US stock futures are pointing lower today with European markets in the red this morning. The Fed minutes gave risky assets some breathing space last night, striking a cautious tone with the FOMC unlikely to overreact to the upcoming spike in US inflation. But the rapid rise in bond yields and the fine line the Fed is now walking between a healing economy and its communication is giving investors, shall we say, a lot of food for thought.

There’s more important US data this afternoon, after the blowout stimulus-check fuelled retail sales numbers yesterday. The weekly jobless claims have received a lot of attention lately given concerns that the jobs market has stalled. That was prompted by a drop in employment in December and the meagre rebound last month. That said, falls in initial claims in recent weeks have hinted at an improving situation, so the markets will be zeroing in on whether this has continued.

Gold finds support

As bond yields have pulled back, so the yellow metal has found support on the dovish FOMC minutes and stock market weakness. $1765 is the key level and any break of this will need to see the dollar go higher from here. Interestingly, yesterday’s strong retail sales saw the greenback move north signalling that the world’s reserve currency has become increasingly cyclical, with a link to a Fed moving on rates sooner than previously expected.

If we lose $1765, then the 38.2% retracement level of the rally from August 2018 comes into play around $1725, before the psychological $1700 mark. Prices need to get up above $1825 to arrest the bearish momentum.

GBP on the up again

We highlighted the strong march of sterling earlier in the week and GBP is once more proving highly resilient as the re-rating of the UK outlook kicks on. This is especially seen in EUR/GBP this morning which has dropped to its lowest levels since March last year.

Downside pressure has been exceptionally strong in the “vaccine” pair with the EU vaccine rollout much less impressive than the UK, with supplies still said to be backdated to December for Pfizer.

Strong support lies around the Spring lows from 2019 at 0.85, with the psychological 0.86 level needing to be checked first. The fifth day of losses is pushing momentum indicators into overbought territory so we may see some pullback soon.

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