Tel Aviv stocks rebound as markets gauge effects of Iran-Israel conflict
Market Response to Conflict: Israeli equities rose 1% on Sunday despite escalating hostilities with Iran, recovering from early losses as investors appeared to overlook initial geopolitical concerns and global market weakness.
Impact of Military Actions: Israel conducted targeted strikes on Iranian facilities, leading to Iranian retaliation that resulted in civilian casualties. Emergency measures were implemented domestically, but financial systems remained stable, and the Bank of Israel assured economic continuity.
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Significant Week Ahead for the British Pound with Key UK Economic Data on the Horizon
US Economic Data: Recent US NFP and CPI reports have led to increased market expectations for rate cuts, with 62 bps of easing anticipated by year-end, although the US dollar remains rangebound pending further data releases, including Flash PMIs and Q4 GDP.
GBP Economic Outlook: The upcoming week is crucial for the GBP, with key economic releases such as the UK employment report and CPI expected; stronger data could boost the pound, while weaker figures may have the opposite effect.
GBPUSD Technical Analysis: The GBPUSD pair is currently consolidating around the 1.35 level, with potential resistance at 1.3670 and a key breakout point at 1.3732, which could lead to a rally if surpassed.
Upcoming Economic Events: Key economic reports are scheduled for this week, including the UK employment report, CPI, and retail sales, as well as US jobless claims and GDP figures, alongside a potential Supreme Court decision on Trump's tariffs.
EUR/USD Remains Stagnant Following Last Week's Decline After Payrolls Report
Market Movement: The EUR/USD currency pair experienced fluctuations last week, initially rising above 1.1900 before dropping due to a strong US jobs report, and has since been consolidating around 1.1900 with a neutral bias.
Technical Analysis: Key technical levels are identified, with 1.1853 acting as a support floor; a break above the 100-hour moving average could lead to a bullish trend, while a fall below the 200-hour moving average may indicate a bearish shift.
Fundamental Factors: The euro's outlook appears limited as the ECB remains inactive, while the dollar's performance will be influenced by upcoming US economic data, including FOMC minutes and GDP reports.
Valuation Insights: ING suggests that while the EUR/USD pair may be overvalued, a weaker dollar will support its value; the short-term fair value is estimated at 1.165, indicating a widening overvaluation gap.
Weekly Market Forecast for February 16th-20th
Market Overview: U.S. markets are closed for Presidents’ Day, while China is affected by the Spring Festival holiday. Key economic data releases are scheduled throughout the week from the U.K., Canada, New Zealand, Australia, and the U.S.
Inflation Expectations: In Canada, a slight increase in CPI is anticipated, driven by temporary tax effects, while the Bank of Canada will focus on core inflation metrics. The U.K. expects a decline in headline inflation, but core inflation may remain persistent.
Monetary Policy Insights: The RBNZ is expected to keep rates unchanged at 2.25%, with a dovish outlook due to remaining spare capacity and easing inflation pressures. The BoE may consider an additional rate cut if job and wage growth data show softness.
U.S. Economic Indicators: The core PCE price index is projected to rise, supporting a patient policy stance from the Fed. GDP growth is expected to moderate, reflecting a resilient economic backdrop despite some volatility in trade and inventory data.
USDJPY Stabilizes at Key Trendline as Traders Look for New Directional Catalysts
USD Overview: The US dollar remains rangebound following a hot NFP report and soft CPI data, with market expectations for rate cuts by year-end. Key upcoming data includes US Flash PMIs and Q4 GDP, which will influence future outlooks.
JPY Overview: The Japanese yen experienced a "sell the fact" reaction after Takaichi's election victory, with no new developments from the Bank of Japan. Governor Ueda indicated that future rate hikes depend on economic data, particularly in April.
USDJPY Technical Analysis: The daily chart shows USDJPY consolidating at a major trendline, with buyers positioned for a potential rally towards 159.00, while sellers are looking for a break below to target 150.00.
Upcoming Catalysts: Key economic releases this week include FOMC Meeting Minutes, US Jobless Claims, Japanese CPI, US Q4 GDP, PCE price index, Flash PMIs, and a potential Supreme Court decision on Trump's tariffs.
BofA: Europe Expected to Drive Structural Selling of the Dollar
Dollar's Precarious Position: BofA highlights that while attention is on China's shift away from dollar-denominated assets, Europe should be monitored more closely for potential structural USD selling.
China's UST Exposure: A report indicates that China's regulators are guiding banks to limit exposure to US Treasuries, reflecting a trend of diversification away from US assets, although the full picture is complicated by holdings through non-US custodians.
Equity Market Dynamics: BofA notes that European holdings are primarily in equities with lower hedge ratios, suggesting that while there isn't a mass exit yet, future flows may increasingly favor non-US markets.
S&P 500 vs. International Equities: The ratio of the S&P 500 to international equities has significantly declined in recent months, indicating a shift in investment patterns that aligns with BofA's analysis.
Westpac sets long-term targets of 1.22 for EUR/USD and 1.41 for GBP/USD.
Dollar Outlook: Westpac predicts the US dollar will drift lower over the next 12 to 18 months, despite a positive economic outlook for the US, with risks skewed to the downside.
US Economic Growth: The bank expects above-trend growth in the US for 2026, driven by consumer spending and tech investment, while inflation pressures may limit the Federal Reserve to only one more rate cut.
Currency Forecasts: Westpac anticipates the euro and sterling will outperform the dollar, reaching $1.22 and $1.41 respectively by mid-2027, with gradual gains expected for the Canadian dollar and yen.
Asia Currency Strength: The renminbi is projected to appreciate as Asia's growth prospects improve, with USD/CNY expected to advance toward 6.35 over the next two years.
Significant Week Ahead for the British Pound with Key UK Economic Data on the Horizon
US Economic Data: Recent US NFP and CPI reports have led to increased market expectations for rate cuts, with 62 bps of easing anticipated by year-end, although the US dollar remains rangebound pending further data releases, including Flash PMIs and Q4 GDP.
GBP Economic Outlook: The upcoming week is crucial for the GBP, with key economic releases such as the UK employment report and CPI expected; stronger data could boost the pound, while weaker figures may have the opposite effect.
GBPUSD Technical Analysis: The GBPUSD pair is currently consolidating around the 1.35 level, with potential resistance at 1.3670 and a key breakout point at 1.3732, which could lead to a rally if surpassed.
Upcoming Economic Events: Key economic reports are scheduled for this week, including the UK employment report, CPI, and retail sales, as well as US jobless claims and GDP figures, alongside a potential Supreme Court decision on Trump's tariffs.
EUR/USD Remains Stagnant Following Last Week's Decline After Payrolls Report
Market Movement: The EUR/USD currency pair experienced fluctuations last week, initially rising above 1.1900 before dropping due to a strong US jobs report, and has since been consolidating around 1.1900 with a neutral bias.
Technical Analysis: Key technical levels are identified, with 1.1853 acting as a support floor; a break above the 100-hour moving average could lead to a bullish trend, while a fall below the 200-hour moving average may indicate a bearish shift.
Fundamental Factors: The euro's outlook appears limited as the ECB remains inactive, while the dollar's performance will be influenced by upcoming US economic data, including FOMC minutes and GDP reports.
Valuation Insights: ING suggests that while the EUR/USD pair may be overvalued, a weaker dollar will support its value; the short-term fair value is estimated at 1.165, indicating a widening overvaluation gap.
Weekly Market Forecast for February 16th-20th
Market Overview: U.S. markets are closed for Presidents’ Day, while China is affected by the Spring Festival holiday. Key economic data releases are scheduled throughout the week from the U.K., Canada, New Zealand, Australia, and the U.S.
Inflation Expectations: In Canada, a slight increase in CPI is anticipated, driven by temporary tax effects, while the Bank of Canada will focus on core inflation metrics. The U.K. expects a decline in headline inflation, but core inflation may remain persistent.
Monetary Policy Insights: The RBNZ is expected to keep rates unchanged at 2.25%, with a dovish outlook due to remaining spare capacity and easing inflation pressures. The BoE may consider an additional rate cut if job and wage growth data show softness.
U.S. Economic Indicators: The core PCE price index is projected to rise, supporting a patient policy stance from the Fed. GDP growth is expected to moderate, reflecting a resilient economic backdrop despite some volatility in trade and inventory data.
USDJPY Stabilizes at Key Trendline as Traders Look for New Directional Catalysts
USD Overview: The US dollar remains rangebound following a hot NFP report and soft CPI data, with market expectations for rate cuts by year-end. Key upcoming data includes US Flash PMIs and Q4 GDP, which will influence future outlooks.
JPY Overview: The Japanese yen experienced a "sell the fact" reaction after Takaichi's election victory, with no new developments from the Bank of Japan. Governor Ueda indicated that future rate hikes depend on economic data, particularly in April.
USDJPY Technical Analysis: The daily chart shows USDJPY consolidating at a major trendline, with buyers positioned for a potential rally towards 159.00, while sellers are looking for a break below to target 150.00.
Upcoming Catalysts: Key economic releases this week include FOMC Meeting Minutes, US Jobless Claims, Japanese CPI, US Q4 GDP, PCE price index, Flash PMIs, and a potential Supreme Court decision on Trump's tariffs.
BofA: Europe Expected to Drive Structural Selling of the Dollar
Dollar's Precarious Position: BofA highlights that while attention is on China's shift away from dollar-denominated assets, Europe should be monitored more closely for potential structural USD selling.
China's UST Exposure: A report indicates that China's regulators are guiding banks to limit exposure to US Treasuries, reflecting a trend of diversification away from US assets, although the full picture is complicated by holdings through non-US custodians.
Equity Market Dynamics: BofA notes that European holdings are primarily in equities with lower hedge ratios, suggesting that while there isn't a mass exit yet, future flows may increasingly favor non-US markets.
S&P 500 vs. International Equities: The ratio of the S&P 500 to international equities has significantly declined in recent months, indicating a shift in investment patterns that aligns with BofA's analysis.
Westpac sets long-term targets of 1.22 for EUR/USD and 1.41 for GBP/USD.
Dollar Outlook: Westpac predicts the US dollar will drift lower over the next 12 to 18 months, despite a positive economic outlook for the US, with risks skewed to the downside.
US Economic Growth: The bank expects above-trend growth in the US for 2026, driven by consumer spending and tech investment, while inflation pressures may limit the Federal Reserve to only one more rate cut.
Currency Forecasts: Westpac anticipates the euro and sterling will outperform the dollar, reaching $1.22 and $1.41 respectively by mid-2027, with gradual gains expected for the Canadian dollar and yen.
Asia Currency Strength: The renminbi is projected to appreciate as Asia's growth prospects improve, with USD/CNY expected to advance toward 6.35 over the next two years.
