Morning Note: BoE Rate Cut, ECB’s Caution, and Amazon’s Earnings

BoE Set to Cut Interest Rates by 25bps

The Bank of England looks set to cut interest rates on Thursday for only the third time since 2020. In doing so, the central bank faces the challenge of ensuring support for a sluggish economy and dealing with persistent inflationary pressures. The BoE’s benchmark bank rate currently stands at 4.75%, the highest among major developed economies. A widely expected cut of 25bps would bring it closer to the U.S. Federal Reserve’s 4.25-4.5% range.

(GBP/USD Daily Price Chart, Source: Trading View)

From a technical analysis perspective, the recent price action has broken through the descending channel, forming a bullish trend as indicated by the formation of higher lows and higher highs. However, the price is currently testing the rectangular resistance zone. If the price breaks through this resistance, it is highly likely to gain bullish momentum, driving the price higher.

ECB to Adopt Cautious Approach to Rate Cuts

ECB Chief Economist Philip Lane stated on Wednesday that the European Central Bank should ease monetary policy at a gradual pace to prevent unnecessarily stifling growth or fuelling excessive inflation.

Even though eurozone inflation sped ahead in the previous month, the ECB remains on track to allow further rate cuts. Four successive interest rate cuts occurred during the last four meetings of the ECB, and traders are expecting at least three more within the year. Inflation is projected to return to the 2% target by summer.

(EUR/USD Daily Price Chart, Source: Trading View)

From a technical analysis perspective, the overall trend of the EUR/USD currency pair remains bearish, as indicated by the formation of lower highs and lower lows within the descending channel. The price has recently been rejected by the rectangular resistance zone, driving it downward with minimal bearish momentum. If the price fails to break upward through this channel, it is highly likely that bearish momentum will regain control, pushing the price further downward.

Investors Await Amazon Q4 2024 Earnings Report

Amazon will release its fourth quarter 2024 earnings after the market closes on February 6. The company’s stock has reached new all-time highs, driven by its dominance in e-commerce and its expanding presence in cloud computing, advertising, and artificial intelligence. Amazon’s AI business, already experiencing triple-digit percentage growth, is outpacing the cloud segment at a similar stage of development.

Additionally, the company has had an excellent earnings surprise history with an average bear of 25.85% over the last four quarters. It remains to be seen whether Amazon will continue to surprise investors with its performance.

(Amazon Shares Daily Price Chart, Source: Trading View)

From a technical analysis perspective, the overall trend for Amazon shares remains bullish, as indicated by the higher highs and higher lows within the ascending channel. Recently, it has retested the previously broken structure, gained support, and continued to gain bullish momentum, driving the price upward. Such a solid bullish structure may lead the price to keep moving upward until it reaches the upper boundary of the ascending channel.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.