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Asset Watch
Wednesday, 12 February 2025
Markets are closely watching the release of January’s US Consumer Price Index data. Expectations indicate that the YoY inflation will remain steady at 2.9%, unchanged from last month, while core inflation may ease slightly from 3.2% to 3.1%.
In his testimony before Congress, Federal Reserve Chairman Jerome Powell signalled a cautious stance on interest rate adjustments, emphasising that the Federal Open Market Committee will remain “patient” in considering cuts. If inflation continues to stray from the 2% target, the likelihood of maintaining current interest rates through the first half of 2025 increases.
Markets currently anticipate just one rate cut this year. Meanwhile, President Trump’s policies may complicate the Fed’s ability to ease rates. His agenda—including tax cuts, measures to curb illegal immigration, and new tariffs—could fuel inflationary pressures. Notably, his recent 25% tariff on all steel and aluminium imports may trigger retaliatory tariffs from US trade partners, further impacting inflation and economic stability.
The pound is awaiting the release of preliminary UK GDP data for Q4 2024. The UK economy saw its strongest growth in over 18 months, with GDP rising from 0.7% in Q2 to 0.9% in Q3. The upcoming report will highlight the impact of consumer and corporate spending, as well as government expenditures, on economic growth. Forecasts suggest annual growth may stabilise at 1% in Q4.
On February 3, GBP/USD corrected its upward trend, forming a higher low at 1.2247 before continuing its sideways movement, developing an inverted head and shoulders pattern. A breakout and sustained trading above the neckline at 1.2548 could signal a potential rise toward 1.2990. However, resistance at 1.2706, 1.2775, and 1.2866 should be considered along the way.
Currently, GBP/USD is trading between 1.2344 and 1.2548. A daily close below the low end of this range could encourage further declines toward 1.2099. In this case, the support level located at the February 3 low mentioned above should be monitored.
Chart Source: ADSS Platform
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