previous -2.3%, with the market estimating the figure at -2.3%. Monthly decline momentum accelerated to -5.3% from -4.6%, disappointing experts who expected neutral dynamics. Investors also noted rising exports for February by 6.5% after strengthening by 3.5% in the previous month at market estimates of 7.1%. Imports strengthened by 8.3% over the same period, significantly behind the previous month's 17.5%, while the forecast was for a positive 12.2%. A notable recovery in Japan's exports significantly narrowed the trade deficit for February to -897.7 billion yen from -3498.6 billion yen, surpassing experts' estimates of -1069.4 billion yen.
- Resistance levels: 134.00, 134.54, 135.57, 136.50.
- Support levels: 133.00, 132.00, 131.00, 130.00.
USDCAD: The pair is testing the level 1.3750.
During the Asian trading session, the trading instrument USDCAD shows a moderate decline at the level of 1.3750.
Earlier, the U.S. dollar showed significant strengthening, allowing to fully offset losses from the beginning of the week amid reports on the liquidation of Signature Bank and Silicon Valley Bank, which caused a barrage of criticism from investors, collapsing the quotes. The U.S. Federal Reserve and the Treasury Department, in turn, hastened to stabilize the situation, promising guaranteed payments for all lost deposits and announcing additional measures for emergency funding of the banking sector in order to avoid similar events in the future. Economists agree that the financial authority will take a break in the cycle of systemic tightening of monetary parameters and refrain from the decision to strengthen the interest rate by 0.25% at the end of the meeting announced for next week.
- Resistance levels: 1.3800, 1.3860, 1.3900 and 1.3950.
- Support levels: 1.3750, 1.3700, 1.3650, 1.3600.
The precious metal is actively strengthening for the second week in a row, making a new high of the last two months, reaching the level of 1937.50. Gold increased its attractiveness among investors, as a hedge asset based on two factors: the developing banking crisis and the U.S. Federal Reserve's monetary policy.
Investors are most concerned about the likely lack of liquidity in the banking sector, because the liquidation of Signature Bank and SVB may provoke a similar process around the world, followed by a decrease in the volume of loans issued, business activity will noticeably decrease, and the global economy will come under serious pressure. According to investors, such concerns are not unfounded, especially since a negative trend is beginning to be observed in the eurozone, ignoring the joint statements of officials at various levels about the fact that the banking sector is protected and the stability of the financial system is at a reliable level. During the last week, UniCredit Group, FinecoBank S.p.A., Banca Monte dei Paschi di Siena and Credit Suisse Group actively lost positions in the markets, and the latter was at risk of bankruptcy, which forced the Swiss Central Bank to allocate an additional 50.0 billion. francs to stimulate the institution. The general trend across the regions allows for the manifestation of a crisis situation in the short term, despite the efforts of the authorities to stabilize the situation, and investors will have to look for more stable assets, among which gold becomes more attractive.
- Resistance levels: 1937.50, 1968.75, 2000.00.
- Support levels: 1875.00, 1843.75, 1812.50.