Market sentiment dwindles amid concern over Kyiv/Moscow peace negotiations, and yields fail to maintain Powell’s lead amid a sluggish session.
Supporters of Brexit cheer the return of skilled workers. BOE’s Tenreyro points out economic fears. UK PM Johnson mocks Putin supporters.
The February UK Services final reading will decorate the calendar, but risk catalysts will be greater.
GBP/JPY is still trading at 154.70 in Thursday’s Asian session. This mildly offered price was a result of rebounding from a 10-week low on the previous day. The market’s recent weakness in the cross-currency pair could be due to anxiety ahead of key events/data, or a lack major catalysts.
An anticipated round of peace talks between Russia, Ukraine is causing cautious optimism. However, there are increasing expectations of a faster rate-hike trajectory from the Fed in order to test market sentiment.
According to Interfax, a Russian negotiator shared the news about a possible round of diplomatic negotiations on Thursday. Interfax stated that a ceasefire would be discussed during upcoming talks with Ukraine’s delegation.
CME’s FedWatch Tool shows that the market is also skeptical about a rise in the probability of a 0.50% rate increase at the March Fed meeting. The US inflation expectations rose to a 15 week high as measured by the 10-year breakeven rate of inflation per the St. Louis Federal Reserve data.
Global rating agencies such as Moody’s or Fitch have lowered Russia’s ratings, contributing to the offbeat sentiment.
The Daily Express reports data that shows a rise in EU nationals living in the UK, allowing them to ignore Brexit criticisms. Boris Johnson, the UK PM, spoke with Volodymyr Zelenskiy, Ukraine’s President, and stated that he would publish a ‘full listing of all those associated to the Putin regime’, according to The Guardian. Furthermore, Bank of England policymakers, including Silvana Tereyro (BOE), cited the economic risks posed by Russia’s invasion of Ukraine.
Junko Nagaya, a member of the Bank of Japan’s monetary policy board, stated in a statement that Japan’s economic outlook was “highly uncertain” starting January.
These plays result in mild losses for the S&P 500 Futures, while the US 10-year Treasury yields drop 1.2 basis points (bps), to 1.85% at press time.
The final reading of the Services PMI in the UK for February will be displayed on the calendar. It is expected that 60.8 figures will be confirmed. For clear direction, geopolitical headlines should be the focus of attention.
Analyse technique
A daily close above the 100-DMA level at 154.40 favors GBP/JPY bulls. However, converting the three-month-old support line and a downward trend line starting from February 10, around 155.90 seems to be a difficult nut for them.
