26.01.202310:38 Forex Analysis & Reviews: Deteriorating situation in the US could boost positive sentiment in markets

Markets closed with mixed dynamics on Wednesday due to corporate earnings reports and the anticipation over key economic data that are due out today. Forecasts have indicated that core durable goods orders should be down by 0.2% in December, while revised US GDP figures should slow down from 3.2% to 2.6%. Underlying monthly PCE figures is expected to increase by 2.5% in December, but in quarterly terms should fall from 4.7% to 4%. Weekly initial jobless claims is also expected to rise from 190,000 to 205,000.

An evident slowdown in the US economy, decrease in purchasing power of residents and surge in lay-offs will definitely put downward pressure on inflation, which, in turn, will signal the Fed to take a pause in raising rates after an expected 0.25% increase at the two-day meeting on February.

Markets saw different scenarios earlier, but today more and more people are inclined to believe that if key data shows an overall deterioration of the US economy, the Fed will pause its rate hike cycle, which will trigger a rally in equity markets. It would also lead to a further weakening of dollar on the forex market.

Forecasts for today:

GBP/USD

The pair is currently trading below 1.2400. If market sentiment improves on the back of weak US economic data, the pair may overcome the resistance level and resume rising towards 1.2600.

XAU/USD

After correcting to the support line at 1935.00, gold turned up and is on its way towards 1957.00. However, this level will be reached only if demand for dollar weakens.