Market Drivers – US Session 30/01/2023

Bitcoin received a breakout and rejection against $23,878.62 and later, retreated on Monday as the rally came under pressure by profit-taking. The most famous cryptocurrency is trading at $ 22747.00 at the time of writing. Some analysts do expect bitcoin to drop near $21,969 by the end of this week once all central bank events and the US job report have been fully digested.

Key Developments

The US dollar modestly advanced at the beginning of this trading week, receiving momentum from a general risk aversion pulse. The dollar retains its positive bias ahead of Tuesday’s Asian session opening, although caution dominates the scenes as the macroeconomic calendar offers multiple key events later this week.

Monday’s earlier focus was on the Bank of Japan, as a panel of academics and business executives urged the BoJ to make its 2% inflation target a long-term goal. The proposal reportedly also included the need to have interest rates rise more in line with economic fundamentals and normalize Japan’s bond market function. BOJ’s Haruhiko Kuroda stated that their biggest responsibility was price stability and reiterated it is possible to achieve 2% inflation with wage growth and the current easy policy. USD/JPY declined to 129.19 but ended the day at around 130.50 amid broad US Dollar demand.

GBP/USD is down to 1.2340, while AUD/USD hovers around 0.7050. The USD/CAD pair advanced towards the current 1.3390 price zone.

Spot gold eased modestly and currently trades at around $1,922 a troy ounce. Crude oil prices edged sharply lower, with WTI currently hovering around $77.70 a barrel.

Between Wednesday and Thursday, the US Federal Reserve, the European Central Bank and the Bank of England will unveil their monetary policy decisions. At the time being, market players are betting on a 25 basis points (bps) rate hike. For the ECB, a  50 bps rate hike is fully priced in, while the BoE is expected to hike its benchmark rate by 50 bps.

Economic Data

Early on Tuesday, Australia will release December Retail Sales, foreseen down by 0.3% in the month. Additionally, China will unveil the NBS Manufacturing and Non-Manufacturing PMIs. The first is expected to improve from 47 in November to 49.7, while services output is foreseen jumping from 41.6 to 51.

EUR/USD traded above 1.0900 but settled at around 1.0840. European data failed to impress as the German economy grew at an annualized pace of 1.1% in the last quarter of 2022, missing expectations of 1.3%.

The Harmonized Index of Consumer Prices (HICP), Spanish inflation unexpectedly rose by 5.8% YoY in January, an alarm bell ahead of the ECB monetary policy meeting later this week.

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