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DAILY MARKET UPDATE

Overview:
The forex market on 24th January 2025 has been characterised by moderate volatility as global economic data and geopolitical events continue to influence currency movements. Key risk factors include developments around central bank policies, as well as ongoing concerns over inflation and the pace of economic recovery in major economies.

GBP/USD:

The British pound remains under pressure against the US dollar, with the GBP/USD trading at 1.2150, down by 0.3% from the previous day’s close. Market participants are still weighing the Bank of England’s next steps after its cautious stance in December, amid ongoing inflationary concerns and economic slowdown risks.

Economic data today showed a slight improvement in UK retail sales, but these gains were tempered by softer-than-expected manufacturing output for December. This has led to increased market speculation that the BoE may hold off on further rate hikes. As a result, the pound is struggling against a stronger US dollar, which has benefitted from recent hawkish signals from the Federal Reserve.

Outlook: The short-term outlook for GBP/USD looks bearish, with potential for further weakness if the US economy continues to show signs of resilience and the dollar remains strong. Support is seen at the 1.2100 level, while resistance remains at 1.2250.

EUR/USD:

The euro is trading relatively flat against the US dollar at 1.0705, with little major movement since the European session opened. European economic data continues to present a mixed picture, with eurozone growth showing signs of stagnation, and inflation showing some signs of cooling, though still above the European Central Bank's target.

The ECB’s recent policy stance has been more cautious compared to the Fed, leading to a slight weakening of the euro. However, market participants are eyeing the upcoming ECB meeting next week, where more clarity on the future policy path may emerge.

Outlook: EUR/USD is likely to remain range-bound in the near term, with 1.0650 acting as support and resistance near the 1.0750 area. Any new developments from the ECB could cause further volatility.

USD/JPY:

The USD/JPY pair is showing some strength, trading at 134.25 as of the latest update. The Japanese yen remains weak amid ongoing policy divergence between the US and Japan. The Bank of Japan’s ultra-loose monetary policy continues to cap any significant appreciation in the yen, while the US dollar is benefiting from the Fed’s more aggressive stance.

Outlook: The broader trend for USD/JPY is bullish, with potential to test the 135.00 level. Support is seen around 133.50, and any hints of a shift in the BoJ’s policy stance could change the dynamics of this pair.

AUD/USD:

The Australian dollar has been somewhat weaker, trading at 0.6750 against the US dollar, amid concerns over global growth and its potential impact on commodity prices. The slowdown in China, Australia’s largest trading partner, has been weighing on sentiment. Recent Chinese data, including disappointing GDP growth numbers, has added to the bearish outlook for the Aussie.

Outlook: The Australian dollar may continue to struggle against the stronger US dollar. Support is seen at 0.6700, with resistance at 0.6800. Any positive surprises in global risk sentiment could help reverse the bearish trend temporarily.

Key Events Today:

  • UK Retail Sales Data: Released at 07:00 GMT, showing a modest uptick in retail activity.

  • US Weekly Unemployment Claims: Scheduled for release at 13:30 GMT, these numbers could provide insight into the strength of the US labour market.

Technical Levels:

  • GBP/USD: Support at 1.2100, resistance at 1.2250.

  • EUR/USD: Support at 1.0650, resistance at 1.0750.

  • USD/JPY: Support at 133.50, resistance at 135.00.

  • AUD/USD: Support at 0.6700, resistance at 0.6800.

Conclusion:

The forex market today reflects cautious sentiment, with most major currencies struggling against the US dollar, which remains supported by the Fed’s hawkish policy outlook. The British pound is particularly vulnerable amid soft economic data and ongoing doubts about the Bank of England’s next move. As always, global growth concerns, particularly in China, remain a key factor to watch, as they could influence commodity-linked currencies like the Australian dollar.