Expectations for relative Mid-East calm and a US bank holiday imply a seemingly calm start to the week. The FOMC Meeting Minutes stand out as investors fear higher rates for longer. Jobless claims and forward-looking PMIs promise a turbulent Thursday in markets.  Only three? Yes, this week is lighter on big events – and begins with a US bank holiday on Monday. The Middle East could always provide surprises, but the chances of big developments this week are lower. A senior Israeli minister warned that without the release of hostages before the beginning of Ramadan on March 10, the military would enter Rafah, the last major town at the southern tip of the Gaza Strip. This stated deadline means a lower chance of action now.  That leaves US developments to dominate the scene. Here are the main events for the week: 1) FOMC Meeting Minutes Wednesday, 19:00 GMT. The Federal Reserve clarified that it intends to leave rates unchanged in March, contrary to market hopes for a cut. Fed Chair Powell downed markets in the latest decision in late January; since then, data has been strong. Bond markets seem to have received the message, but stocks remain elevated. The bank might prefer to reiterate these hawkish messages in the minutes – which are redacted until the last moment to convey a message to investors. If the tone is hawkish, stocks would slide, Gold would struggle, and the US Dollar would rise. However, such a move would not last too long, as a slow path of rate cuts is already priced. If the bank surprises with a relatively calm or even dovish message, there is room for the US Dollar to fall, Gold to rise, and stocks to surge. In such a case, which is less likely, the move would be sustained, as it would surprise markets.  2) Jobless claims Thursday, 13:30 GMT. The absence of big events allows this weekly barometer of the labor market to shine. Fed officials would begin slashing rates faster if unemployment rises. The economic calendar points to a minor advance from 212K to 217K. A jump to 230K or above would create worries of a downturn – and hopes for rate cuts. A drop to 200K or below would cause the labor market to remain resilient and depress any hopes for earlier cuts.  3) Flash PMIs Thursday, 14:45 GMT: S&P Global's forward-looking surveys may provide some clues about the direction of the US economy. The Manufacturing Purchasing Managers' Index stood at 50.7 points in January, close to the 50-point threshold separating expansion from contraction. The Services PMI stood at 52.5. If both dip below 50, it would create worries about a recession and hopes for lower rates. If both hold up or rise, it would show resilience. I expect upbeat figures, with manufacturing potentially catching up with services, as investment in the industry remains robust. 

It is safe to say it has been an energetic start to the year, underscoring meaningful shifts in the economic landscape and rate expectations. Last week delivered a busy slate of tier-1 risk events; this week's economic calendar, however, offers a lighter docket. Monday is poised to be a snooze. Void of tier-1 numbers and US banks closing in observance of Presidents' Day, volatility is likely to slow heading into US trading hours. RBA minutes The Reserve Bank of Australia (RBA) minutes will be released on Tuesday at 12:30 am GMT and could be one worth observing for Asia Pac traders, though it is doubtful we'll see much more than what we already know. You may recall that the central bank left the Cash Rate unchanged at 4.35% at its first policy-setting meeting this year, a 12-year high. In addition, the accompanying Rate Statement pencilled in a fresh line noting that further policy tightening 'cannot be ruled out'. However, on the other side of the fence, according to the Statement of Monetary Policy (SoMP), the central bank's projections announced a downward revision to its growth and inflation forecast, alongside higher unemployment. The RBA anticipates CPI inflation (as well as trimmed-mean inflation) to cool to 2.8% by the end of 2025 (November's forecast: 2.9%) and (for CPI inflation) to slow to 3.2% at the end of 2024 (November's forecast: 3.5%). Unemployment will peak at 4.4% in mid-2025 and hold at this level until the year-end, with GDP growth expected to be at 2.1% in mid-2025 (down from November's 2.2% reading). Fed minutes The minutes from the latest FOMC rate decision will be on the watchlists for many this week on Wednesday at 7:00 pm GMT. Last week's hotter-than-expected US CPI data (inflation continues to cool but not as fast as we expected) reinforced the dollar and witnessed an unwind in Fed rate-cut pricing, consequently bringing market expectations more in line with the Fed. In the latest SEP, you may remember that the Fed projects only three rate cuts this year. Hence, we head into the minutes with not only elevated inflationary pressures but also resilient economic GDP growth and a tight labour market. As a result, the recent dovish repricing should not raise too many eyebrows. According to the futures market, the first 25bp rate cut is now priced out to June (March is all but a sealed deal for another no-change with only a 10% probability of a 25bp cut), with 93bps of easing forecast for the year ahead (just shy of four rate cuts). The last Fed policy meeting at the end of January revealed a language change in the Rate Statement, striking a line through a familiar sentence that referenced the central bank's readiness to increase rates: '… additional policy firming that may be appropriate to return inflation to 2 percent over time'. While dropping this sentence suggests a dovish shift, the substitute delivered a hawkish vibe to the proceedings, signifying that the central bank is not rushing to cut rates until inflation has further softened. Ultimately, another pushback against a March cut could be seen in the minutes, which would be logical at this point and may bolster demand for the dollar in the short term. With that being said, in the event of a lack of any fresh insights from the minutes (the most likely course), the report might be difficult to trade with any conviction. February PMIs Thursday will see the release of PMIs from the eurozone (9:00 am GMT), the UK (9:30 am) and the US (2:45 pm). In the UK, last week directed the spotlight to a slew of tier-1 economic numbers, including wages, which came in higher than expected, as well as CPI inflation and GDP data revealing larger-than-expected misses which weighed on sterling (MTD, GBP is down -0.7% against the US dollar). The latest GDP data also elbowed the UK into a mild technical recession (to be frank, the UK economy [as well as the euro zone] has been stagnating for several quarters). The week wrapped up with retail sales rebounding across the board in January. Therefore, this week's UK business surveys will be widely monitored. On the service side of the PMIs, we entered expansionary territory in late 2023 after a pickup. Manufacturing, however, remains in contractionary territory, though less so than it was in mid-2023: contracting at a slower pace. Market consensus as of writing is for the services PMI to tick slightly higher to 54.4 in February from January's 54.3, while the manufacturing PMI is forecast to rise to 47.5 in February from 47.0 in January. As most are aware, the PMIs can move the market's needle quite significantly if out-of-consensus prints are observed. Following the CPI and GDP miss and given sterling failed to rally beyond the $1.26 handle on Friday on...

Summary We wrote reports in 2016 and again in 2019 to determine if election periods had a significant impact on U.S. economic activity. With the 2024 presidential election right around the corner, we revisit that analysis. Initial theories suggested that elections positively impact the economy through the actions of politicians, who may try to stimulate it as a part of their re-election campaigns. More recent theory, however, implies the opposite, suggesting that elections weigh on near-term economic growth, as individuals and businesses may delay large purchases or investments in the face of political uncertainty. Our analysis in 2016 and again in 2019 did not find evidence of weaker economic growth in the 18 presidential election years that occurred between 1948 and 2016. In fact, we found that growth rates of real GDP, real consumer spending and real business investment spending were stronger during presidential election years than non-election years. Did elected officials "juice" the economy via stimulative fiscal policy to improve their electoral prospects? Apparently not. Our 2016 analysis did not find a statistically significant difference between growth in real government spending in election years compared to non-election years. We forecast the U.S. economy will continue to expand in 2024, albeit at a sluggish pace due to the current restrictive stance of monetary policy. Given the findings of our previous analyses, we suspect that this year's election will not have a material effect on the U.S. economy in 2024. Download The Full Special Commentary

Gold price extends its recovery mode at the start of the week on Monday. US Dollar eases with Treasury bond yields, as investors reassess Fed rate cut bets.  Gold buyers need to crack the 21-day SMA at $2,025. RSI steadies below the 50 level.   Gold price sets off the new week on the front foot, as buyers extend the previous week's recovery mode into Monday. The upward trajectory in the Gold price is powered by a broadly softer US Dollar (USD), tracking the US Treasury bond yields lower amid a mixed market sentiment. Gold price extends recovery gains Chinese traders return to markets with full optimism after a week-long Lunar New Year holiday but rest of the Asian equity markets trade with caution. Investors reassess the US Federal Reserve (Fed) interest rate cut expectations, especially after hot US Consumer Price Index (CPI) and Producer Price Index (PPI) data came in hotter-than-expected and helped push back their expectations of a Fed rate cut from March to June. Markets are currently pricing a 77% chance of a cut in June, the CME Group's Fed Watch Tool shows. Despite hopes for a delayed Fed rate cut than previously expected, the non-yielding Gold price remains resilient and resumes its recovery momentum, in the face of a broad-based US Dollar softness. The Greenback remains on the defensive at the start of the new week, as traders resort to repositioning ahead of Wednesday's Minutes of the February Fed meeting. Further, a US market holiday on Monday, in observance of Presidents' Day, leaves the US Dollar at the mercy of risk sentiment. Additionally, Gold price is taking advantage of a sluggish performance in the US Treasury bond yields and geopolitical tensions in the Middle East. The latest developments include news of a Belize-flagged, UK-registered and Lebanese-operated ship that was attacked in the Bab al-Mandab Strait, Red Sea. Meanwhile, global growth fears also continue to act as a tailwind for the traditional safe-haven Gold price. Last week, Gross Domestic Product (GDP) data from the UK and Japan showed that both economies slipped into technical recession after reporting two consecutive quarters of negative growth. Looking ahead, Gold price is likely to hold onto its upswing from the two-month low of $1,984, with an exaggerated move not ruled out amid holiday-thinned trading conditions. The key focus this week remains on Wednesday's Fed Minutes and US S&P Global business PMI data on Thursday. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price needs acceptance above the 21-day Simple Moving Average (SMA), now at $2,025 on a daily closing basis to stretch the recovery. The 14-day Relative Strength Index (RSI) is also following the recovery mode, testing the midline for the upside. If the RSI indicator manages to yield a sustained break above the midline, the tide could change in favor of Gold buyers. The next upside barrier is seen at the 50-day SMA of $2,032 if the 21-day SMA at $2,025 is taken out convincingly. Further up, the February 7 high of $2,044 will test bearish commitments, if Gold price eyes the $2,050 psychological barrier. Alternatively, rejection above the 21-day SMA could recall Gold sellers, with immediate support seen at the daily low of $2,011. If the latter gives way, a retest of the $2,000 threshold will be on the cards. The last line of defense for Gold buyers will be the 100-day SMA at $1,998, which defended Gold price throughout the previous week.

When EUR/USD dropped 8 weeks ago on December 23 from 1.1138, the 5 year average was located at 1.1160. The initial respomse for the next 2 weeks was trade lower by 134 then 162 pips. The week of January 6 began and for the next 6 weeks, EUR/USD ranges severely compressed. EUR/USD traded its best week at 123 pips during the week of January 13. EUR/USD traded 110 pips last week and  73 for the prior week. For the past 8 weeks, EUR/USD averaged 115 pips per week and 105 pips for the last 6 weeks. DXY from the 100.00 bottom 8 weeks ago traveled higher for the next 2 weeks by 115 then 176 pips then ranges assumed severe compression.  For the past 8 weeks, DXY averaged 111 pips per week and 100 pips for the last 6 weeks. EUR/USD traded 500 pips lower and straight down while DXY progressed 500 pips higher. EUR/USD achieved its destination but at a much slower pace than normal as 100 pip weeks for EUR/USD is far outside the 150 and 200 pip norm. Posted December 21 and 24 to EUR/USD levels. 1.0590, 1.0680, 1.0828, 1.0878, , 1.1056, 1.1160, 1.1273, 1.1521. EUR/USD' s low achieved last week at 1.0594 at 8 weeks later and well within the trade bounds. The answer to tiny EUR/USD ranges occurred 4 weeks ago when EUR/USD broke below 1.0800's. The 148 pip range from 1.0828 to 1.0680 began to not only compress as EUR/USD traded lower but EUR/USD became more oversold with every traded pip drop. The opposite is true for DXY as overbought began at 102.00's and 101.00 but DXY traveled higher despite overbought and ranges became compressed with every traded pip higher. The 2nd EUR/USD and DXY problem is located at the interest rates of the ECB and FED as neither the ECB nor Fed rates moved since November. The USD 10 year yield ranged 0.52 points and 0.45 for the German bond. What slowed prices over the past 6 and 8 weeks was a combination of zero interest rate moves and range compression to EUR/USD and DXY. Overall, EUR/USD dropped from the 5 year average at 1.1160 as DXY rose from the 50 year average at 99.00's. EUR/USD at 1.0700's trades deeply oversold. The overall problem is the 5 year average now at 1.1144 and 10 year at 1.1399. EUR/USD updates for next months are located at 1.0723, 1.0738, 1.0806, 1.0898, 1.1057, 1.1144, 1.1262, 1.1399 and 1.1507. EUR/USD targets: 1.0859, 1.0911 and 1.0980. EUR/USD's best trade range at 159 pips is located from 1.0898 to 1.1057. For EUR/USD to break the 5 year average, DXY must trade below 99.00's. The week USD/JPY first targets 149.19 then lower. The true expert commentators in Japan have much to say to USD/JPY as the 150.00 levels is far to high and stifles comsumer demand coupled with above 2% Inflation levels. On a possible lift of negative interest rates to positive, the current JGB yield at 0.73 travels to 1.0. Japanese banks overwhemingly favors the BOJ to assume positive interest rates as trading profits and interest income massively increases. Oversold in the EUR/USD universe includes EUR/AUD, EUR/CAD, EUR/NZD and EUR/GBP. GBP/JPY targets easily 188.20, EUR/JPY 160.82 and CAD/JPY 110.66. All easy targes to achive and all severely overbought. GBP/USD updates for next months: 1.2454, 1.2603, 1.2630, 1.2797, 1.2826, 1.3149, 1.3542. The 5 year average at 1.2826 bumps against 1.2797 and 1.3542 represents the 10 year average. AUD/USD higher must break 0.6448. GBP/AUD traded to target on Friday at 1.9267 and just prior to the big break at 1.9243. The longer term target remains 1.8700's. Lower must cross below 1.9246. Both EUR/AUD and GBP/AUD begin the week oversold. EUR/NZD and GBP/NZD also trade oversold and heading higher this week. USD./CAD sits just below vital 1.3487 and must cross to trade 1.3518. Currency market prices remain in severe compression mode and the results this week will materialize the same as the past 6 and 8 weeks.

The United States Consumer Price Index rose by more than anticipated in January. The European Central Bank keeps cooling down rate cut expectations. EUR/USD keeps posting lower lows, anticipating more slides in the coming days. The EUR/USD pair is ending a second consecutive week little changed at around 1.0750, although it posted a fresh low for 2024 of 1.0694. The US Dollar soared on Tuesday as the United States (US) reported an uptick in inflation at the beginning of the year. Hot CPI reaffirms Federal Reserve's caution The US Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) increased 0.3% MoM and 3.1% YoY in January, surpassing the market expectations. Core figures came in at 0.4% and 3.9%, respectively, higher than anticipated. Market participants entered panic mode with the news, as combined with the latest solid Nonfarm Payrolls (NFP) report, inflation numbers confirmed the Federal Reserve's (Fed) stance of maintaining interest rates at record highs for longer and taking more time to process data before loosening monetary policy by trimming interest rates. In its latest monetary policy meeting, the central bank clarified that there is no rush to cut rates. Chair Jerome Powell disregarded a March cut, and bets were moved to May, but the latter decreased after the CPI's unexpected advance. According to the CME FedWatch Tool, odds for a May cut fell to 34.6% after peaking at 52.2% in the Fed's meeting aftermath. Meanwhile, policymakers flood the wires. Fed officials confirmed Powell's posture, optimistic about the economic performance, yet at the same time cautious about changing the monetary policy too fast. Generally speaking, officials noted that progress is being made on inflation, but they need more data before taking the next step. The latest speakers summed it up quite clearly. On the one hand, Fed Vice Chair for Supervision Michael Barr declared the central bank remains confident that US inflation is on the way to hitting the Fed's 2% target, although adding that it is too early to say there will be a soft landing and affirming he needs to see continued good data before advocating for rate cuts. On the other hand, Federal Reserve Bank of Atlanta President Raphael Bostic noted that the Fed faces no urgency to cut rates given the current strong economy, which "argues for patience in adjusting monetary policy." Tepid European data fuels European Central Bank concerns Across the pond, Eurozone data failed to impress, to say the least. The German ZEW Survey on Economic Sentiment improved in February, although the assessment of the current situation plummeted to  -81.7. Also, the EU reported the December Trade Balance posted a surplus of €16.8 billion, down from the previous €20.3 billion and missing expectations. On a positive note, Industrial Production rebounded in December, up 2.6% against the 0.2% decline expected. In other order of news,  the European Commission released the latest Economic Growth Forecasts,  downgrading growth perspectives to 0.9% for the EU and 0.8% for the euro area.  However, inflation is predicted to ease further, as the Harmonised Index of Consumer Prices (HICP) inflation in the EU is set to decline faster from a steep 6.3% in 2023 to 3.0% in 2024, further dropping to 2.5% in 2025. Finally,  European Central Bank (ECB) President Christine Lagarde testified before the Committee on Economic and Monetary Affairs of the European Parliament. Lagarde repeated that the central bank still needs more information before it can affirm inflation is heading back toward the desired 2% target.  "The latest data confirms the ongoing disinflation process and is expected to bring us gradually further down over 2024," Lagarde said. She also added that the Governing Council needs additional data to determine whether the decline is sustainable in time. Finally, she noted that wage growth remains strong and could affect inflation dynamics. ECB officials throughout the week backed her cautious message. Lagarde was forced to admit rate cuts could come in the European summer, back when she assisted the Davos forum, but the case for a rate cut in the first half of the year is quite weak. Clues from stocks and yields  Following the release of the US CPI, stocks plummeted, and government bond yields soared to multi-week highs, reflecting market concerns about economic health and persistently high rates. The movements slowly reverted throughout Wednesday and Thursday, but stocks´ decline and yields' strength returned ahead of the weekly close following the release of fresh US inflation-related data. The country released the January Producer Price Index (PPI), which rose more than anticipated. The PPI rose 0.9% YoY, easing from the previous 1% but above the 0.6% expected. The core annual reading rose 2%, up from a previously revised 1.8%. Ahead of the weekly close, the 10-year Treasury yield is reaching fresh highs beyond the 4.30% mark, pushing the US...