January 26, 2022
EUR/USD: The major currency pair is trading around 1.1300 level, after falling for 2 days in a row to the five-week lows. In doing so, EUR/USD tries to maintain the previous pullback, which started during the US session yesterday. In addition to the Fed rate hiking fears, the European Central Bank’s rejection of Omicron-linked inflation fears also pressures the EUR/USD bulls. From another point of view, positive German and Eurozone IFO numbers, as well as the downbeat US CB Consumer Confidence, supported the EUR/USD pair. However, the optimistic US inflation expectations kept sellers in control.
GBP/USD: Having recovered from its lows, the cable formed a double bottom pattern and kept rising and turning green. The US dollar came under pressure as the 10-year yields remained at their lows. Meanwhile, the market participants are awaiting the Federal Reserve’s interest rate decision and a statement. The pound has become an outperformer, at least while the extreme risk-off mood came to markets in the second half of this month. GBP suffered from a sharp sell-off when geopolitical uncertainty alarmed the markets at the end of last week and the beginning of this week. It weakened broadly last Friday, pulling back from almost a two-year high.
Gold: Gold showed a bullish dynamic yesterday, rising about 0.5% after climbing from the 1835 low. The blackout in central Asia didn’t affect gold prices much today, because the Federal Open Market Committee’s two-day meeting that draws to a close on Wednesday seemed to be more important for gold traders. Investors were expecting the Fed to announce the end of its asset purchase program and signal its readiness to hike rates in March. Moreover, traders may be looking to take their profits before the Fed announcements, which could support the US dollar as we approach month-end as well. Given the recent market decline, more and more market participants hope that the Fed will try to keep the markets calm.