Forex Signals Brief Feb 17: RBA and RBNZ Rate Cuts – UK and Canada Inflation
This week the RBA and RBNZ are expected to cut interest rates, with CPI and PMI data also on schedule, but tariff, talk will set the sentiment.
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Financial markets experienced mixed movements last week as economic data and central bank expectations drove sentiment. Markets largely ignored inflation and trade war concerns, instead focusing on lower inflation data and expected tariff adjustments, keeping the sentiment positive last week. Equities remain robust, with gold poised to break $3,000 and risk sentiment keeping the US dollar under pressure.
- Equities: The S&P 500 edged higher, closing near all-time highs, while the Nasdaq outperformed, driven by strength in tech stocks. The Dow Jones lagged, ending slightly lower. Small caps (Russell 2000) struggled, reflecting concerns over economic growth.
- Bonds & Yields: US Treasury yields pulled back after softer-than-expected retail sales data reinforced expectations for rate cuts later this year. The market continues to price in at least two Fed cuts in 2025.
- Currencies: The US dollar saw mixed performance, weakening against the euro and yen but holding firm against commodity-linked currencies like the AUD and CAD. The Japanese yen saw a brief rally on speculation about a potential BoJ policy shift.
- Commodities: Gold continued its bullish momentum, approaching the $3,000 level as investors sought safe-haven assets amid inflation concerns. Oil prices remained volatile, reacting to geopolitical developments and supply data.
- Crypto: Bitcoin hovered below the $100,000 level, struggling to regain momentum despite optimism around institutional adoption. Ethereum remained in a tight range, with market participants awaiting clearer direction.
This Week’s Market Expectations
This week it starts slow, with only the Japanese GDP report today, but the calendar will pick up tomorrow with the RBA 25 bps rate cut projection and the RBNZ 50 bps rate cut expectations on Wednesday. We have CPI inflation repots as well, while the week will close on Friday with Manufacturing and Services PMI reports. However, the tariff talk and market sentiment will continue to dominate the markets.
Upcoming Economic Events
Monday
- Japan GDP – A key indicator of economic growth, influencing monetary policy and investor sentiment in Japan.
Tuesday
- Reserve Bank of Australia (RBA) Policy Decision – The central bank’s interest rate decision and policy outlook could impact AUD volatility.
- UK Employment Report – Wage growth and job data will provide insight into inflation pressures and the Bank of England’s (BoE) policy stance.
- German ZEW Economic Sentiment – A leading indicator of economic confidence in Germany and the broader Eurozone.
- Canada CPI – Inflation data could influence the Bank of Canada’s (BoC) interest rate outlook.
- New Zealand PPI – Producer price index data could provide insights into inflation trends and the Reserve Bank of New Zealand’s (RBNZ) policy stance.
Wednesday
- Australia Wage Price Index – An important indicator for inflationary pressures and RBA policy outlook.
- RBNZ Policy Decision – New Zealand’s central bank will set interest rates and provide guidance on future monetary policy.
- UK CPI – Key inflation data that will shape expectations for BoE rate decisions.
- US Housing Starts and Building Permits – Reflects the health of the US real estate sector and economic growth prospects.
- FOMC Minutes – The Federal Reserve’s meeting notes may offer clues on future interest rate decisions and economic outlook.
Thursday
- Australia Employment Report – Labor market strength will influence RBA’s monetary policy stance.
- People’s Bank of China (PBoC) Loan Prime Rate (LPR) – A key rate decision that could impact global markets, especially commodities and emerging markets.
- Canada PPI – Producer inflation trends that may guide expectations for BoC’s rate path.
- US Jobless Claims – A weekly measure of labor market health and economic momentum.
Friday
- Flash PMIs for Australia, Japan, Eurozone, UK, and US – Preliminary Purchasing Managers’ Index data will provide an early indication of economic activity across major economies.
- Japan CPI – A key inflation report that could influence BoJ policy decisions.
- UK Retail Sales – Consumer spending trends will shape economic growth expectations and BoE policy.
Traders are closely watching key technical levels and economic shifts to anticipate the next moves in the financial markets. Last week, gold resumed its bullish momentum, reaching a new record high of $2,948. As a result, buying on dips remained the dominant strategy, aligning with broader market sentiment. Favorable risk appetite was evident across forex pairs and stock markets, prompting a preference for long positions, which yielded strong results. A total of 27 forex signals were initiated, with 20 closing in profit and 7 in losses.
Gold Buyers Are Relentless
Despite President Donald Trump’s decision to delay tariffs, financial markets maintained a cautious tone, driving demand for safe-haven assets like gold. On Tuesday, GOLD experienced a sharp pullback but found support at the 50-day SMA (yellow) on the H4 chart before rebounding above the 20-day SMA (gray) on Wednesday. However, the rally struggled to sustain momentum above $2,900, even after hitting a fresh high of $2,942 on Tuesday and retesting the $2,940 level on Friday. By the end of the week, profit-taking and improved risk sentiment pushed gold below the 50-day SMA and under $2,900, where it settled.
XAU/USD – H4 Chart
USD/JPY Still Remain Bullish on the Weekly Chart
USD/JPY recovered early last week after a dramatic four-cent drop the previous week, fueled by the Bank of Japan’s (BOJ) hawkish rate hike, which strengthened the yen. Rising inflation and higher consumer expenditure have also boosted the yen’s momentum. However, investors were unable to maintain their gains and lost the majority of them, with the stock ending near 152. USD/JPY continued to fall early this morning, following the excellent Japan GDP report, which indicated a 2.8% rise in the Japanese economy in 2024.
USD/JPY – Daily Chart
Cryptocurrency Update
Bitcoin Continues to Remain Between MAs
BTC/USD – Daily chart
Ethereum Starts to Reverse Higher
Ethereum faced intense selling pressure, failing to hold gains after surpassing $4,000 in late 2024. A flash crash on Monday slashed its value by 50%, briefly sending ETH down to $2,000 before staging a mild recovery. While downside risks persist, Ethereum could rebound if the $2,000 support level remains intact and broader market sentiment improves.
ETH/USD – Daily Chart
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