GBP/JPY Price Analysis: Finds Support Around Nine-Day Ema at 191.00

Economic

Forex

Summary:

GBP/JPY tests immediate support at the nine-day EMA at 191.00. The 14-day RSI falls below 50, signaling increasing bearish momentum. The currency cross could test immediate resistance at the 14-day EMA at 191.17.

GBP/JPY continues its losing streak for the third consecutive session, trading around 191.00 during the European hours on Monday. An analysis of the daily chart showed the pair remains within the descending channel pattern, indicating a prevailing bearish bias.

Additionally, the 14-day Relative Strength Index (RSI), a key momentum indicator, falls below the 50 level, strengthening the bearish momentum. However, the GBP/JPY cross trades around the nine- and 14-day Exponential Moving Averages (EMAs), suggesting short-term price momentum is neutral.

Regarding its support, the nine-day EMA at the 191.00 level acts as immediate support for the GBP/JPy cross. A break below this level could weaken the short-term price momentum and lead the currency cross to navigate the region around a five-month low at 187.05, which was recorded on February 7, followed by the lower boundary of the descending channel around the psychological level of 186.00.

On the upside, the GBP/JPY cross could test immediate resistance at the 14-day EMA at 191.17. A break above these levels could weaken the bearish bias and support the pair to test the descending channel’s upper boundary at the 192.50 level.

Source: FXSTREET

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Glendon

Commodity

(Feb 17): Gold advanced, following its biggest one-day decline in two months, on nervousness over US President Donald Trump’s latest trade threats.

Bullion traded near US$2,900 (RM12,844) an ounce, after tumbling 1.6% last Friday. The gains on Monday came even after the 14-day relative strength index — a gauge of the pace and intensity of moves — showed the precious metal reached overbought levels in recent sessions.

Market participants are waiting for more insights on Trump’s reciprocal tariff plans, which could heighten global trade tensions, said Manav Modi, an analyst at Motilal Oswal Financial Services Ltd. “President Trump kept alive his drumbeat of tariff threats, saying levies on automobiles would be coming as soon as April 2,” he said.

Despite the trepidation over what Trump might do next, there is speculation that the tariff threats are mainly being used as a negotiating tool. His administration’s trade policies have become increasingly muddled due to delays and exclusions, with geopolitical and economic uncertainties tending to add to bullion’s haven appeal.

Traders were also studying the latest US economic data for clues about the Federal Reserve’s likely easing path, after a report last Friday showed retail sales slumped by the most in nearly two years. The figures prompted traders to restore bets that the central bank will cut interest rates by September. Lower borrowing costs typically benefit gold, as it doesn’t pay interest.

Money managers cut their bullish wagers on gold to a four-week low in the week ending Feb 11, according to the latest Commodity Futures Trading Commission report last Friday.

Despite last Friday’s fall, gold still notched its seventh consecutive weekly advance, the longest winning streak since 2020. It’s been helped partly by continued buying from central banks including China’s, along with rising holdings in bullion-backed exchange-traded funds. Bullion posted an all-time high of US$2,942.68 an ounce last Tuesday.

Source: Theedgemarkets

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Owen Li

Economic

Central banks and finance ministries should work in tensile tandem

The general consensus on how best to run the monetary side of an economy has been to have an autonomous central bank – an entity with sole responsibility for controlling inflation and using standard monetary policy tools.

However, in the UK, and following the high inflation of 2021-23, it is now time to reexamine the arguments for the Bank of England’s independence nearly 30 years after Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown set up the Monetary Policy Committee in 1997.

I favour making the UK’s management of inflation in 2021-23 the subject of a full public inquiry. An investigation should build on the largely technical findings of the 2024 review conducted by former US Federal Reserve chairman Ben Bernanke. In addition, the House of Commons Treasury Committee reported on quantitative easing in 2024 and the House of Lords Economic Affairs Committee completed a separate inquiry on independence in 2023.

Such a review should extend beyond the operation of the Bank in isolation. It should consider the Bank’s place in national economic policy conduct and examine its interaction with the Treasury. The aim should be to redesign and strengthen the Bank’s political oversight as well as its public accountability.

Social and political pressures

After a period of high inflation, we should examine afresh some key questions. Should the role of central banks be narrowly defined and treated as ‘merely technical’? Should their actions be isolated from the rest of national economic management? Should their governance continue to be at arm’s length to the political process?

The standard defence of keeping central banks at one remove from the political process is powerfully entrenched. As central bankers are keen to point out, the period of widespread central bank independence neatly coincided with the period of low inflation of the 2000s and 2010s. But the thesis can be challenged.

The idea that monetary policy is too important to entrust to politicians – because they have short horizons driven by the electoral cycle – begs a question. What makes decisions on interest rates so unusual? What should we do with real life-and-death decisions, such as the declaration of war? Should they too be considered too important to entrust to politicians?

The suggestion that monetary policy is merely a technical matter without political or social consequences cannot be maintained either. Changing interest rates creates winners and losers in society just as much as any move the chancellor might make in the budget. The extended period of ultra-low interest rates up to late 2021 favoured asset-owners and existing homeowners. And the very sharp increase in interest rates since then has wrought havoc with the finances of many borrowers, most obviously, young families seeking to buy a home.

Tighter co-ordination between central bank and finance ministries

The clinching defence is that low inflation for 20 years proves that central bank independence works. The problem with this defence is that it collapses completely the moment it ceases working – which many would say that in 2021, it did.

Managing the monetary side of an economy is important. But this makes it even more crucial that it should be an integral part of an economy’s management, particularly in co-ordination with other actors.

In practice, central banks cannot ignore what finance ministries do. They often find themselves responding to finance ministry policies and decisions in an effort to restore stability after the politicians have done their worst, such as September 2022’s ill-fated UK budget.

A far better solution would be for central bank and finance ministries to work together, planning fiscal and monetary policy as a coherent whole. This is surely likely to prove more successful than working without reference to each other, sometimes pulling in opposite directions.

The advent of QE makes the idea untenable that monetary policy is a ‘technical matter’. In the UK, extensive QE has radically changed the size, tenor and interest cost of the national debt, as well as the distribution of winners and losers. All of these factors are political, not merely technical and they impact directly on the Treasury and its fiscal management.

We can justifiably query how much central banks really understand inflation at all. The long period of low inflation from the mid-1990s to 2020 is open to various interpretations. Were central banks responsible? Did they create the low inflation or did they merely preside over it? How much was due to external factors such as the end of the cold war, the increase in globalisation, new technologies and above all, China’s entry into the world economy?

Central banks tried for 10 years between 2010-20 to increase inflation with almost no success – but at huge cost. If they could not increase inflation when they wanted to, why are they credited with the power to decrease it?

Furthermore, central banks spent much of 2021 and 2022 saying they were not responsible for the then-high inflation. ‘Not a monetary phenomenon’, they said, and with some justification – though they proceeded to use monetary methods to attack it. We know why this is: working in isolation of other organs of government means monetary methods are all they have at their disposal. But would it not have made more sense to work with their respective finance ministries on an all-economy response, when the full range of policy tools could be considered and deployed?

Absence of an alternative?

The final issue to resolve is the question of democratic accountability. How can a democracy align commonly accepted societal objectives – stable prices – with oversight through the electoral process and the actions of an unelected agency? And, more directly, how does the electorate express its views and concerns over central bank policy?

Let us go back to those young families whose finances were upended by the rise in interest rates and mortgage rates in 2022 and 2023. What is their political remedy? How do they express an electoral preference for an alternative approach? It is not good enough for central banks to say, in effect, ‘There is no alternative. You must just accept what we decide.’

All of these questions go to the heart of the decision to free monetary policy from the hand of government. The ability to subject generally accepted theses to rigorous questioning is the hallmark of democratic societies. It is time for a reappraisal of the system, in the hope that we can find better answers to crises that, sooner or later, are bound to reappear.

Source:OMFIF

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Justin

Economic

Natural rate of interest provides useful framework for policy-makers

When astronomers observe the stars, impressive images can come into view. When economists talk about stars, it usually gets complicated. The natural rate of interest – also known as r-star – is a concept that economists have been grappling with for more than 125 years. And it has perhaps never received more attention than in the current era of monetary policy.

Let’s start with the definition. The natural rate is the real interest rate that would prevail if the economy were operating at its potential and prices were stable. R-star is commonly thought to be driven by real forces that structurally affect the balance between saving and investment. This also means that r-star should, by definition, be independent of monetary policy.

At first glance, the natural rate could be a guiding star for the conduct of monetary policy. If a central bank sets its policy rates so that the real interest rate is above r-star, monetary policy is restrictive or ‘tight’. Consequently, economic activity slows and the inflation rate should decrease.

If the real rate is below r-star, monetary policy is expansionary or ‘loose’. It provides incentives for consumers to purchase more and for enterprises to step up investment and output. This should result in more economic activity and a higher inflation rate.

However, the idea of the natural rate serving as a guiding star for monetary policy comes with profound challenges.

Uncertainties around r-star estimates

Estimates of the natural rate of interest are subject to major uncertainties, shaped by three Ms: megatrends, methodology and monetary policy.

First, we are facing a number of megatrends. Think of climate change, ageing societies, digitalisation and the risks of de-globalisation and increasing geopolitical divisions. The effects of these megatrends on natural rates are difficult to gauge and may change over time.

On the one hand, they could contribute to a higher natural rate. The widespread uptake of artificial intelligence could boost productivity growth. The green transition could lead to higher investment. Fiscal deficits could persist at an elevated level due to higher defence spending given geopolitical tensions. The entry of the baby boomer generation into retirement could reduce savings.

On the other hand, life expectancy is predicted to keep rising, the high hopes for the productivity-enhancing effect of AI could turn out to be too optimistic and, given high public debt levels, fiscal space for additional spending is limited in many countries. Overall, it is virtually impossible to predict which developments will prevail in affecting r-star.

The second factor of uncertainty is methodology. The methods used to define and estimate r-star differ in important ways, especially in terms of time and risk.

Third, monetary policy itself may play a role in shaping the natural rate or its estimates. A number of studies challenge the view that money is neutral in the long run.

There are different channels through which monetary policy could have lasting effects on real interest rates. Prolonged tight monetary policy, for example, may lower investment, innovation and productivity growth. By contrast, persistent monetary easing could fuel financial imbalances and contribute to zombification.

Conclusions for monetary policy

What role can and should r-star play for monetary policy in practice?

Put yourself in the shoes of a monetary policy-maker who only looks at r-star. The relevant interest rate with which you steer the monetary policy stance is currently 2.75%. After a previous series of interest rate cuts, you consider whether a further cut would be appropriate.

Your staff inform you that various point estimates of r-star range from around 1.8% to 2.5% in nominal terms. If r-star were at the upper end of the estimates, the policy rate would become neutral with the next rate cut. Things would be different if r-star were at the lower end of the estimates: monetary policy would continue to be restrictive, even after several further rate cuts.

So how would you proceed, given a certain stance you want to achieve? Beware: if you rely on a wrong estimate, your decision may have a different effect on inflation than you intended. Simply choosing the middle of the range might not be a happy medium. Around the point estimates, there are often uncertainty bands of different sizes and with asymmetries.

As you have probably guessed:it is no coincidence that I have described this particular decision-making situation. It looks similar in the euro area ahead of the next monetary policy meeting of the European Central Bank Governing Council at the beginning of March. After several rate cuts, the neutral rate could already be near – or there may still be some way to go.

The president of the Federal Reserve Bank of New York, John Williams, put the problem in a nutshell when he said: ‘as we have gotten closer to the range of estimates of neutral, what appeared to be a bright point of light is really a fuzzy blur’.

The bottom line here is this: the closer we get to the neutral rate, the more appropriate it becomes to take a gradual approach. For this purpose, r-star is a helpful concept: it indicates when we need to be more cautious with policy rate moves so that we don’t take a wrong step.

At the same time, the limits of the concept are also clear: it would be risky to base decisions mainly on r-star estimates. Much more is needed to assess the current monetary policy stance and the optimal policy path for the near future.

That is why the Eurosystem uses a variety of financial, real economic and other indicators along the monetary policy transmission mechanism. We want the fullest picture possible. And, of course, r-star also has a place in this picture.

In my opinion, proceeding in a data-driven and gradual manner has served the ECB Governing Council well. There is no reason to act hastily in the present uncertain environment. The data will tell us where we need to go.

Away from day-to-day monetary policy-making, the concept of the natural rate of interest provides a useful framework. It is important to understand the forces that are shifting real interest rate trends. We need to find out how these forces and trends affect our work to ensure price stability.

Reviewing our monetary policy strategy from time to time is therefore vital. That is precisely what we are doing right now in the Eurosystem.

Source:OMFIF

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Michelle

Commodity

West Texas Intermediate (WTI) Oil price rebounds from losses in the previous session, trading around $70.60 per barrel during Monday’s Asian hours. However, crude Oil prices faced headwinds as optimism surrounding a potential peace deal between Russia and Ukraine eased supply concerns. The possible removal of sanctions on Moscow could boost global energy supplies.

According to BBC sources, Trump administration officials are scheduled to meet with their Russian counterparts in Saudi Arabia on Tuesday to discuss a potential peace agreement. This meeting marks a significant step in restoring US-Russia relations, following last week’s breakthrough phone call between President Donald Trump and Russian leader Vladimir Putin.

Meanwhile, delays in United States (US) reciprocal tariffs helped stabilize Oil prices as investors grew more optimistic about potential trade agreements. Last week, Trump directed commerce and economic officials to evaluate reciprocal tariffs on countries that impose duties on US goods, with recommendations due by April 1.

Reuters cited JPMorgan analysts that global Oil demand has surged to 103.4 million barrels per day (bpd), an increase of 1.4 million bpd from the previous year. Analysts also said, “Initially sluggish demand for mobility and heating fuels picked up in the second week of February, suggesting the gap between actual and projected demand will soon narrow.”

Additionally, US Treasury Secretary Scott Bessent told Fox Business on Friday that the US intends to cut Iran’s Oil exports to less than 10% of current levels as President Trump intensifies his “maximum pressure” campaign on Tehran’s nuclear program. “We are committed to reducing Iran’s Oil exports back to the 100,000 barrels per day level seen during Trump’s first term,” Bessent stated.

Source: FXSTREET

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Justin

Stocks

KR Choksey's research report on Lupin

Lupin’s revenue beat our estimates (+3.1%) due to better-than-expected revenue in North America and India. EBITDA beat our estimates due to better-than-expected gross profit and lower-than-expected other expenses. Adj. PAT beat our estimates due to lower-thanexpected depreciation expense. We maintain our FY26E/FY27E EPS estimates at INR 79.9 and INR 104.7, reinforcing our positive outlook on Lupin’s growth trajectory. The US market is expected to sustain double-digit growth, driven by a robust pipeline of complex generics, injectables, and respiratory therapies.

Outlook

Additionally, the India Formulations business is poised to outperform the market, supported by new product launches, strategic acquisitions, and a growing focus on chronic therapies. We roll over our valuation multiple to FY27E and assign a PE multiple of 23.6 to arrive at a target price of INR 2,472 (unchanged) and reiterate our “BUY” rating.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source:Moneycontrot

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Glendon

Economic

Forex

The GBP/USD pair trades with mild gains near 1.2585 during the early Asian session on Monday. The major pair edges higher amid the upbeat UK Gross Domestic Product (GDP) report and weaker US Retail Sales data. The US market will be closed on Monday in observance of President's Day.

US Retail Sales posted the biggest drop in nearly two years, dragging the Greenback lower. Retail Sales dropped 0.9% in January after an upwardly revised 0.7% increase in December, the Commerce Department's Census Bureau reported Friday. This figure came in weaker than the estimation of a 0.1% decline. On a yearly basis, Retail Sales increased 4.2% during the same reported period.

The better-than-expected UK GDP provides some support to the Pound Sterling (GBP). The UK economy grew by 0.1% QoQ in the fourth quarter (Q4) of 2024, beating expectations, according to a preliminary estimate from the UK Office for National Statistics (ONS) on Thursday.

Traders will keep an eye on the UK labor market data and Consumer Price Index (CPI) inflation data, which will be published on Tuesday and Wednesday, respectively. These reports could offer some hints as to whether the Bank of England (BoE) will cut its interest rates again in the March meeting.

Source: FXSTREET

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GBP/JPY Price Analysis: Finds Support Around Nine-Day Ema at 191.00

Source: FXSTREET

Gold Advances on Mounting Anxiety Over Trump Tariff Plans

Source: Theedgemarkets

High time to reassess the Bank of England’s independence

Source:OMFIF

Gradual approach on inflation has served ECB well

Source:OMFIF

WTI Holds Steady Above $70.50, Eyes on Russia-Ukraine Peace Deal

Source: FXSTREET

KR Choksey's research report

KR Choksey's research report on Lupin

Outlook

For all recommendations report, click here

Source:Moneycontrot

GBP/USD Holds Positive Ground Above 1.2550 On Weaker US Retail Sales Data

Source: FXSTREET

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