FTSE rises to fresh record highs

• Attention is on Trump’s policy changes
• Rightmove data shows strong house price growth
• GBP/USD remains bellow 1.22
• FTSE rises to 8515

The Betsy has risen to a new record high, rising about Friday and closing at 8505, the previous record. The index was led higher by a broad range of sectors, including miners, banks, and utilities.

The FTSE 100 is supported after soft data last week, which reassured expectations that the Bank of England could cut interest rates more aggressively than the 1 cut the market had priced in.

GBP/US struggles below 1.22 at the multi-year low, which fits the multinationals that make up the large majority of the FTSE index.

Attention is on Donald Trump’s second inauguration and the measures he will implement immediately. While the UK isn’t necessarily in line for a direct hit from trade tariffs, it will likely be impacted indirectly should Trump adopt an aggressive stance. The US stock market is closed today.

The UK economic calendar is quiet, and figures from Rightmove have failed to buoy the house-building sector. Average asking prices for newly listed homes in the UK have seen the biggest start-of-the-year increase since 2020. According to Rightmove, the average price rose by 1.7% between December 8th and January 11th compared to the same period a year ago.

While the housing market gained some momentum on hopes that borrowing costs would continue to fall, the uncertainties surrounding BoE could limit gains going forward. The market is pricing two 25 basis point cuts this year, up from one at the start of last week. However, the BoE has guided towards four rate cuts.

FTSE forecast – technical analysis

The FTSE has broken out of range, rising above 8490 to fresh all-time highs. With blue skies above, buyers could consider the 8600 round number.

However, the RSI is very overbought, so buyers should be cautious some consolidation could be on the cards. Immediate support is at 8490 and 8400 below here. Should sellers take out 8325, the price returns to the familiar range within which it traded for much of the past 9-months.

USD/JPY holds steady in cautious trade ahead of Trump’s inauguration

• Attention is squarely on Trump’s inauguration
• BoJ could cut rates this week
• USD/JPY recovers from 155 support

USD/JPY is holding steady at the start of the new week as investors await cautiously ahead of chumps inauguration. President-elect Donald Trump is expected to make a flurry of policy announcements in the first hours of his second presidency. Meanwhile, the Bank of Japan is expected to hike interest rates at the end of the week.

Trump will take the oath at noon Eastern Time (19:00 GMT). He is expected to sign a slew of executive orders that will set the tone for his presidency. Monday is a US holiday, with stock markets closed for Martin Luther King Day. So, the forex market will see an immediate reaction to his inauguration pledges, while the stock markets will likely react when they open on Tuesday.

Where the US dollar goes from here greatly depends on how aggressively Trump implements trade tariffs and tax cuts. These measures are inflationary.  The USD has rallied on expectations of few rate cuts since Trump’s victory. Any sense of a more relaxed approach could pull the US dollar lower.

The USD fell last week after weaker-than-expected underlying US inflation saw the market ramp up Fed rate cut expectations. Dovish comments from Federal Reserve governor Christopher Waller also weighed on the USD.

The yen rallied last week on hints from the BoJ that a rate hike could be discussed at this week’s BoJ rate meeting.

Before the BoJ meeting on Friday, Japanese inflation data will be released.

USD/JPY forecast -technical analysis

USD/JPY eased back from a six-month high of 158.90 reached last week before finding support at 155.00, around the 50 SMA. The price holds steady around 156.20, while the RSI gives away few clues at its neutral level.

Buyers will need to rise above 156.20 and 157.00, the 78.6% Fib retracement level, to bring 158.90 into focus. A rise above here is needed to create a higher high and turn attention to 160.00.

Support is seen at 155.00, ahead of 154, the rising trendline dating back to 2022, and 153.30, the 61.8% fib retracement.

Image © Adobe Images

Pound Sterling has entered a technical downtrend against the Euro, with Tuesday’s labour market report posing new downside risks.

The Pound to Euro exchange rate (GBPEUR) is at 1.1850 after falling for three weeks in succession, and there is little in the technical charts or fundamental setup to advocate for a major recovery.

Weakness culminated in a break below the 200-day exponential moving average (EMA) last Tuesday (1.1890), and the exchange rate has so far failed to reclaim this technical level. A rule of Pound Sterling Live’s Week Ahead model is that a break below the 200 EMA signals an exchange rate has entered a multi-week downtrend.

In fact, it looks as though the 200 EMA will now act as a resistance level that will block any recovery attempts, suggesting any GBP/EUR strength in the coming days will be shallow.

The selloff has, nevertheless, slowed. The Relative Strength Index (RSI) reached oversold conditions last week (after hitting 30), which meant a period of recovery or consolidation was needed. It appears that consolidation has played out, allowing the RSI to unwind from oversold.

There also appears to be some graphical support forming at approximately 1.18450-1.1900, which goes back to periods of weakness in September and October of last year (see the turquoise line on the chart). This could offer some support in the run-up to Tuesday’s UK labour market report before ultimately giving way to a fresh leg lower.

Above: GBP/EUR at daily intervals, showing the break below the 200 EMA and the recent recovery from oversold in the RSI (lower panel).

Pound Sterling has been hit by a run of poor data over recent weeks that speaks of an economy that has run out of momentum owing to the significant taxes placed on businesses by the government. In addition, an inflation-busting increase to the minimum wage is due to come into effect, as is further red tape on employing people.

All this points to the labour market as a key cost driver and headwind for businesses operating in the UK, and this is why this week’s labour market report will be of particular interest. The outcome is likely to influence expectations for the amount of interest rate cuts the Bank of England will likely make this year.

The consensus looks for the unemployment rate to edge up to 4.4% from 4.3% in light of survey evidence of growing job losses and a slowdown in hiring intentions. In particular, the PMI surveys have been warning of a deterioration in the labour market for a couple of months now.

GBP/EUR investment bank consensus forecast for 2025. See the median, mean, highest and lowest point targets, giving a highly accurate forecasting resource. Request it Now.

“Employment indicators are pointing firmly to a decline in payrolled employment in the coming months,” says Sam Hill, Head of Market Insights at Lloyds Bank.

The Pound is likely to fall should unemployment rise faster than was expected and the opposite reaction is likely if the data proves stronger than expected.

“A payrolls rise would be a big surprise, suggesting business sentiment is overegging the jobs slowdown and likely pushing the market back to pricing fewer than two cuts,” says Robert Wood, an economist at Pantheon Macroeconomics.

Above: The economy has essentially flatlined following strong growth in the first half of 2024.

Of importance to traders will be the wage data that is released alongside the job figures. Here, The consensus expects wages to rise 5.5% in November, up from 5.2% in October. In isolation, the rule is that the pound will fall if wages undershoot expectations, but it will rise if the data beats.

The Bank of England is watching employment and wage dynamics, judging that high wages are inflationary and must be met with higher-for-longer interest rates.

However, rising unemployment will suggest to the Bank that wage pressures will fall notably in the coming months, which will allow them to cut interest rates further.

For the Pound, rising expectations for rate cuts will result in weakness and this is why we forecast further GBP downside in the coming days, judging that the process has further to run.

Money market pricing shows investors have raised bets for more rate cuts from the Bank of England this year, which has contributed to the weaker Pound. However, the market is still only expecting two rate cuts, with a third being a possibility.

Above: Markets see more rate cuts ahead than was the case just one week ago, and there is scope for this trend to continue.

Most economists we follow suggest four cuts is the most likely outcome. This means the market can continue to ‘price in’ rate cuts from here, resulting in further weakness in Pound Sterling.

Keep an eye on Friday’s release of PMI survey data for January as this will be the first major snapshot of how the UK and Eurozone economies performed in January.

The consensus looks for Eurozone output to have improved, driven by a recovery in Germany. This can bolster the Euro relative to the Pound.

The UK is meanwhile expected to show a slowdown in activity:

“Flash PMIs on Friday will likely show continued weak momentum; we expect the services PMI to drop to 50.5. But the details are as important as the headline now. The crucial question for the economic outlook and the MPC’s decisions is how much tax hikes are cutting employment or raising prices,” says Wood.

Our setup for the Pound-Euro is bearish owing to the event risks associated with the labour market data and the downbeat technical setup. However, we do note that some investment bank technical strategists now think weakness has gone too far and are looking to buy the pound against the euro at these levels.

“We go short EURGBP,” says a strategy note from Citi, citing expectations for a reversal in negative sentiment towards the UK.

However, we think this week will be too soon for sentiment to improve, given expectations for a poor labour market report.

Bitcoin price (BTCUSD) rallied upwards sharply to succeed touching our waited target at 108350.45$ and approached 110000.00$ barrier, and the way seems open to continue the rise to achieve additional gains that extend to 112000.00$, noting that breaking 104900.00$ will put the price under negative pressure to head towards testing key support levels that start at 98930.00$.

The expected trading range for today is between 106500.00$ support and 111000.00$ resistance.

Trend forecast: Bullish

FTSE rises to fresh record highs

• Attention is on Trump’s policy changes
• Rightmove data shows strong house price growth
• GBP/USD remains bellow 1.22
• FTSE rises to 8515

The Betsy has risen to a new record high, rising about Friday and closing at 8505, the previous record. The index was led higher by a broad range of sectors, including miners, banks, and utilities.

The FTSE 100 is supported after soft data last week, which reassured expectations that the Bank of England could cut interest rates more aggressively than the 1 cut the market had priced in.

GBP/US struggles below 1.22 at the multi-year low, which fits the multinationals that make up the large majority of the FTSE index.

Attention is on Donald Trump’s second inauguration and the measures he will implement immediately. While the UK isn’t necessarily in line for a direct hit from trade tariffs, it will likely be impacted indirectly should Trump adopt an aggressive stance. The US stock market is closed today.

The UK economic calendar is quiet, and figures from Rightmove have failed to buoy the house-building sector. Average asking prices for newly listed homes in the UK have seen the biggest start-of-the-year increase since 2020. According to Rightmove, the average price rose by 1.7% between December 8th and January 11th compared to the same period a year ago.

While the housing market gained some momentum on hopes that borrowing costs would continue to fall, the uncertainties surrounding BoE could limit gains going forward. The market is pricing two 25 basis point cuts this year, up from one at the start of last week. However, the BoE has guided towards four rate cuts.

FTSE forecast – technical analysis

The FTSE has broken out of range, rising above 8490 to fresh all-time highs. With blue skies above, buyers could consider the 8600 round number.

However, the RSI is very overbought, so buyers should be cautious some consolidation could be on the cards. Immediate support is at 8490 and 8400 below here. Should sellers take out 8325, the price returns to the familiar range within which it traded for much of the past 9-months.

USD/JPY holds steady in cautious trade ahead of Trump’s inauguration

• Attention is squarely on Trump’s inauguration
• BoJ could cut rates this week
• USD/JPY recovers from 155 support

USD/JPY is holding steady at the start of the new week as investors await cautiously ahead of chumps inauguration. President-elect Donald Trump is expected to make a flurry of policy announcements in the first hours of his second presidency. Meanwhile, the Bank of Japan is expected to hike interest rates at the end of the week.

Trump will take the oath at noon Eastern Time (19:00 GMT). He is expected to sign a slew of executive orders that will set the tone for his presidency. Monday is a US holiday, with stock markets closed for Martin Luther King Day. So, the forex market will see an immediate reaction to his inauguration pledges, while the stock markets will likely react when they open on Tuesday.

Where the US dollar goes from here greatly depends on how aggressively Trump implements trade tariffs and tax cuts. These measures are inflationary.  The USD has rallied on expectations of few rate cuts since Trump’s victory. Any sense of a more relaxed approach could pull the US dollar lower.

The USD fell last week after weaker-than-expected underlying US inflation saw the market ramp up Fed rate cut expectations. Dovish comments from Federal Reserve governor Christopher Waller also weighed on the USD.

The yen rallied last week on hints from the BoJ that a rate hike could be discussed at this week’s BoJ rate meeting.

Before the BoJ meeting on Friday, Japanese inflation data will be released.

USD/JPY forecast -technical analysis

USD/JPY eased back from a six-month high of 158.90 reached last week before finding support at 155.00, around the 50 SMA. The price holds steady around 156.20, while the RSI gives away few clues at its neutral level.

Buyers will need to rise above 156.20 and 157.00, the 78.6% Fib retracement level, to bring 158.90 into focus. A rise above here is needed to create a higher high and turn attention to 160.00.

Support is seen at 155.00, ahead of 154, the rising trendline dating back to 2022, and 153.30, the 61.8% fib retracement.

• EUR/USD clings to daily gains above 1.0300 heading into the American session.
• The technical picture highlights a buildup of bullish momentum in the near term.
• Investors await comments from Donald Trump at the inauguration ceremony.

EUR/USD started the week on a firm footing and climbed above 1.0300. The upbeat market mood makes it difficult for the US Dollar (USD) to stay resilient against its rivals and allows the pair to continue to stretch higher.

Stock and bond markets in the United States (US) will be closed in observance of the Martin Luther King Jr. Day holiday on Monday. Hence, EUR/USD’s action could remain subdued in the first half of the American session. Later in the day, Donald Trump will deliver a speech at his inauguration ceremony.

Investors remain optimistic about Trump’s refraining from introducing an aggressive tariff policy right away. On his call with Chinese President Xi Jinping, Trump said: “It is my expectation that we will solve many problems together, and starting immediately.”

Earlier in the day, the data from Germany showed that the Producer Price Index (PPI) declined by 0.1% on a monthly basis in December, against the market expectation for an increase of 0.3%. This data, however, failed to trigger a noticeable market reaction.

On Tuesday, the ZEW Survey – Economic Sentiment for the Euro area and Germany will be scrutinized by investors. 

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 60, reflecting a buildup of bullish momentum. At the time of press, EUR/USD was trading at around 1.0325, where the 100-period Simple Moving Average (SMA) is located. Once the pair rises above this level and confirms it as support, technical buyers could remain interested. In this scenario, 1.0390-1.0400 (Fibonacci 50% retracement of the latest downtrend, 200-period SMA) could be seen as the next bullish target before 1.0440 (Fibonacci 61.8% retracement).

On the downside, first support could be spotted at 1.0290-1.0300 (50-period SMA; 20-period SMA, Fibonacci 23.6% retracement) ahead of 1.0250 (static level) and 1.0200 (end-point of the downtrend).