bank of england

Markets need to be prepared. Otherwise, hysteria will happen to them. The Fed knows this very well, which, looking at the "taper tantrum" of 2013, began to gradually introduced investors the QE curtailment in 2021. But governments communicate with the markets less often. Unless they have to. UK Prime Minister Liz Truss, amid a sharp decline in the ratings of her Conservative Party, was forced to admit a mistake. More attention should have been paid to preparing investors for tax cuts. However, the help of the Bank of England smoothed out this oversight: the GBPUSD pair, after sinking to a new anti-record, completely regained the lost ground.

The worst month for sterling since 2008 and the best week since 2020. It is rare to find such a breathtaking roller coaster in Forex. The presentation of the fiscal stimulus package to the general public turned into a large-scale sale of British bonds and the fall of the GBPUSD to a new historical bottom. Only the suspension of the quantitative ti

OPEC, Oil prices, investors awaiting Bank of England's decision

OPEC, Oil prices, investors awaiting Bank of England's decision

Walid Koudmani Walid Koudmani 04.11.2021 10:43
Investors await Bank of England decision Markets await today's highly anticipated Bank of England decision as expectations are mixed for today's meeting after yesterday's FED decision to start the QE tapering process. While some analysts think the central bank will raise interest rates by 15 points, others believe the bank will follow in the Fed's footsteps and leave rates unchanged while adjusting government asset purchasing. The uncertainty surrounding today's decision could lead to some added volatility once it is announced as many believe that rising inflation must be addressed by the Bank since it is having a significant impact on the economy as a whole. Whatever the BoE decides to do, it is clear that the global situation is beginning to shift as more central banks start to take steps towards normalising monetary and fiscal policy after nearly two years of emergency measures.  OPEC meeting remains in focus as Oil prices rebound Oil prices continued to trade higher in recent times, reaching new multi year highs and benefitting from the last OPEC decision to not increase monthly output further. While that decision caught markets slightly by surprise as many were expecting an increase in order to cope with rising demand and several supply issues, today's decision could be equally as important as it could set the tone for the final part of the year. OPEC is expected to leave the production increase at the previously agreed upon 400K, but any major surprises could potentially impact the prices of oil either by pushing them higher once again or by pressuring them back down if the group were to decide to unexpectedly increase levels. Download our Mobile Trading App:   Google Play   App Store
Meta (FB) Has Some Things To Worry About, Amazon (AMZN) And Ford (F) Ahead Of Publishing Their Reports

Meta (FB) Has Some Things To Worry About, Amazon (AMZN) And Ford (F) Ahead Of Publishing Their Reports

Swissquote Bank Swissquote Bank 03.02.2022 12:05
Yesterday’s ADP data showed that the US economy lost some 300’000 private jobs in December, versus 185’000 job additions expected by analysts, but no one cared. Google jumped by more than 7% yesterday to a fresh record high on the back of strong earnings. Nasdaq gained for the fourth consecutive session adding another 0.50% to its gains. But don’t uncork the champagne just yet! Because the Nasdaq futures are trading more than 2% lower at the time of writing. Disappointing Facebook results, and a 23% plunge in Meta shares in the afterhours trading calls for a red session in the US. Amazon is the last FAANG stock to announce earnings today, and the company is expected to reveal a second consecutive month of earnings decline. Ouch. Inflation in the Eurozone hit 5.1% in December. So, all eyes are on Christine Lagarde and what she has to say at today’s press conference. Will she insist that inflation is transitory or will she finally accept the defeat, and call it a problem? Across the Channel, the Brits will probably raise their interest rates by another 25bp for the second time at today’s meeting. Elsewhere, OPEC maintained its production increase target at 400’000 barrels per day and the consensus is a further advance in crude oil to $100pb in the foreseeable future. Watch the full episode to find out more! 0:00 Intro 0:36 Market update 2:23 Facebook plunges 20% post-results 3:40 Amazon to reveal another earnings decline 5:03 European inflation puts pressure on ECB 7:12 BoE to raise rates for the second time 8:16 OPEC raises output slowly, only Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
The Euro (EUR) Is In A Stable Channel And The Pound (GBP) Has Little Chance Of Falling

GBP: BoE Expected to Raise Yields, US Dollar (USD) Strengthens across the board - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 02.05.2022 09:24
Summary: USD Trumps all other currencies on the forex market today. SNB Sticks to loose monetary policy. BoE expected to raise treasury yields. EUR weakens further over the weekend. Since the market opened today the EURO has weakened against the USD. The USD strengthening comes with expectations of the hawkish Fed pushing U.S yields higher in May, this comes in the fight against the highest inflation the US has seen in 40 years. In addition, the European Central Bank is not expected to increase yields until their Asset Purchasing Program (APP) comes to a close. The current market sentiment is mixed for this major currency pair. EUR/USD Price Chart   Read next: US Dollar (USD) Continues To Trump The EUR, BoE Expected To Increase Interest Rates, SNB Remains Dovish, South African Rand (ZAR) Performance    Mixed market sentiment for EUR/GBP. GBP weakens against the EURO today. The Eurozone and Germany are expected to announce their GDP figures this week which could likely improve investor sentiment in the EURO. The market sentiment for this currency pair is mixed, this comes as the lockdowns in China and the Russia-Ukraine conflict are current aspects that affect both of these currencies. EUR/GBP Price Chart Swiss National Bank Sticks to their loose monetary policy. The USD strengthening against the CHF comes in anticipation of the Fed further increasing U.S yields in May. The Swiss National Bank (SNB) is not budging on their loose monetary policy amidst beliefs that this period of high inflation is temporary, causing the Swiss Franc to weaken. USD/CHF Price Chart Bank of England (BoE) expected to raise yields. Since the market opened this morning, the market sentiment for this currency pair is bullish. Although the price is decreasing, the bullish sentiment comes with expectations that the Bank of England (BoE) will announce an increase in treasury yields by 25 basis points at Thursday's announcements. The Fed is also expected to raise yields, this is causing the price to show volatility. GBP Price Chart   Read next: Euro (EUR) Continues To Weaken Against The US Dollar (USD), Euro Under Pressure Amidst Russia’s Decision To Tighten Gas Supplies. GBP Strengthens Against the JPY.    Sources: fxstreet.com, Finance.yahoo.com, dailyfx.com.
Record-breaking but near-peak inflation in Britain

Record-breaking but near-peak inflation in Britain

Alex Kuptsikevich Alex Kuptsikevich 19.05.2022 08:40
UK consumer prices rose by 2.5% in April, the second-biggest monthly gain in the indicator’s history since 1988. Annual inflation jumped from 7% to 9%, unseen in the indicator’s history. Metals, meanwhile, have withdrawn from the highs The longer-established retail price index last saw a high annual growth rate (11.1% y/y in April) in 1982, while such a big monthly jump (3.4% m/m) was last observed in 1980. However, despite the horror that these figures represent, there are still indications that the UK’s peak annual rate of inflation will be much lower than in the 1980s (22%) or 1970s (27%). While Output Producer Prices are showing an acceleration in the annual growth rate, rising to 14%, Input PPI has slowed from 19.2% to 18.6%. Although remaining volatile in recent weeks, oil and gas have regularly retreated from highs, limiting upward pressure on prices. Metals, meanwhile, have withdrawn from the highs. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Early hints that UK inflation may be slowing in the coming months may allow the Bank of England to raise the rate by 25 points At the same time, there are growing questions about final global demand, which will constrain producers in shifting costs to consumers. Early hints that UK inflation may be slowing in the coming months may allow the Bank of England to raise the rate by 25 points at its next meeting in mid-June and not copy the Fed’s 50-point move. This is moderately negative news for the British currency, which started to retreat from the $1.25 area on the data after a 2.9% rally from last Friday’s lows. Short-term traders should pay particular attention to the 1.2350 area. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Already, a dip lower this week would suggest that the brief period of recharging dollar bulls has ended. In this case, GBPUSD could quickly fall below 1.2000, making the 1.1500 area a potential ultimate target for this attack Follow FXMAG.COM on Google News
The Euro To The US dollar Pair May Move Upward

FX Daily: Dollar rally pauses for breath | ING Economics

ING Economics ING Economics 20.05.2022 10:57
Some support measures for the Chinese economy and some stability in the Chinese renminbi have helped usher in a period of consolidation in FX markets. This may well last into next week, although we would consider this a pause not a reversal in the dollar's bull trend. The stronger dollar is also exporting Fed hikes around the world Not until the Fed pours cold water on tightening expectations should the dollar build a top USD: Some consolidation is in order The dollar is now about 2% off its highs seen late last week. Driving that move has probably been some position liquidation and a preference for currencies like the Japanese yen (JPY) and the Swiss franc (CHF) during turbulent times in global equity markets. In fact, yesterday's FX activity looked like the big sell-off in EUR/CHF on Swiss National Bank (SNB) comments which triggered downside stops in USD/CHF and prompted a slightly broader dollar adjustment. Also helping this period of consolidation has been this week's stability in the Chinese renminbi (CNY). The overnight 15bp cut in the 5-year Loan Prime Rate – aimed at supporting the property sector – has instilled a little more confidence in Chinese assets markets. However, we cannot see USD/CNY heading straight back to 6.50. Instead, a 6.65-6.80 trading range may be developing after the recent CNY devaluation.  However, the emerging market environment still looks challenged given that the stronger dollar is effectively exporting tighter Fed policy around the world. Yesterday we saw rate hikes in Egypt, South Africa, and the Philippines. After devaluing the Egyptian pound by 15% in March, authorities there are very much struggling with the external environment. This has seen Egypt's 5-year Sovereign Credit Default swap rise to news highs of 940bp and is a reminder of the challenge North Africa faces from surging food prices. For today, the data calendar is relatively quiet and there may be some interest in what G7 finance ministers and central bank governors have to say after their meeting in Bonn. Reports suggest Japan would like some tweaks to the final G7 communique, but we very much doubt there will be any change in the core FX language that FX rates be market-determined and that excessive volatility and disorderly moves be avoided. DXY could correct a little lower to 102.30, but we see this as bull market consolidation, rather than top-building activity. Not until the Fed pours cold water on tightening expectations should the dollar build a top. And yesterday Fed hawk, Esther George, said that even this 'rough week' in equity markets would not blow the Fed off course.  EUR: ECB hawks in control Minutes of the April ECB meeting released yesterday show that the hawks are calling the shots. The market now prices a 31/32bp ECB rate hike at the 21 July ECB meeting – pricing which has plenty of scope to bounce between +25bp and +50bp over the next two months. This could drag EUR/USD back to the 1.0650/70 area over the coming days – helped by brief periods of calm in the external environment – but as above we would see this as a bear market bounce. Our core EUR/USD view for 2H22 is one of heightened volatility and probably EUR/USD getting close to parity in 3Q22 when expectations of the Fed tightening cycle could be at their zenith. Read next: Altcoins: What Is PancakeSwap (CAKE)? A Deeper Look Into The PancakeSwap Platform| FXMAG.COM GBP: April retail sales provide a reprieve UK retail sales have come in a little better than expected and break/suspend the narrative that the cost of living squeeze is large enough to derail the Bank of England tightening cycle. We would not get carried away with the sterling recovery, however. Sterling is showing a high correlation with risk assets – trading as a growth currency – and the outlook for risk assets will remain challenging for the next three to six months probably. Here's what our credit strategy team thinks of the European outlook.  Cable may struggle to breach the 1.2500/2550 area and 1.20 levels are very possible over the coming months. New-found hawkishness at the ECB means that EUR/GBP may struggle to sustain a move below 0.8450 before returning to 0.8600. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM CHF: SNB policy makes the case for EUR/CHF sub 1.00 next year As we discuss in an article released yesterday, it looks like the SNB is targeting a stable real exchange rate to fight inflation. Given that Switzerland's inflation is roughly 4% lower than key trading partners, a stable real exchange rate means that the nominal exchange rate needs to be 4% stronger. This will be an added factor supporting the CHF over the coming months and may start to generate interest in trades positioning for a lower GBP/CHF. 1.2080 is a big support level but 1.1860 looks like the near-term target. Read this article on THINK TagsGBP FX Daily ECB CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Investors' Concerns About The Coming Recession In The UK, Will GBP/USD Pair Reach Its Lowest Level In History?

British Pound (GBP) yawns on mixed retail sales | Oanda

Kenny Fisher Kenny Fisher 20.05.2022 12:03
The British pound is drifting on Friday, after showing unusually strong volatility this week. The pound rebounded on Thursday, racking up gains of 1.06% and briefly breaking above the symbolic 1.25 line. UK retail sales showed a strong gain in April, with a gain of 1.4% MoM. This followed a decline of 1.2% in March. However, on a yearly basis, sales volumes were 4.9% lower, as the broader picture looks grim. The monthly gain for March may have been a blip, as consumers were hit with higher household energy costs as well as an increase in taxes. Add into the mix inflation at 9.0% and possibly heading into double-digits, and it’s difficult to envision retail sales moving higher. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Consumer confidence hits record low The GfK consumer confidence index remains deep in negative territory. The index dropped to -40 in May, down from -38 in April. How pessimistic are consumers about the economy? The previous record of -39 was set in July 2008, at the height of the global financial crisis.  Consumer confidence is considered an early, reliable signal of economic activity, and these massively poor numbers could well indicate that the UK economy is falling into recession. A GfK note summed up the grim situation, saying that the BoE is pessimistic about inflation, consumer confidence is gloomy, and there aren’t any reasons for optimism anytime soon. This certainly does not bode well for the British pound, which has plunged over 7% since the start of the year. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM The BoE finds itself playing catch-up with the inflation curve. There have been voices calling for more aggressive rate hikes than the 25-bps increments we’ve seen over the past three meetings, especially with inflation hitting 9%. The central bank has a daunting challenge, as it must raise rates to curb inflation but also needs to be mindful that the economy is still recovering from Covid and could tip into a recession due to high interest rates. GBP/USD Technical 1.2393 has switched back to support. Below, there is support at 1.2275 There is resistance at 1.2525 and 1.2643   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
AUD/USD: Australian Dollar (AUD) May Be Considered As Not That "Attractive" In Times Of Aggresive Fed And The War

Will Pound (GBP) Strengthen? Ebury Weekly Analysis: British Pound (GBP) | Ebury

Matthew Ryan Matthew Ryan 23.05.2022 15:16
Last week saw some strange market action. Financial headlines were dominated by the relentless sell-off in world equity markets that left the S&P 500 index flirting with the semi-official bear market line of 20% below its record high. Among G10 currencies, the Swiss franc notched a rare win as the flight to safety bid combined with a hawkish central bank to send it soaring by over 2% against the US dollar. More surprising was the general weakness in the US dollar, which failed to benefit from its safe-haven role. In fact, the winners of the week were Latin American currencies, which is particularly impressive in the current risk averse environment. As long standing LatAm bulls, we are not complaining, however.  Learn more on Ebury This week the focus will be on any spillovers from the volatility in stock markets to the FX market, on one hand, and the PMIs of business activity on the other. The Eurozone and UK indices are all expected to print well above 55.nWe think that these levels belie the fears of recession that appear to be gripping asset markets. It is difficult to reconcile still massively negative real rates, huge government deficits and economies at full employment with any sustained economic pullback. Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 23/05/2022 British Pound (GBP) Data out of the UK continued to suggest a dichotomy between sentiment and reality. Consumer sentiment was dismal, but jobs data came out very strong, as did retail sales. Inflation in April was sky high, as expected. Sterling bounced back in line with the general dollar selloff and managed some gains against the euro as well. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM We think there is little to suggest a recession is likely, and this week’s PMI data should be further evidence. It seems that the Bank of England’s apparent willingness to tolerate inflation due to the risks to growth is misplaced. In the short-term, Bank of England dovishness may weigh on the pound, but after the recent sell-off we think that the currency is quite cheap and offers a solid opportunity over the longer term. Figure 2: UK Inflation Rate (2017 – 2022) Source: Refinitiv Datastream Date: 23/05/2022
Week Ahead:  US Dollar Falls As Growth Fears Rise on Fed Hawkishness

Week Ahead: US Dollar Falls As Growth Fears Rise on Fed Hawkishness

OneRoyal Market Updates OneRoyal Market Updates 23.05.2022 08:24
Weekly Recap The main story this week was the reversal lower in the US Dollar. The Dollar Index closed out its first losing week since the final week of March as recession fears took hold. The reversal was seemingly fuelled by comments from Fed chairman Powell midweek suggesting a more aggressive course of action from the Fed. Powell warned that the central bank is prepared to raise rates above the neutral level, if necessary, to bring inflation down and will not stop until inflation is back at target. With inflation still at elevated levels and with interest rates higher and expected to rise materially in coming months, traders are concerned over the impact on growth. These fears were well reflected this week in the sharp reversal lower in USD. UK inflation was seen hitting 40-year highs last month at 9%, putting BOE rate hike expectations back into focus. The SNB was seen making a U-turn on monetary policy with SNB chairman Jordan warning that the SNB is ready to act on inflation, which is travelling well above the SNB’s target. The release of the ECB meeting minutes this week highlighted the hawkish shift taking place among members, with the market now increasingly pricing in a July rate hike. It was a volatile week for equities with the FTSE ending the week roughly flat (as of writing) after plenty of two-way action. The ASX200, the DAX and the Nikkei ended the week higher while the S&P and the Nasdaq were firmly in the red as Fed rate-hike expectations overtook USD weakness. It was a better week for precious metals with both gold and silver rallying on USD weakness. Oil prices were unable to capitalise on USD weakness, however, as focus remains on the ongoing EU negotiations regarding potential sanctions on Russian oil. While many EU leaders are pushing for an EU-wide ban on Russian oil by year end, the chances of achieving this look unlikely given fierce opposition from Hungary and Greece among others. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM Coming Up Next Week US, Eurozone, UK PMIs Traders will get the latest insight into the performance of the factory and non-factory sectors in the US, eurozone and UK. With inflation surging in all three economies and with supply-chain issues remaining a real problem there is a very real threat that these readings highlight weakness. Given the recessionary concerns which have taken centre stage recently, if these readings underperform asset markets are likely to come under pressure over the week. RBNZ Rate decision The RBNZ meeting this week is expected to see the bank hike rates by a further .5%. 20 out of 21 economists polled by Reuters are calling for such a move. Given these hawkish expectations, if the bank hikes by less than .5% NZD will likely come under heavy selling pressure. If a .5% hike is announced, the focus will then be on forward guidance with NZD likely to rally if the RBNZ points to further hikes incoming. FOMC Meeting Minutes The May FOMC minutes this week are expected to highlight the uptick in Fed hawkishness recently. There’s potentially some reduced impact in the wake of recent comments from Fed’s Powell suggesting that the Fed has turned more aggressively hawkish since that meeting. Nonetheless, the details are likely to be firmly hawkish and market volatility can be expected in response to them. Forex Heat Map Coming up This Week Technical Analysis Our favourite chart this week is GBPCHF GBPCHF has been moving lower in a well-defined channel over the correction from 2021 highs. Recently price has been underpinned by support along the 1.2114 level. This has been a major support area since late last year. If price can breach below this level on a weekly closing basis, this would suggest a continuation of the downtrend towards the next big support at the 1.1687 level. Read next: Altcoins: Cardano (ADA) What Is It? - A Deeper Look Into Cardano (ADA) | FXMAG.COM Economic Calendar – High Impact Another busy data week coming up, key highlights include: US, eurozone and UK PMI readings on Tuesday, US GDP on Thursday and US trade data on Friday. See the calendar below for full schedule.
Bank Of England Is Expected To Choose Between 50 and 75bp, Ethereum Arouses More And More Discussions As Merge Is Around The Bend

What's The Future Of British Pound (GBP)? Stocks: Snap Has Fallen! How Far Will New Zealand Dollar Go!? | Least worst choices | Oanda

Jeffrey Halley Jeffrey Halley 25.05.2022 11:05
RBNZ hikes by 50-bps The Reserve Bank of New Zealand has raised policy rates by 0.50% to 2.0% this morning, with Governor Orr setting a hawkish tone in the press conference afterwards. In the statement itself, the RBNZ’s “least worst choices” policy seemed to imply that although external risks remained, the domestic economy was strong and could tolerate tighter monetary conditions. Mr Orr seemed to be saying much the same, suggesting that terminal rates could go above 3.0% and would get there sooner, rather than later. We’ll see just how strong the New Zealand economy is in due course, but a hawkish RBNZ has seen the New Zealand dollar rally by 0.70% to 0.6505 today, making it the biggest currency gainer in Asia today. Elsewhere, Singapore’s GDP growth came in tight on expectations, rising by 3.70% YoY for Q1. With inflation data yesterday also less worse than expected, expectations for another unscheduled tightening by the Monetary Authority of Singapore have receded for now. That may bring some relief to the Malaysian ringgit, which has fallen to 3.20 against the Singapore dollar. Snap Has Fallen In Malaysia itself, Inflation data for April continues to remain benign as domestic demand stays subdued. Inflation YoY rose by just 2.30% and will leave Bank Negara, like Bank Indonesia yesterday, in no hurry to tighten monetary policy. Ominously though, the Malaysian ringgit has shown no strength versus the US dollar. USD/MYR remains at recent highs at 4.4000 even as the greenback is experiencing an extended bull market correction versus the G-10 and EMFX elsewhere. If the US dollar turns higher once again, and the MYR resumes its sell-off, Bank Negara’s hand might be forced. Overnight, the recession word weighed on stock markets once again. European PMI data was a mixed bag. Manufacturing PMIs held steady, while Services PMIs fell as consumer demand takes a hit from the rise in the cost of living. That wasn’t enough to stop the euro rally, powered by suddenly hawkish ECB heavyweights. Bank of England, has already signalled a white flag on bringing down inflation The picture was rather grimmer in the United Kingdom where the most honest central bank in the world, the Bank of England, has already signalled a white flag on bringing down inflation and pencilled in a recession next year. UK Manufacturing PMI held steady at 54.6, but Services PMIs plummeted to 51.8. The UK is facing a winter of discontent as the cost of living soars, with the railways RMT union voting to strike over pay negotiations. Expect more of this going forward. Additionally, the Chancellor is apparently preparing to widen the scope of the windfall tax on energy companies, probably to help pay for his cost of living mini-budget. UK stock markets didn’t like that. Finally, the “party gate” report on those lockdown wine frenzies in the No 10 garden is due for release today, potentially putting more pressure on PM Johnson’s leadership. ​ Little surprise that the sterling slumped versus the euro and the US dollar overnight. In the United States, the recession world hit particularly hard after the Snap Inc. induced meltdown by Nasdaq stocks overnight. US New Home Sales plummeted to 591,000 in April, while Richmond Fed Manufacturing slumped to -9 in May. The S&P Global Services Flash PMI for May fell to 53.5, with Flash Manufacturing easing to 57.5. It was the new home sales that really frightened the street, though, as house building, and its ancillary services and suppliers are a good chunk of US domestic GDP. Soaring mortgage interest rates and petrol prices appear to be doing a lot of the Fed’s work for it before it even gets started. Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM If there is one takeout from all of this for me, it is that rising inflation and borrowing rates are already crimping the demand side of the equation. Unfortunately, we are seeing very little sign of price pressures reducing due to a combination of factors, all of which have been thrashed to death here and in research everywhere. The uncomfortable reality is that central banks are going to be forced to continue the tightening path, even as growth slows around the world, because inflation has proven sticky and not transitory. That is the least worst choice central banks need to make in a stagflationary environment. I am asked every day if we have seen the low in the equity market sell-off. Hopefully, I have answered the question. US President Joe Biden’s trip around Asia continues Finally, US President Joe Biden’s trip around Asia continues. Unfortunately, with its emphasis on containing China and hawking a trade agreement empty of potential access to the US domestic market (Congress needs to approve that), the trip is not going to make much headway in re-establishing US leadership in the region. Asia really needs to see the colour of America’s money. Furthermore, the reliability of the US as a partner has taken a further hit today, with White House officials explicitly refusing to rule out the possibility that the US could enact crude oil export restrictions to help cap energy prices domestically. The US doesn’t have a crude oil problem, it has a refining and transportation problem, but let’s not let facts get in the way. I have warned about food nationalism previously, but if President Biden prioritises November’s mid-term elections over the economic war with Russia, and supporting Europe, it really is every man for himself globally. I can’t see that being positive for equities anywhere, or European asset markets full stop, or for Ukraine. Only the Kremlin is likely to be popping champagne as the US does Russia’s divide and conquer for them. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
The Euro Will Strengthen, But Questions Remain About What To Do Next

Supporting EUR, USD And Others - What Is Interest Rate? What Is A Negative Interest Rate | Binance Academy

Binance Academy Binance Academy 01.06.2022 16:55
TL;DR It doesn’t make much sense to lend money for free. If Alice wants to borrow $10,000 from Bob, Bob will need a financial incentive to loan it to her. That incentive comes in the form of interest – a kind of fee that gets added on top of the amount Alice borrows. Interest rates profoundly impact the broader economy, as raising or lowering them greatly affects people’s behavior. Broadly speaking: Higher interest rates make it attractive to save money because banks pay you more for storing your money with them. It’s less attractive to borrow money because you need to pay higher amounts on the credit you take out. Lower interest rates make it attractive to borrow and spend money – your money doesn’t make much by sitting idle. What’s more, you don’t need to pay huge amounts on top of what you borrow. Learn more on Binance.com Introduction As we’ve seen in How Does the Economy Work?, credit plays a vital role in the global economy. In essence, it’s a lubricant for financial transactions – individuals can leverage capital that they don’t have available and repay it at a later date. Businesses can use credit to purchase resources, use those resources to turn a profit, then pay the lender. A consumer can take out a loan to purchase goods, then return the loan in smaller increments over time. Of course, there needs to be a financial incentive for a lender to offer credit in the first place. Often, they’ll charge interest. In this article, we’ll take a dive into interest rates and how they work.   What is an interest rate? Interest is a payment owed to a lender by a borrower. If Alice borrows money from Bob, Bob might say you can have this $10,000, but it comes with 5% interest. What that means is that Alice will need to pay back the original $10,000 (the principal) plus 5% of that sum by the end of the period. Her total repayment to Bob is, therefore, $10,500. So, an interest rate is a percentage of interest owed per period. If it’s 5% per year, then Alice would owe $10,500 in the first year. From there, you might have: a simple interest rate – subsequent years incur 5% of the principal or  a compounded interest rate – 5% of the $10,500 in the first year, then 5% of $10,500 + $525 = $11,025 in the second year, and so on.   Why are interest rates important? Unless you transact exclusively in cryptocurrencies, cash, and gold coins, interest rates affect you, like most others. Even if you somehow found a way to pay for everything in Dogecoin, you’d still feel their effects because of their significance within the economy. Take a commercial bank – their whole business model (fractional reserve banking) revolves around borrowing and lending money. When you deposit money, you’re acting as a lender. You receive interest from the bank because they lend your funds to other people. In contrast, when you borrow money, you pay interest to the bank. Commercial banks don’t have much flexibility when it comes to setting the interest rates – that’s up to entities called central banks. Think of the US Federal Reserve, the People’s Bank of China, or the Bank of England. Their job is to tinker with the economy to keep it healthy. One function they perform to these ends is raising or lowering interest rates. Think about it: if interest rates are high, then you’ll receive more interest for loaning your money. On the flip side, it’ll be more expensive for you to borrow, since you’ll owe more. Conversely, it isn’t very profitable to lend when interest rates are low, but it becomes attractive to borrow. Ultimately, these measures control the behavior of consumers. Lowering interest rates is generally done to stimulate spending in times when it has slowed, as it encourages individuals and businesses to borrow. Then, with more credit available, they’ll hopefully go and spend it. Lowering interest rates might be a good short-term move to rejuvenate the economy, but it also causes inflation. There’s more credit available, but the amount of resources remains the same. In other words, the demand for goods increases, but the supply doesn’t. Naturally, prices begin to rise until an equilibrium is reached. At that point, high interest rates can serve as a countermeasure. Setting them high cuts the amount of circulating credit, since everyone begins to repay their debts. Because banks offer generous rates at this stage, individuals will instead save their money to earn interest. With less demand for goods, inflation decreases – but economic growth slows.   ➟ Looking to get started with cryptocurrency? Buy Bitcoin on Binance!   What is a negative interest rate? Often, economists and pundits speak of negative interest rates. As you can imagine, these are sub-zero rates that require you to pay to lend money – or even to store it at a bank. By extension, it makes it costly for banks to lend. Indeed, it even makes it costly to save. This may seem like an insane concept. After all, the lender is the one assuming the risk that the borrower may not repay the loan. Why should they pay?  This is perhaps why negative interest rates are something of a last resort to fix struggling economies. The idea comes from a fear that individuals may prefer to hold onto their money during an economic downturn, preferring to wait until it recovers to engage in any economic activity.  When rates are negative, this behavior doesn’t make sense – borrowing and spending appear to be the most sensible choices. This is why negative interest rates are considered to be a valid measure by some, under extraordinary economic conditions.   Closing thoughts On the surface, interest rates appear to be a relatively straightforward concept to grasp.  Nevertheless, they’re an integral part of modern economies – as we’ve seen, adjusting them can fundamentally alter the behavior of individuals and businesses. This is why central banks take such a proactive role in using them to keep nations’ economies on track. Do you have more questions about interest rates and the economy? Check out our Q&A platform, Ask Academy, where the Binance community will answer your questions.
The Euro (EUR) Is In A Stable Channel And The Pound (GBP) Has Little Chance Of Falling

The Market Has Strong Expectations Of An Even More Hawkish Fed (EUR/USD, USD/CHF), Pound Sterling Tumbled Amidst Investor Sell-off Sentiment (EUR/GBP, GBP/USD)

Rebecca Duthie Rebecca Duthie 14.06.2022 12:19
Summary US Dollar supported by prospects of a hawkish Fed. The Pound sterling remains vulnerable to further losses against the Euro. Read next: US CPI Inflation Acceleration Likely To See Hawkish Fed Retaliation (EUR/USD), On Thursday The Market Expects The BoE Monetary Policy Decision (EUR/GBP)  Expectations of a hawkish Fed is driving the dollar up. The market is reflecting bearish signals for this currency pair. As expectations for the Federal Reserve to continue on its hawkish path, and raise interest rates even higher at the next FOMC heighten, the US Dollar is strengthening. A hawkish move from the Fed will likely drive the US Dollar higher as it will gain a yield advantage over its G10 peers. Uncertainty around driving the US economy into a recession also brings about the appeal for the US Dollars liquidity. EUR/USD Price Chart Pound Sterling tumbles in the wake of investor sell-off sentiment The market is reflecting bullish signals for this currency pair. The Pound sterling remains vulnerable to further losses against the Euro following the losses experienced in the last 24 hours which was driven by the strong risk-off sentiment that has been seen by the global markets, which is also linked to the strong expectations for larger interest rate hikes at the US Federal Reserve. EUR/GBP Price Chart US Dollar/Swiss Franc (USD/CHF) Bullish The market is reflecting bullish signals for this currency pair. With expectations for the US Federal Reserve to further tighten monetary policy, the US Dollar is strengthening against most of its counterparts, including the Swiss Franc. USD/CHF Price Chart UK employment data released UK jobs data was released early on Tuesday, which reflected an employment change for March beating estimates whilst the employment statistic missed expectations. The initial reaction to this data saw the pound sterling weaken against the US Dollar as the ease in the labor market could be a signal towards the start of an economic shift. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
The GBP/USD Pair Was Trading Calmly But The Volatility Still Remained Very High

FX: What Is Cable? British Pound To US Dollar (GBPUSD). Technical Analysis of GBP/USD for June 21, 2022

InstaForex Analysis InstaForex Analysis 21.06.2022 10:20
Relevance up to 09:00 2022-06-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Technical Market Outlook: The GBP/USD pair has been seen steadily moving towards the technical resistance located at the level of 1.2468, just where the main channel lower line is located. The bulls are temporary in change of the market, the momentum is strong and positive, so after the pull-back to the nearest technical support is done, the price keeps bouncing up. The nearest technical support is seen at the level of 1.2281 and 1.2207. Nevertheless, the supply zone located between the levels of 1.2618 - 1.2697 is still the main obstacle for bulls that needs to be broken if the rally is expected to be continued.     Weekly Pivot Points: WR3 - 1.2922 WR2 - 1.2665 WR1 - 1.2442 Weekly Pivot - 1.2193 WS1 - 1.1971 WS2 - 1.1712 WS3 - 1.1494 Trading Outlook: The price broke below the level of 1.3000 quite long time ago, so the bears enforced and confirmed their control over the market in the long term. The Cable is way below 100 and 200 WMA , so the bearish domination is clear and there is no indication of trend termination or reversal. The bulls are now trying to start the corrective cycle after a big Pin Bar candlestick pattern was made last week. The next long term target for bears is seen at the level of 1.1989. Please remember: trend is your friend.   Read more: https://www.instaforex.eu/forex_analysis/281021
The Euro (EUR) Is In A Stable Channel And The Pound (GBP) Has Little Chance Of Falling

ECB’s Christine Lagarde Eased Fears (EUR/USD, EUR/CHF), Expectations Of A More Hawkish BoE Strengthen (EUR/GBP, GBP/USD)

Rebecca Duthie Rebecca Duthie 21.06.2022 15:46
Summary: President Joe Biden announced he is considering a gas tax holiday. Markets expect a more hawkish BoE, thus offering the pound sterling support. CHF is supported by the SNB's hawkish attitude. Read next: BoE’s Dr Catherine L Mann Speaks  EUR/USD currency pair The market is reflecting bullish signals for this currency pair. US President Joe Biden has announced that he may be considering imposing a gas tax holiday in an attempt to ease inflationary pressure on the US consumer. This looser fiscal policy move could help the Monetary policy tightening moves by the Federal Reserve by adding more flexibility and optionality in its fight against inflation. Theoretically speaking, looser fiscal policy encourages more foreign investment, and thus a higher US Dollar demand. This mixed with a hawkish Federal Reserve could give an extra boost to the US Dollar if the tax cut is approved. During her speech yesterday, European Central Bank (ECB) president Christine Lagarde managed to ease fears via her statement around the ECB’s proactive fight against fragmentation, thereby offering the Euro support. EUR/USD Price Chart BoE expected to accelerate their interest rate hiking path The market is reflecting bearish signals for this currency pair. Analysts at Goldman Sachs and Deutsche Bank say they expect the Bank of England (BoE) to accelerate the rate in which they will raise interest rates. The BoE indicated they would be more inclined to take a more stern stance on inflation, even at the expense of growth. Therefore, giving the markets expectation of a more hawkish BoE, and offering the pound sterling support. EUR/GBP Price Chart SNB’s move to raise interest rates offers CHF support The market is reflecting bearish signals for this currency pair. Despite European Central Bank’s (ECB) Christine Lagarde easing fears around fragmentation, the Swiss Franc is still showing strength against the Euro. Last week the Swiss National Bank (SNB) surprised the markets with a 50 basis point rate hike in its interest rates, which offered the safe-haven currency support. The Swiss Franc was the best performing currency last week. EUR/CHF Price Chart Looming recessions and slowing economies The market is reflecting bullish signals for this currency pair. The pound sterling was edging higher during early trading on Tuesday despite negatives hanging over the GBP. On Wednesday, the UK is expected to release headline inflation data, which is expected to come in at 9.1%, which may even come in higher. In addition, the fears of a slowing UK economy and a global recession are only 2 of the factors that are weighing on this currency pair and on many other foreign exchange pairs. GBP/USD Price Chart Sources: dailyfx.com, finance.yahoo.com, poundsterlinglive.com
Volatility Is In The Currency Markets This Week|USD/CAD Pair Has Jumped

Fears Of Recession Loom (EUR/USD), UK CPI Inflation Data 9.1% For May (EUR/GBP), Surprisingly Strong Canadian Inflation Data (USD/CAD), EUR/JPY

Rebecca Duthie Rebecca Duthie 22.06.2022 16:27
Summary: UK CPI inflation data came in at 9.1% for May. BoJ remaining dovish. Fears of a recession loom. Read next: ECB’s Christine Lagarde Eased Fears (EUR/USD, EUR/CHF), Expectations Of A More Hawkish BoE Strengthen (EUR/GBP, GBP/USD)  ECB could benefit from QEQT combination The market is reflecting bullish signals for this currency pair. The Euro currency could benefit if the European Central Bank (ECB) uses the European continent's fragmented economic landscape to its advantage by combining both quantitative easing (QE) and quantitative tightening (QT) to normalise monetary policy by minimising upset. The Euro has been recovering against the US Dollar this week. Concerns over a recession in the US have grown as the Fed continue on their hawkish path of fighting inflation. EUR/USD Price Chart UK CPI inflation data met market expectations The market is reflecting bearish signals for this currency pair. The pound sterling weakened against the Euro in the direct wake of the release of UK inflation data which mostly came in as expected, however, some parts of the report came in softer than was expected and could prove supportive of the British pound currency. UK CPI inflation data came in year-on-year in May at 9.1% which beat April's 9.0% and was in-line with the market expectations. EUR/GBP Price Chart USD/CAD The market is slowing mixed market signals for this currency pair. Canadian inflation data came in surprisingly strong for the month of May, which could likely drive investor expectations of a more hawkish Bank of Canada (BoC) interest rate hiking policies going forward, thus likely supporting the Canadian Dollar. USD/CAD Price Chart BoJ Continues to opt out of monetary policy tightening The market is reflecting bullish signals for this currency pair. As the Bank of Japan (BoJ) continues their monetary easing and chooses to stay away from tightening monetary policy, the Euro and other currencies seem to be gaining on the safe-haven asset. EUR/JPY Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Hold On Tight Swiss Franc (CHF) - Swiss National Bank Decides On Interest Rate This Week!

Data Showed A Slowing Eurozone Economy (EUR/USD, EUR/CHF), UK PMI Data Came In Stronger Than Expected (EUR/GBP), NZD Was The Top Performing Currency On Thursday (GBP/NZD)

Rebecca Duthie Rebecca Duthie 23.06.2022 15:44
Summary: Eurozone data showed a slowing European economy for June. Pound sterling offered support from strong UK PMI data. NZD was Thursday's top performing currency. Read next: Fears Of Recession Loom (EUR/USD), UK CPI Inflation Data 9.1% For May (EUR/GBP), Surprisingly Strong Canadian Inflation Data (USD/CAD), EUR/JPY  Euro weakened in the wake of slowing economy data The market is reflecting mixed signals for this currency pair. The Euro fell sharply on Thursday in the wake of data that showed that the Eurozone economy had slowed during June and undermined the expectations for a series of rapid interest rate hikes from the European Central Bank (ECB) that are due to start in July. The fall in the Euro helped reinforce a bid for the US Dollar against all major pairs as investors continue to bet on a global economic slowdown. ` EUR/USD Price Chart UK PMI data beat market expectations The market is reflecting mixed market sentiment for this currency pair. The UK economy continued to grow during June as UK PMI data came in stronger than the market expected. At the same time UK wage pressures remained strong at firms that were increasingly willing to pass on price increases to customers, which is likely to continue to place pressure on the Bank of England (BoE) to raise interest rates. EUR/GBP Price Chart GBP/NZD upside risk The New Zealand Dollar was one of the top performing major currencies on Thursday when the NZD/USD pair seemed to be drawing dip-buyers from the market. The Pound to NZD has been contained over the past month, but with the NZD/USD pair testing major support levels, it is possible that the breakout risk for the GBP/NZD is on the upside. GBP/NZD Price Chart EUR/CHF The market is reflecting bearish signals for this currency pair. As the Swiss Franc continues to strengthen in the wake of the Swiss National Banks (SNB) interest rate hike, the Euro is weakening due to unfavourable economic data. EUR/CHF Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
Investors' Concerns About The Coming Recession In The UK, Will GBP/USD Pair Reach Its Lowest Level In History?

Concerns Of A Global Recession Continue To Weigh On Markets - Take A Look At The EUR/USD, EUR/GBP, GBP/AUD And EUR/JPY Currency Pairs

Rebecca Duthie Rebecca Duthie 24.06.2022 13:32
Summary: ECB expected to increase rates at a faster pace. CBA thinks the AUD is at risk of trading at its lowest levels against the GBP since the start of the pandemic.\\ Read next: Data Showed A Slowing Eurozone Economy (EUR/USD, EUR/CHF), UK PMI Data Came In Stronger Than Expected (EUR/GBP), NZD Was The Top Performing Currency On Thursday (GBP/NZD)  EUR/USD currency pair The market is reflecting bullish signals for this currency pair. At this point, the market expects to see a continuing hawkish Federal Reserve, pushing both interest rates and long-term rates up even further, thus, the USD is likely to remain strong for most of the remainder of 2022. The European Central Bank (ECB) is expected to raise interest rates further and at a faster pace, the ECB has already communicated hikes in both July and September, as it tries to contain the Eurozone inflation narrative. As concerns around a global recession tighten, the aggressive 75 basis point rate hike made by the Fed has caused investors to be more cautious across the board. EUR/USD Price Chart Eurozone and UK economy slowing. The market is reflecting bearish signals for this currency pair. UK retail sales declined in May as consumers felt the pain of rising prices which in turn did not allow the pound sterling a boost heading into the weekend. In addition the retail data from the UK came after the data revealved by France and Germany also missed market expectations. The markets are expecting economic slowdown in both the UK and Eurozone economies. EUR/GBP Price Chart CBA outlook on AUD According to the Commonwealth Bank of Australia (CBA), the Australian Dollar is at risk of trading at its lowest levels against the British pound since the start of the Covid-19 pandemic. The CBA sees the AUD as being amongst the most vulnerable currencies to the recent souring of the global economic outlook. GBP/AUD Price Chart EUR/JPY The market is reflecting mixed signals for this currency pair. As the Japanese Yen (JPY) continues to weaken in the wake of a dovish Bank of Japan (BoJ), the Euro is also experiencing troubles in the wake of disappointing economic data released from France and Germany, which indicates a slowing of the Eurozone economy. EUR/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
The Euro To US Dollar (EUR/USD) Pair: The Strong And Dynamic Sell-off Continues

EUR/USD Currency Pair Bullish, KPMG Cuts Growth Forecast For Pound Sterling (EUR/GBP, GBP/USD), RBC Capital Markets Recommend Selling GBP/SEK

Rebecca Duthie Rebecca Duthie 27.06.2022 13:38
Summary: RBC are so confident in this they recommended selling the GBP/SEK currency pair. Euro’s concerns lie in the rising energy prices and possible supply chain disruptions. KPMG cut UK economic growth forecasts for 2022 and 2023. Recession concerns are weighing on the US dollar. Read next: Concerns Of A Global Recession Continue To Weigh On Markets - Take A Look At The EUR/USD, EUR/GBP, GBP/AUD And EUR/JPY Currency Pairs  EUR and USD facing economic concerns The market is reflecting bullish signals for this currency pair. Federal Reserve Chairman, Jerome Powell reiterated in congress that it will be tough for the Fed to bring inflation down without harming the economy or disrupting the labour market, this began a downward revision to market expectations for US interest rates. The biggest concern for the Euro lies in the economic hit in the wake of rising energy prices and possible supply disruptions. Hence, the European Central Bank (ECB) views this as a medium-term source of disinflation, which is yet another reason to take a slower, more cautious approach to normalising monetary policy that has been priced in over the past months. EUR/USD Price Chart EUR/GBP currency pair The market is reflecting bullish signals for this currency pair. KPMG cut UK economic growth forecasts for 2022 and 2023, the cut comes from the expectation of a “mild” recession in the UK economy in 2023, in the wake of surging commodity prices and China's Covid outbreak. News of the downgrade in expectations is driving the Euro to strengthen against the pound sterling. EUR/GBP Price Chart Strong Sell recommendations for the GBP/SEK RBC Capital Markets’ foreign exchange strategists are warning that the pound is likely to suffer losses in the near-term against the Swedish Krona. They are so confident in this they recommended selling the GBP/SEK currency pair. The GBP is expected to take a hit at the end of the Month due to the release of important economic data. GBP/SEK Price Chart US recession concerns weighing on the US Dollar The market is reflecting bullish signals for this currency pair. During last week's trading week, the narrative changed from inflation concerns to recession concerns which are weighing on the US Dollar via lower treasury yields. The UK PM Borris Johnson is looking to hold onto his PM status and run for a 3rd term. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
The GBP/USD Pair Was Trading Calmly But The Volatility Still Remained Very High

UK: Recession In The End Of 2022? Scary Projections Of Bank Of England!

Saxo Bank Saxo Bank 08.08.2022 09:36
Summary:  In today’s ‘Macro Chartmania’, we give an update on the British economy. A few months ago, we warned the UK economy is one of the developed countries most likely to enter into a recession. There is no debate about it anymore. Last week, the Bank of England updated its macroeconomic forecasts for the years until 2025. These are frightening. The United Kingdom is projected to enter into a recession in Q4 2022. This could last five quarters and cause GDP to fall about 2.1 % - as deep as the recession of the early 1990s. But this is not the worst. Very often, the economy rebounds quite sharply after a recession. This is unlikely to happen this time. The slump will last. The BoE sees GDP still 1.75 % below today’s levels in mid-2025. Click here to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week. The United Kingdom is more and more looking like an emerging market country: Political instability (the new Prime Minister will be announced on 5 September after Boris Johnson’s resignation), trade disruptions (due to Brexit and Covid-related bottlenecks), energy crisis (the risk of a blackout this winter is real) and high inflation (the Bank of England forecasts that UK CPI will peak at 13 % in October but this is certainly a bit optimistic) are all hurting the UK economy. The only major difference : there is no currency crisis. The sterling pound exchange rate is rather stable. It only dropped 0.70 % against the euro and 1.50 % against the U.S. dollar over the past week. Our bet : after surviving Brexit uncertainty, we don’t see what could push the sterling pound into a free fall. All the leading indicators point in the same direction : The worst is yet to come for the British economy. There is a consensus among economists about that very fact. The OECD’s leading indicator for the United Kingdom, which is supposed to anticipate reversals in the economy six to nine months in advance, fell to 98.6 in June. The annual rate was 7.3 % in June 2021 (partially reflecting the post-lockdown rebound). It now stands at minus 2.9 %. The change is impressive over a year. This is not only linked to Covid data noise. This is a clear sign that a recession is coming. In addition, new car registrations, which are often considered as a leading indicator of the overall UK economy, continue to drop. This also reflects the deep collapse in consumer confidence (see chart below). In July 2021, after the peak of the pandemic, new car registrations stood at 1,835,000. They now stand at 1,528,000, a sharp drop of 14%. This is the lowest level since the end of the 1970s. The recession will be long and deep. There won’t be an easy escape. This is the most worrying, in our view. The Bank of England assesses the slump will last with GDP still 1.75 % below today’s levels in mid-2025. What Brexit has not done by itself, Brexit coupled with Covid and high inflation have succeeded in doing. The UK economy is crushed. The window for further rate hikes is closing :   Last week, the Bank of England hiked interest rates by 50 basis points, from 1.25 % to 1.75 %. We think the Bank of England’s next rate hike in September (probably of 50 basis points) could be the last. Outside of the jobs markets, there are signs that some of the key inflation drivers may be starting to ease. In addition, the prospect of a long recession (five negative quarters of GDP starting in Q4 2022 all the way through to Q4 2023) will certainly push the Bank of England into a wait-and-see position. On the topic of balance sheet reduction, we don’t expect any changes in the medium-term. Gilt sales will begin shortly after the September meeting. They will amount to £10bn per quarter the first year (this amount will be revised each year). We think the Bank of England has a rather traditional approach to deal with the current macroeconomic situation. Domestic demand must be slowed down by pushing GDP below its potential level, thus increasing unemployment and lowering inflation. A key rate of 2.25 % could already have a noticeable positive impact on the overall inflation dynamics, in our view. However, this is too early to know whether the current tightening cycle will definitely be over in September. The inflation dynamics have been a bit unpredictable in recent months. This is the least we can say. The social contract is broken : Imagine the graduate entering the workforce in 2009/10, who will have been told this was a once-in-a-lifetime crash. They are now in their early 30s and having yet another once-in-a-lifetime economic crisis. They faced an economy of suppressed wages, no housing prospects, two years of socializing lost to lockdown, obscene energy bills and rent and now a lengthy recession. This will lead to more poverty and despair. The Bank of England is now forecasting that real household post-tax disposable income will fall by 3.7 % over this year and next. This would be easily the weakest two years on record since 1963. The lowest income is hit the hardest. The International Monetary Fund found the poorest households in the United Kingdom are amongst the hardest hit by the cost of living in Europe. They found that living costs for the poorest 20 % of households are set to rise by about twice as much as those for the wealthiest, for instance. If this situation would happen in France, there would be a street revolution. Remember the Yellow Vest Movement in 2018. But this is the United Kingdom. It will unlikely lead to any major political shift. There will be more social distress, wealth inequality and poverty all around, however. The sixth largest economy in the world will look even more like an emerging market country, unfortunately.     Source: Chart of Week Emerging market Britain | Saxo Group (home.saxo)
CarMax Inc And SolarEdge Technologies Inc Are The Biggest Losers At The Close In The New York Stock Exchange

US Jobless Claims: Even More Than The Previous Year. PBOC Hopes CPI To Stay At 3%

Saxo Strategy Team Saxo Strategy Team 12.08.2022 09:03
Summary:  Another downside surprise in US inflation in the wake of lower energy prices lifted the equity markets initially overnight. However, sustained hawkishness from Fed speakers brought the yields higher, weighing on equities which closed nearly flat in the US. Crude oil prices made a strong recovery with the IEA boosting the global growth forecast for this year. EURUSD stayed above 1.0300 and will be eying the University of Michigan report today along with UK’s Q2 GDP. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  After rising well over 1% in early trading amid the weaker-than-expected PPI prints, U.S. equities wiped out gains and closed lower, S&P 500 -0.07%, Nasdaq 100 -0.65%. Energy stocks were biggest gainers, benefiting from a 2.6% rally in the price of WTI crude, Devon Energy (DVN:xnys) +7.3%, Marathon Oil (MRO:xnys) +7%, Schlumberger (SLB:xnys) +5.7%.  Consumer discretionary and technology were the biggest decliners on Thursday. Chinese ADRs gained, Nasdaq Golden Dragon Index climbed 2.6%.  U.S. treasuries bear steepened In spite of weaker-than-expected PPI data, U.S. long-end treasury yields soared, 10-year yields +10bps to 2.99%, 30-year yields +14bps to 3.17%. The rise in long-end yields were initially driven by large blocks of selling in the T-bond and Ultra-long contracts and exacerbated in the afternoon after a poor 30-year auction. The yield of 2-year treasury notes was unchanged and the 2-10-year yield curve steepened 10bps to minus 23bps.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese equities surged, Hang Seng Index +2.4%, CSI300 Index +2.0%. Northbound inflows into A shares jumped to a 2-month high of USD1.9 billion. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +17.7%, Sunny Optical (02382:xhkg) +9%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. China internet names rebounded, Alibaba (09988:xhkg) +4.3%, Tencent (00700:xhkg) +2.7%, Meituan (03690:xhkkg) +4.0%, Baidu (09888:xhkg) +5.2%. Power tool and floor care manufacturer, Techtronic Industries (00669:xhkg) soared nearly 11% after reporting  a 10% year-on-year growth in both revenues and net profits in 1H22. The company rolled out a new generation of drill drivers that have embedded with machine learning algorithm. After collapsing 16% in share price yesterday, Longfor (00960) managed to stabilize and recover 5.7% following the company’s refutation of market speculation that it had failed to repay commercial papers due. EURUSD re-tested resistance levels EURUSD reclaimed the key 1.0300 on Thursday amid a softer dollar, and printed highs of 1.0364. While weaker-than-expected inflation prints in the US this week have curtailed dollar strength, it is hard for EURUSD to sustain gains amid the energy crisis and European recession concerns. A break below 1.0250 would be needed for EURUSD to reverse the trend, however. AUDUSD, likewise, trades above 0.7100 amid the risk on tone, but a turn lower in equities could reverse the trend. GBPUSD has been more range-bound around 1.2200 ahead of the Q2 GDP data scheduled to be released today, and EURGBP may be ready to break above 0.8470 resistance if the numbers come out weaker-than-expected. Crude oil prices (CLU2 & LCOV2) Crude oil prices gained further on Thursday amid signs of softer inflation, weaker dollar and improving demand. The International Energy Agency (IEA) lifted its consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch to oil. This could be aided by lower gasoline prices, which have dented demand during the US driving season. Prices fell below USD4/gallon for the first time since March. Meanwhile, OPEC may struggle to raise output in coming months due to limited spare capacity. WTI futures touched $94/barrel while Brent futures rose towards the 100-mark.   What to consider? Another downside surprise in US inflation US July PPI dipped into negative territory to come in at -0.5% MoM, much cooler than 1% last month or the +0.2% expected. But on a YoY basis, PPI remains up a shocking 9.8%. Core PPI rose 0.4% MoM, which means on a YoY basis core producer prices are up 7.6% (lower than June's +8.2% but still near record highs). Goods PPI fell 1.8%, dominated by a 9.0% drop in energy. Meanwhile, services PPI was up 0.1% in July. Despite the slowdown in both PPI and CPI this week, PPI is still 1.3% points above CPI, suggesting margin pressures and a possible earnings recession. Fed’s Daly said she will be open to a 75bps rate hike at the September meeting. US jobless claims rise, University of Michigan ahead US initial jobless claims 262K vs 265K estimate, notably higher than the 248k the prior week and the highest since November 2021. The 4-week moving average of initial jobless claims increased to 252K vs 247.5K last week, but still below 350k levels that can cause an alarm. The modest pickup in claims suggests that turnover at weaker firms is increasing. Key data to watch today is the preliminary University of Michigan survey for August, where expectations are for a modest improvement given lower gasoline prices. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. The PBOC reiterates that it will avoid excessive money printing to spur growth so as to safeguard against inflation.  China’s President Xi is said to be visiting Saudi Arabia next week The Guardian reports that President Xi Jinping is expected to visit Saudi Arabia on an invitation extended from Riyadh in March.  China has been eager to secure its oil supply and explore the possibility of getting its sellers to accept the renminbi to settle oil trade.   While relying on the United States for security in a volatile region and supplies of weapons, Saudi Arabia with Prince Mohammed being in charge is looking for leverage in the kingdom’s relationship with the United States.  UK Q2 GDP likely to show a contraction The Q2 GDP in the UK is likely to show a contraction after April was down 0.2% and May up 0.5%. June GDP is likely to have seen a larger contraction given less working days in the month, as well as constrained household spending as inflation surged to a fresh record high. While there may be a growth recovery in the near-term, the Bank of England clearly outlined a recession scenario from Q4 2022 and that would last for five quarters. Our Macro Strategist Chris Dembik has painted a rather pessimistic picture of the UK economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 12, 2022
The US Labour Market...

AUDUSD Is Sliding Down. AUDJPY Aims High!? GBPAUD Finally Have A Chance!

Kim Cramer Larsson Kim Cramer Larsson 12.08.2022 08:47
AUDUSD AUDUSD confirmed short-term uptrend yesterday breaking above 0.7069. RSI back above 60 indicating AUDUSD is likely to move higher towards resistance at 0.7283. AUDUSD could move higher from there after a likely correction. If closing above 0.76 AUDUSD could move toward peak at around 0.7660.To neutralise that scenario AUDUSD must move back below 0.7069. To reverse it AUDUSD must collapse to below 0.6865. Source: Saxo Group Weekly chart shows AUDUSD trading in a wide falling channel. A test of upper falling trendline is not unlikely, given that the above bullish scenario plays out. Source: Saxo Group AUDJPY AUDJPY is slowly crawling higher after the spike down below key support last week. AUDJPY is back above all Simple Moving averages and RSI is still showing positive sentiment indicating a test of the slightly falling upper trendline is likely. If AUDJPY breaks above the trendline and above resistance at 95.75 the pairs is likely to take out the peak in June at around 96.90. Source: Saxo Group GBPAUD GBPAUD is testing support at 1.7173 and seems likely to break bearish out of the range it has been trading in past 6 months. If AUDGBP closes below 1.7173 the pair is set for lower levels Source: Saxo Group Weekly chart shows that 01.7173 is a key support level rejecting GBPAUD several times. If GBPAUD finally breaks below the support a medium- to long-term move towards 1.60 area is in the cards.IF it fails to close below 1.7173 GBPAUD could resume its rangebound behaviour Source: Saxo Group Source: Technical Update - AUD pairs on the move testing or breaking resistance levels. AUDUSD , AUDJPY & GBPAUD
British Pound: Oanda Expects That If Liz Truss Doesn't Change The Plan, The UK Inflation May Go Up!

We're Going To Verify Bank's Of England Expectations. What Do We Expect From UK GDP Data?

Jing Ren Jing Ren 12.08.2022 10:05
After their last meeting, the BOE warned that 5 quarters of negative growth were coming. The consensus of expectations shows that there could be starting with data reports from tomorrow. There is an avalanche of data before the market opens, as is customary for the UK, but naturally GDP is likely to be the main focus, particularly given the context. The battle for leadership of the Tory party also continues, with whomever winning the vote in September becoming Prime Minister. The leader in the race so far, Liz Truss, has spoken repeatedly about intervening in the BOE to broaden its mandate. Many question whether this will hurt the bank's credibility. More importantly, a change in the mandate in the middle of an inflationary spiral could make things more difficult. On the other hand, one of the measures that Truss is proposing includes offering a rate outlook forecast, similar to the Fed's dot-plot matrix, which could help reassure markets. It's all about the trends Since many attributes are slowing economic growth, tightening monetary policy to fight inflation, how the BOE could react will also factor into the market's reaction to the data. If GDP is growing, then the BOE has more room to keep hiking. If GDP is starting to contract, then the presumption is that inflation will start to turn around, and the BOE will be less likely to tighten. In this context, the BOE's projection that inflation will peak at 13 sometime later in the year implies that policy will likely remain tight, even if there is a technical move to negative growth. Technical here usually means a couple of decimal points in the red, which, while not good, isn't the same as a full-blown recession such as 2020 or 2008. What to look out for There are three bits of data coming out, with different levels of importance to the market. In general, the "faster" the data, the more the market cares about it. By "faster" that means the most recent, shortest interval. So, in order of importance, we will likely have June, quarterly and annual GDP change figures. June monthly GDP is expected to show -1.3% growth compared to 0.5% prior. Monthly GDP is a lot more volatile thus it's easier to dismiss a large move. But for markets already sensitive to bad news, this could be interpreted as an acceleration to the downside in the near term. The other market moving points Quarterly GDP is likely to get the most attention, as it's expected to show -0.2% growth, compared to +0.8% in the prior quarter. If the forecast is met, that could be the first of negative growth of two needed to technically talk about a recession. But it's such a low margin, that a beat of just two decimals could have an important psychological impact on the markets as well. Annual GDP is projected to show 1.3% growth compared to 3.5% prior. While this on the surface appears to be a strong deceleration, this probably has more to do with comparables. Last year's spring was much better for the economy than the winter, which is why there is a bigger difference between Q1 and Q2. It's not as indicative of the move over the first half of this year, as of what happened last year.
GBP Performance Ahead Of UK GDP Release. US Dollar (USD) Is Supported By Pricing In Future Fed Decisions

GBP Performance Ahead Of UK GDP Release. US Dollar (USD) Is Supported By Pricing In Future Fed Decisions

Jing Ren Jing Ren 12.08.2022 09:41
USDJPY struggles for bids The US dollar consolidates as traders reassess future rate hike moves by the Fed. A bearish RSI divergence and MA cross on the daily chart suggest the start of a correction. A short-lived rebound came to a halt in the supply zone around 135.40 which coincides with the 20-day moving average. A follow-up break below 133.00 indicates that the path of least resistance could be down. 130.50 at the origin of a bullish breakout in June is a critical floor, its breach may extend losses to last May’s lows next to 126.90. EURGBP tests resistance Sterling treads water as the market expects a contraction in the UK’s Q2 GDP. The latest rebound came under pressure near the support-turned-resistance at 0.8470 which sits on the 30-day moving average. A bounce off 0.8410 showed solid interest in keeping the single currency afloat. A close above 0.8470 would send the pair to 0.8520 where a breakout could prompt more sellers to cover their bets, laying the groundwork for a rally to June’ highs next to 0.8580. 0.8410 is the first support in case of hesitation. SPX 500 pulls lower The S&P 500 falls back over concerns that inflation is yet to peak. Divergence between the 20 and 30-day moving averages indicates an acceleration to the upside. The current recovery may have gained traction after a break above June’s peak at 4200. Along with medium-term bears rushing to avoid a squeeze, momentum buying may continue to support the index. May’s high at 4300 would be the next target. An overbought RSI may cause a limited pullback, If this occurs, 4150 is a new support level.
The Weakening Of Confidence In The British Government| Oil Prices Extended Gains And More

Yesterday GBP/USD Went Up Because Of Weaker US Dollar. Today Pound Has Been Hit By GDP

Kenny Fisher Kenny Fisher 12.08.2022 14:02
The British pound is in negative territory today, after a contraction in UK GDP. In the European session, GBP/USD is trading at 1.2126, down 0.61% on the day. British economy declines in Q2 The British pound posted dazzling gains on Wednesday, surging 1.19%. The impressive climb was, however, a case of US dollar weakness, rather than any newfound strength in the pound. Inflation in the US was unexpectedly weaker than forecast, which raised market hopes that the Fed will ease policy. This led to the US dollar being less attractive and the currency took a nasty spill against all the majors. Sterling hasn’t fared as well after the UK posted the second-quarter GDP report. The economy fell in July by -0.1% QoQ, following a 0.8% gain in June (-0.2% exp). On an annualized basis, GDP growth slowed to 2.9%, within expectations but sharply down from 8.7% in Q1. The outlook does not look good as we head towards winter, with UK households about to be hit with sharp increases in energy prices. Consumers are already struggling with a nasty cost of living crisis, and as they tighten the purse strings, the spectre of a recession will become that much more likely. Another key indicator, Manufacturing Production, came in at -1.6% MoM, down from a 1.7% gain in May (-1.8% exp). This was the fourth decline in five months, pointing to a worrying downtrend in manufacturing. The week wraps up with UoM Consumer Sentiment, a key confidence indicator. With the cost of living crisis in the US, it’s no surprise that the index has tumbled – falling from 65.7 in March to just 51.5 in June. This points to weak expansion, just above the neutral 50.0 line. The July forecast calls for a slight improvement to 52.5 points. GBP/USD Technical GBP/USD continues to test resistance at 1.2241. Next, there is resistance at 1.2361  There is support at 1.2123 and 1.2061 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD slips on GDP, US confidence data next - MarketPulseMarketPulse
The USD/JPY Pair Has Potential For Further Bigger Rally Towards Upside References

Japanese Yen (JPY) Rise. Energy Prices Are Finally Falling!?

John Hardy John Hardy 16.08.2022 10:05
Summary:  Weak data out of China overnight, together with a surprise rate cut from the PBOC and collapsing energy prices later on Monday saw the Japanese yen surging higher across the board. Indeed, the two key factors behind its descent to multi-decade lows earlier this year, rising yields and surging energy prices, have eased considerably since mid-June with only modest reaction from the yen thus far. Is that about to change? FX Trading focus: JPY finding sudden support on new disinflation narrative Weaker than expected Chinese data overnight brought a surprise rate cut from the Chinese central bank and seems to have sparked a broadening sell-off in commodities, which was boosted later by a crude oil drop of some five dollars per barrel on the news that Iran will decide by midnight tonight on whether to accept a new draft on the nuclear deal forward by the Euro zone. In response, the Chinese yuan has weakened toward the highs for the cycle in USDCNH, trading 6.78+ as of this writing and  (there was a spike high to 6.381 back in May but the exchange rate has been capped by 6.80 since then), but the Japanese yen is stealing the volatility and strength crown, surging sharply across the board and following up on the move lower inspired by the soft US CPI data point. US long yields easing considerably lower after an odd spike last Thursday are a further wind at the JPY’s back here. In the bigger picture, it has been rather remarkable that the firm retreat in global long-date yields since the mid-June peak and the oil price backing down a full 25% and more from the cycle highs didn’t do more to support the yen from the yield-spread angle (Bank of Japan’s YCC policy less toxic as yields fall) and from the current account angle for Japan. Interestingly, while the JPY has surged and taken USDJPY down several notches, the US dollar is rather firm elsewhere, with the focus more on selling pro-cyclical and commodity currencies on the possible implication that China may be content to export deflation by weakening its currency now that commodity prices have come down rather than on selling the US dollar due to any marking down of Fed expectations. Still, while the USD may remain a safe haven should JPY volatility be set to run amok across markets, the focus is far more on the latter as long as USDJPY is falling Chart: EURJPY As the JPY surges here, EURJPY is falling sharply again, largely tracking the trajectory of longer European sovereign yields, which never really rose much from their recent lows from a couple of weeks back, making it tough to understand the solid rally back above 138.00 of late. After peaking above 1.90% briefly in June, the German 10-year Bund, for example, is trading about 100 basis points lower and is not far from the cycle low daily close at 77 basis points. The EURJPY chart features a rather significant pivot area at 133.50, a prior major high back in late 2021 and the recent low and 200-day moving average back at the beginning of the month. After a brief JPY volatility scare in late July and into early August that faded, are we set for a second and bigger round here that takes USDJPY down through 130.00 and EURJPY likewise? A more significant rally in long US treasuries might be required to bring about a real JPY rampage. Source: Saxo Group The focus on weak Chinese data and key commodity prices like copper suddenly losing altitude after their recent rally has the Aussie shifting to the defensive just after it was showing strength late last week in sympathy with strong risk sentiment and those higher commodity prices. Is the AUDUSD break above 0.7000-25 set for a high octane reversal here? AUDJPY is worth a look as well after it managed to surge all the way back toward the top of the range before. The idea that a weak Chine might export deflation from here might be unsettling for Aussie bulls. The US macro data focus for the week is on today’s NAHB homebuilder’s survey, which plunged to a low since 2015 in June (not including the chaotic early 2020 pandemic breakout months), the July Housing Starts and Building Permits and then the July Retail Sales and FOMC minutes on Wednesday. With a massive relief in gasoline prices from the July spike high, it will be interesting to see whether the August US data picks up again on the services side. The preliminary August University of Michigan sentiment survey release on Friday showed expectations rising sharply by over 7 points from the lowest since-1980 lows of June, while the Present Situation measure dropped a few points back toward the cycle (and record) lows from May. Table: FX Board of G10 and CNH trend evolution and strength. The JPY is the real story today, but as our trending measures employ some averaging/smoothing, the move will need to stick what it has achieved today to show more. Watch out for a big shift in the commodity currencies in coming days as well if today’s move is the start of something. Elsewhere, the JPY comeback is merely taking CHF from strength to strength, although even the might franc has dropped against the JPY today. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Big momentum shift afoot today and watching whether this holds and the JPY pairs and pairs like AUDUSD and USDCAD to see if we are witnessing a major momentum shift in themes here. Also note NOK pairs like USDNOK and EURNOK here. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Aug. NAHB Housing Market Index 0130 – Australia RBA Meeting Minutes Source: FX Update: JPY jumps on deflating energy prices, fresh retreat in yields.
Plenty Of Things To Discuss In The Market Insights Podcast By Oanda

Watch Out Forex Traders! EUR/USD May See Parity, US Dollar Stays Strong Amid Energy Market Realities, Canadian Dollar May Be Affected By CPI Release

ING Economics ING Economics 16.08.2022 11:17
The rise in gas prices around the world and how policymakers handle them is very much back in focus as terms of trade indices for the big importers hit new lows. Combining this theme with both the weakness in the Chinese renminbi and what should be a positive set of US events over the next 48 hours favours continued dollar strength Germany continues to suffer both with low water levels on the Rhine and now a gas levy for German consumers USD: All systems are go We see three factors that can keep the dollar strong near term and probably send it a little stronger. The first is the ongoing energy shock primarily being felt through natural gas prices. These prices continue to rise as importers compete for cargoes ahead of the northern hemisphere winter and the very uncertain supply situation. In financial markets, the cost of higher gas prices is born out in terms of trade indices. Energy importers such as Europe and large parts of Asia are seeing their terms of trade indices (export versus import prices) continuing to dive. These effectively represent a large negative income shock. The energy independence of the US leaves the dollar relatively insulated on this score. The second factor is the one we highlighted yesterday – the uncertainty as to whether the People's Bank of China (PBoC) will engineer another mini-devaluation in the renminbi as it searches for growth. The PBoC overnight fixed USD/CNY in line with model-based estimates. This is being read rather equivocally by markets as the PBoC is not actively encouraging speculation of a weaker renminbi, nor delivering a stern warning against yesterday's renminbi sell-off. USD/CNH is now trading through 6.80 and a move through 6.82/84 will certainly raise speculation of something larger afoot akin to the April/May 6% renminbi devaluation. That period saw the DXY dollar index up around 6% too. The final factor is the US economy and the Fed story. Today sees the release of July industrial production and tomorrow the release of retail sales. Our team sees better figures for both – largely helped by lower gasoline prices. The figures should temporarily allay US recession fears and prepare the markets for what could be a hawkish set of FOMC minutes tomorrow night. We agree with Padhraic Garvey's opinion piece that the Fed probably wants tighter financial conditions now – which implicitly include a firmer dollar. In all, we continue to prefer north American currencies, where last week we picked out the Mexican peso for some carry. The Canadian dollar also should remain supported on dips and today sees some July CPI data. This can shed light on whether the Bank of Canada hikes 50bp or 75bp on 7 September (59bp currently priced). Of the three, we would probably prefer slightly overweight US dollar positions since the risk environment could easily deteriorate again. 106.95/107.00 looks like the near-term target for DXY. In addition, please find the August edition of FX talking here and also some thoughts on where ESG issues interact with the FX market.  Chris Turner EUR: Grim As Carsten Brzeski noted yesterday, Germany continues to suffer both with low water levels on the Rhine and now a gas levy for German consumers. The gas levy could keep German inflation higher for longer and cause more headaches for the European Central Bank (ECB). The trade-weighted euro is a whisker away from the lows of the year and a slightly stronger dollar over the next 48 hours could easily see EUR/USD retesting parity. 1.0200 should now prove short-term resistance. In terms of data today, look out for German and eurozone investor expectations for August. These should remain near the lows despite a decent last month for European equities. Chris Turner GBP: You are not alone News that Germany will impose a gas levy – confirming that the government cannot fully shield households from the spike in gas prices – leaves the UK less of an outlier in Europe. This will be one of the factors helping to limit EUR/GBP gains and could actually favour a drift back to the 0.8390/8400 area. Today's July UK employment data is somewhat of a mixed bag for sterling. This showed a slight slowing in hiring but strong average earnings – the latter pointing to hoarding of staff. We think the data supports a 50bp Bank of England hike on 15 September (45bp currently priced). In all, EUR/GBP can soften a little, but a stronger dollar means that Cable can go sub 1.20 again. Chris Turner   CEE: Another painful day under the reign of the US dollar The strong US dollar quickly took back almost all of the CEE region's recent currency gains. However, the invisible hand of the market intervened in a different order than we had anticipated yesterday. While the Polish zloty lost the least and narrowly avoided 4.700 EUR/PLN, the Hungarian forint came under heavy sell-off, hit by the rating outlook downgrade from S&P. And the koruna returned halfway to CNB's intervention levels. In all three cases, we can expect more losses today, in our view. The regional calendar is almost empty and global conditions for CEE currencies have deteriorated again, led by a stronger US dollar. We continue to believe the zloty should head above 4.700 EUR/PLN, while the forint has lost too much in our view. It can be expected to remain out of the market's favour for some time due to the rating decision, but market conditions remain most favourable for the forint. This is the only currency in the region that can rely on a rising interest rate differential. Once the jitters over the rating outlook change subside, the forint could return to 396 EUR/HUF. Frantisek Taborsky Read this article on THINK TagsFX Daily Dollar CEE region Bank of England Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

British Pound (GBP) And Australian Dollar (AUD) May Fluctuate Shortly! Bank Of England And RBA Are Expected To Hike Rates!

Craig Erlam Craig Erlam 16.08.2022 13:17
European stock markets are a little positive on Tuesday following another mixed session in Asia while US futures are pointing marginally lower ahead of the open on Wall Street. It seems investors are gaining confidence amid a recovery in stock markets in recent weeks rather than feeling anxious about its sustainability against a worrying economic backdrop. I wonder how long that can last even if US inflation shows further signs of pulling back from the peak. Recessions around the world are coming and inflation is not falling fast enough. ​ Hard to see the positives in the UK data It’s no secret that the UK is facing a period of stagflation and recession and today’s jobs report highlighted just how grim the situation is becoming. Despite wages rising by 5.1% including bonuses in June, real wages when adjusted for inflation fell at their fastest pace on record while job vacancies fell for the first time in a couple of years. While the situation isn’t exactly dire yet, the path of travel is clear and the energy price cap increase in a couple of months is going to deliver another economic shock to the system. The jobs report today was oddly horrible in two ways. Falling real wages will make life much harder for many but headline wage growth (not adjusted for inflation) will force the BoE to continue hiking aggressively in order to prevent a wage-price spiral. Unemployment still remains extremely low but the BoE believes it will rise quite sharply over the next couple of years. The competitive nature of the labour market over the last couple of years may slow the process but for how long will depend on the severity of the downturn. I’m not sure the retail sales and inflation data over the next couple of days will make for easy reading either. Indian inflation eases but another 50 basis point hike is still possible Indian inflation fell a little faster than expected last month with a deceleration in food prices contributing to the decline. Other factors could continue to support a drop in inflation in the coming months such as declining oil prices and above-average inventories of finished goods. That said, there also remain significant upside risks into year-end and so the RBI will likely continue raising rates next month, it’s just a question of how aggressive it will be. The consensus appears to be 25 basis points but 50 will no doubt be on the table. RBA is not on a pre-set path The RBA minutes didn’t really contain any surprises, with the central bank reiterating its data-dependent stance, insisting that it is not on a pre-set path. Another 50 basis point hike is likely at the next meeting after similar moves at each of the last three meetings. With inflation expected to peak later this year, the central bank may consider moderating its hikes although that ultimately depends on how the data performs in the interim. Has rally run its course? Bitcoin is a little flat today after another failed run at $25,000 at the start of the week. It briefly broke above here but as has been the case for many days now, there was no momentum behind the rally so it quickly crumbled. Perhaps this is a sign that the two-month rally has run its course, at which point it’s just a question of whether we’re facing a correction or a test of the lows. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Too much optimism? - MarketPulseMarketPulse
The Bears Are In Full Control Of The Pound To US Dollar (GBP/USD) Market

GBP May Skyrocket In Autumn! September's Bank's Of England Decision - ING Economics Forecasts 50bp Rate Hike

ING Economics ING Economics 17.08.2022 14:33
Eyewatering increases in household energy bills between now and next April mean inflation is likely to head above 12% from October. But core inflation might have peaked - or is close to peaking - now that goods price pressures are easing. We expect another 50bp rate hike from the Bank of England in September   UK inflation has gone above 10% for the first time since 1980, and indeed both headline and core CPI measures came in above expectations. A lot of that surprise can be traced back to a huge 2.2% month-on-month increase in food prices (in the case of headline CPI) and a sizable increase in various housing costs (in the case of core). Next month, headline inflation looks set to dip back below 10% on a near-7% fall in average petrol/diesel prices, which came too late to affect the July figures. But as everyone knows, that’s only a temporary reprieve with a 75% increase in the household energy cap on its way in October. While it’s not totally clear yet how the Office for National Statistics will treat the government’s £400 discount for household bills, this increase in electricity/gas costs looks set to take inflation above 12% later this year. UK inflation set to head above 12% Source: Macrobond, ING   Plugging the latest wholesale gas and electricity costs into the regulator’s spreadsheet, we estimate that the average household bill will have risen from roughly £2000 currently, to £3500 in October, before heading to roughly £4500 in January and above £5000 in April next year. That latter figure is £1000 higher than it was when we ran these figures at the end of July and reflects a further abrupt rise in gas prices over recent weeks. Those sequential increases mean that inflation is likely to hover around (or a bit above) 12% from October through to about February. Thereafter the energy impact will gradually dissipate and in fact, by 2024, inflation is likely to be a bit below the Bank of England’s 2% target – assuming that energy prices do indeed begin to gradually edge lower from mid-2023. What matters more for policymakers are signs of persistence in the inflation numbers. And once food and energy costs are stripped out, core inflation looks like it might have peaked – or is close. Goods price pressures look set to ease over coming months now that commodity costs have fallen and the insatiable demand for ‘stuff’ seen through the pandemic has faded, and retailers are reporting they have more inventory. Used car prices, which were one of the most extreme examples of pandemic-related goods inflation, have fallen 7% since January. What matters more for policymakers are signs of persistence in the inflation numbers Instead, it is wage pressures that will heavily influence the Bank of England’s decision-making over coming months. As we discussed yesterday, wages (at least in nominal terms) have decent momentum right now, but there’s a lot of uncertainty over how far labour demand is falling, and how much labour supply is improving. In the near term, skill shortages remain a big issue for companies For now, we expect another 50bp rate hike in September. We wouldn’t rule out another hike in November, though this heavily depends on the fiscal response from the new prime minister in September. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Bank Of England (BoE) Chasing The Inflation. Forex: GBPUSD, CNHJPY, EURUSD And Others

The Bank Of England (BoE) Chasing The Inflation. Forex: GBPUSD, CNHJPY, EURUSD And Others

John Hardy John Hardy 19.08.2022 13:41
Summary:  The USD is breaking higher still, with important levels falling versus the Euro and yen yesterday. But the pain in sterling is most intense as presaged by the lack of a response to surging UK rates. Can the Bank of England do anything but continue to chase inflation from behind, caught between the Scylla of inflation and the Charybdis of a vicious recession? Also, USDCNH lurks at the top of the range ahead of another PBOC rate announcement on Monday. FX Trading focus: USD wrecking ball swinging again. UK faced with classic ugly choice between taking the pain via inflation or a severe recession The US dollar strength has picked up further after yesterday saw the breakdown in EURUSD below 1.0100 and a shot through 135.50 in USDJPY as longer US yields pushed to local highs. GBPUSD has been a bigger move on sterling weakness as discussed below.  A bit of resilient US data (especially the lower jobless claims than expected and a sharp revision lower of the prior week’s data taking the momentum out of the rising trend) has helped support the USD higher as longer US yields rose a bit further, taking the 10-year US treasury yield benchmark to new local highs, although we really need to see 3.00% achieved there after a few recent teases higher with no follow through higher. Looking forward to next week, the market will have to mull whether it has been too aggressive in pricing the Fed to pivot policy next year on disinflation and an easy-landing for the economy. The steady drumbeat of Fed pushback against the market’s complacency, together with a few of the recent data points (ISM Services, nonfarm payrolls, yesterday’s claims, etc.) has seen some of the conviction easing. But the key test will come next Friday, when Fed Chair Powell is set to speak on the same day we get the July PCE inflation data. Keep USDCNH on the radar through the end of today on the risk of an upside break above the range and Monday as the PBOC is set for a rate announcement (consensus expectations or another 10 bps of easing).   Chart: GBPUSD Lots at stake for sterling as discussed below, as it is a bit scary to see a currency weaken sharply despite a massive ratcheting higher in rate expectations from the central bank. The fall of 1.2000 has set in motion a focus on the 1.1760 cycle low, with an aggravated USD rise here and tightening of global financial conditions possibly quickly bringing the spike low toward 1.1500 from the early 2020 pandemic outbreak panic into focus. It is worth noting that the lowest monthly closing level for GBPUSD since the mid-1980’s is 1.2156. Without something dramatic to push back against USD strength next week from Jackson Hole, it is hard to see how this month may set the new low water mark for monthly closes. Source: Saxo Group GBPUSD slipped below 1.1900 this morning after breaking below the psychologically important 1.2000 level yesterday. As noted in the prior update, it’s remarkable to see the marked weakness in sterling despite the marking taking UK short rates sharply higher – with 2-year UK swaps over 100 basis points higher from the lows early this month. The Bank of England has expressed a determination to get ahead of the inflation spike and the market has priced in a bit more than a 50-basis-points-per-meeting pace for the three remaining BoE meetings of 2022. But is that sufficient given the UK’s structural short-comings and external deficits? Currency weakness risks adding further to spike in inflation this year. The BoE can take a couple of approaches in response: continue with the 50 bps hikes while bemoaning the backdrop and trotting out the expectation that eventually, economic weakness and easing commodity prices will feed through to drop inflation back into the range. Or, the BoE can actually get serious and super-size hikes even beyond the acceleration the market has priced, at the risk of bringing forward and increasing the severity of the coming recession. Until this week, the BoE’s anticipated tightening trajectory had prevented an aggravated weakness in sterling in broader terms, but the currency’s weakness despite a massive mark-up of BoE expectations has ratcheted the pressure on sterling and the BoE’s response to an entirely new level. Turkey shocked with a fresh rate cut yesterday of 100 basis points to take the policy rate to 13.00%. This with year-on-year inflation in Turkey at 79.6% and PPI at 144.6%, and housing measured at 160.6%. The move took USDTRY above 18.00, though it was a modest move relative to the size of the surprise. Turkish central bank chief Kavcioglu said that the bank would also look to “further strengthen macroprudential policy” by addressing the yawning difference between the policy rate and the rate commercial banks are charging for loans (more than double the official policy rate), as the push is to continue a credit-stimulated approach, inflation-be-darned.   Table: FX Board of G10 and CNH trend evolution and strength Note: a new color scheme for the FX Board! Besides changing the green for positive readings to a more pleasant blue, I have altered the settings such that trend readings don’t receive a more intense red or blue coloring until they have reached more significant levels – starting at an absolute value of 4 or higher. So far, most of the drama in sterling is the lack of a response to shifts in the UK yield curve, the broad negative momentum has only shifted a bit here, but watching for the risk of more. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs AUDNZD is crossing back higher, AUDCAD back lower, so NZDCAD….yep. Note the CNHJPY – if CNH is to make more waves, need to see more CNH weakness in an isolated sense, not just v. a strong USD. And speaking of a strong USD, the last holdouts in reversing, USDNOK and USDCHF, are on the cusp of a reversal. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak   Source: FX Update: USD surging again, GBP spinning into abyss
The Weakening Of Confidence In The British Government| Oil Prices Extended Gains And More

FTSE on verge of crash as institutional interest in UK equities fades

InstaForex Analysis InstaForex Analysis 19.08.2022 17:43
Relevance up to 15:00 2022-08-20 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.   The UK is now facing multiple problems: the cost-of-living crisis, political chaos, and labor strikes. Now, the country's blue-chip index and the only bright spot in the economy, the FTSE 100, is under threat as well. The index gained about 1.6% since the beginning of 2022, beating a 13% drop for the Euro Stoxx 50 thanks to its big exposure to value segments such as energy, miners, and banks. These segments of the economy have advanced as the economy began to broadly move away from growth. The FTSE 100 is also under threat from dimming prospects for commodities. The index rose by about 7% from its mid-July low, compared to gains of about 9% for the Euro Stoxx 50, 16% for the S&P 500 and 20% for the Nasdaq 100.     "We are beginning to see institutional interest in UK equities fade," said Daniel Gerard, senior multi asset strategist at State Street Global Markets. Gerard stated that the outlook for energy would likely fall, and that the tailwinds from rates to currency weakness from the first half of 2022 were unlikely to propel the index further. The latest survey of fund managers by Bank of America Corp. shows a similar trend. Even though the UK stock market is the market of choice for European investors, allocation to British stocks among global fund managers dropped to a net 15% underweight in August from 4% in July. For comparison, investors in the eurozone are a net 34% underweight. At the same time, fund managers have a net 10% overweight for US stocks. Even though the index is still considered to be "attractively valued" Alan Dobbie, co-manager of the Rathbone Income Fund, said he sees a "clear market consensus expecting central banks to be forced into a pivot away from their aggressive tightening programmes." As a result, investors could shift to more longer-duration growth sectors such as technology. The FTSE 100 has very few such companies.   On the other hand, the UK market still enjoys support from several positive fundamental factors: market participants get more than two-thirds of sales from outside the UK. This shields them from the country's economic and political headwinds. "Companies that are not exposed to the domestic UK economy – that have global presence – are good places to hide out from the storm," Swetha Ramachandran, an equities investment manager at GAM, said. The UK's domestic stocks remain under pressure, however. The FTSE 250, the UK's midcap stocks index, could lose 14% in 2022. The weaker pound has added to surging costs, while spiraling inflation has fueled concerns that consumers will limit spending. "While so far earnings have held up better than expected, the market is concerned this will get a lot worse," Tineke Frikkee, head of UK research at Waverton Investment Management, noted.   Read more: https://www.instaforex.eu/forex_analysis/319431
The Euro In The Last Few Months Clearly Reflect What Is Happening In The Euro/Dollar Pair

Everyone Is Dissapointed In Euro (EUR). Japanese Officials Have To Face Discontests From Yields Rise

Marc Chandler Marc Chandler 21.08.2022 23:14
For many, this will be the last week of the summer. However, in an unusual twist of the calendar, the US August employment report will be released on September 2, the end of the following week, rather than after the US Labor Day holiday (September 5).   The main economic report of the week ahead will be the preliminary estimate of the August PMI  The policy implications are not as obvious as they may seem. For example, in July, the eurozone composite PMI slipped below the 50 boom/bust level for the first time since February 2021. It was the third consecutive decline. Bloomberg's monthly survey of economists picked up a cut in Q3 GDP forecasts to 0.1% from 0.2% and a contraction of 0.2% in Q4 (previously 0.2% growth). Over the past week, the swaps market has moved from around 80% sure of a 50 bp hike next month to a nearly 20% chance it will lift the deposit rate by 75 bp.  The UK's composite PMI fell in three of the four months through July  However, at 52.1, it remains above the boom/bust level, though it is the weakest since February 2021. The Bank of England's latest forecasts are more pessimistic than the market. It projects the economy will contract by 1.5% next year and another 0.3% in 2024. It has CPI peaking later this year at around 13% before falling to 5.5% in 2023 and 1.5% in 2024. Market expectations have turned more hawkish for the BOE too. A week ago, the swap market was pricing in a nearly 90% chance of another 50 bp hike. After the CPI jump reported in the middle of last week, the market fully priced in the 50 bp move and a nearly 30% chance of a 75 bp hike.   Japanese officials have successfully turned back market pressure that had driven the benchmark three-month implied volatility to 14% in mid-June, more than twice as high as it was at the start of the year  It slipped below 10% in recent days. The BOJ was forced to vigorously defend its 0.25% cap on the 10-year bond. It has spent the better part of the past three weeks below 0.20%. The BOJ has not had to spend a single yen on its defense since the end of June. However, with the jump in global yields (US 10-year yield rose 20 bp last week, the German Bund 33 bp, and the 10-year UK Gilt nearly 40 bp) and the weakness of the yen, the BOJ is likely to be challenged again.   The economy remains challenging  The composite PMI fell to 50.2 in July from 53.2 in June. It is the weakest reading since February. It has averaged 50.4 through July this year. The average for the first seven months last year was 49.0. The government is working on some support measures aimed at extending the efforts to cushion the blow of higher energy and food prices. Japan's Q2 GDP deflator was minus 0.4%, which was half of the median forecast in Bloomberg's survey, but it shows the tough bind of policy. Consider that the July CPI rose to 2.6%, and the core measure, which the BOJ targets, excludes fresh food, rose to 2.4% from 2.2%. The target is 2%, and it was the third month above it. Tokyo will report its August CPI figures at the end of the week.   Australia's flash PMI may be more influential as the futures market is nearly evenly split between a 25 bp hike and a 50 bp move at the September 6 central bank meeting  The minutes from the RBA's meeting earlier this month underscored its data dependency. However, this is about the pace of the move. The target rate is currently at 1.85%, and the futures market is near 3.15% for the end of the year, well beyond the 2.5% that the central bank sees as neutral. The weakness of China's economy may dent the positive terms-of-trade shock. The Melbourne Institute measure of consumer inflation expectations fell in August for the second month but at 5.9%, is still too high.  Through the statistical quirkiness of GDP-math, the US economy contracted in the first two quarters of the year  A larger trade deficit did not help, but the real problem was inventories. In fairness, more of the nominal growth resulted from higher prices than economists expected rather than underlying activity. Still, it does appear that the US economy is expanding this quarter, and the high-frequency data will help investors and economists assess the magnitude. While surveys are helpful, the upcoming real sector data include durable goods orders (and shipments, which feed into GDP models), July personal income and consumption figures, the July goods trade balance, and wholesale and retail inventories.   Consumption still drives more than 2/3 of the economy, and like retail sales, personal consumption expenditures are reported in nominal terms, which means that they are inflated by rising prices  However, the PCE deflator is expected to slow dramatically. After jumping 1% in June, the headline deflator is expected to increase by 0.1%. This will allow the year-over-year rate to slow slightly (~6.5% from 6.8%). The core deflator is forecast (median, Bloomberg's survey) to rise by 0.4%, which given the base effect, could see the smallest of declines in the year-over-year rate that stood at 4.8% in June. Given the Fed's revealed preferences when it cited the CPI rise in the decision in June to hike by 75 bp instead of 50 bp, the CPI has stolen the PCE deflator's thunder, even though the Fed targets the PCE deflator. Real consumption was flat in Q2, and Q3 is likely to have begun on firmer footing.   The softer than expected CPI, PPI, and import/export prices spurred the market into downgrading the chances of a 75 bp hike by the Fed next month  After the stronger than expected jobs growth, the Fed funds futures priced in a little better than a 75% chance of a 75 bp hike. It has been mostly hovering in the 40%-45% range most of last week but finished near 55%. It is becoming a habit for the market to read the Fed dovishly even though it is engaged in a more aggressive course than the markets anticipated. This market bias warns of the risk of a market reversal after Powell speaks on August 26.   At the end of last year, the Fed funds futures anticipated a target rate of about 0.80% at the end of this year. Now it says 3.50%. The pace of quantitative tightening is more than expected and will double starting next month. There is also the tightening provided by the dollar's appreciation. For example, at the end of 2021, the median forecast in Bloomberg's survey saw the euro finishing this year at $1.15. Now the median sees the euro at $1.04 at the end of December. And even this may prove too high.    The FOMC minutes from last month's meeting recognized two risks. The first was that the Fed would tighten too much. Monetary policy impacts with a lag, which also acknowledges that soft-landing is difficult to achieve. The market initially focused on this risk as is its wont. However, the Fed also recognized the risk of inflation becoming entrenched and characterized this risk as "significant." The Jackson Hole confab (August 25-27) will allow the Fed to help steer investors and businesses between Scylla and Charybdis.  Critics jumped all over Fed Chair Powell's claim that the Fed funds target is now in the area the officials regard as neutral. This was not a forecast by the Chair, but merely a description of the long-term target rate understood as neither stimulating nor restricting the economy. In June, all but three Fed officials saw the long-term rate between 2.25% and 2.50%. To put that in perspective, recall that in December 2019, the median view of the long-term target was 2.50%. Eleven of the 18 Fed officials put their "dot" between 2.25% and 2.50%. The FOMC minutes were clear that a restrictive stance is necessary, and the Fed clearly signaled additional rate hikes are required. The discussions at Jackson Hole may clarify what the neutral rate means.  Barring a significant downside surprise, we expect the Fed will deliver its third consecutive 75 bp increase next month. The strength and breadth of the jobs growth while price pressures remain too high and financial conditions have eased encourages the Fed to move as fast as the market allows. However, before it meets, several important high-frequency data points will be revealed, including a few employment measures, the August nonfarm payroll report, and CPI.   The market is also having second thoughts about a rate cut next year  At the end of July, the implied yield of the December 2023 Fed funds futures was 50 bp below the implied yield of the December 2022 contract. It settled last week at near an 8 bp discount. This reflects a growing belief that the Fed will hike rates in Q1 23. The March 2023 contract's implied yield has risen from less than five basis points more than the December 2022 contract to more than  20 bp above it at the end of last week.   Let's turn to the individual currency pairs, put last week's price action into the larger context, and assess the dollar's technical condition  We correctly anticipated the end of the dollar's pullback that began in mid-July, but the power for the bounce surprises. Key technical levels have been surpassed, warning that the greenback will likely retest the July highs.   Dollar Index: DXY surged by more than 2.3% last week, its biggest weekly advance since March 2020. The momentum indicators are constructive and not over-extended. However, it closed well above the upper Bollinger Band (two standard deviations above the 20-day moving average), found near 107.70. Little stands in the way of a test on the mid-July high set around 109.30. Above there, the 110-111.30 area beckons. While the 107.50 area may offer some support now, a stronger floor may be found closer to 107.00.   Euro:  The euro was turned back from the $1.0365-70 area on August 10-11 and put in a low near $1.0030 ahead of the weekend. The five-day moving average slipped below the 20-day moving average for the first time in around 3.5 weeks. The MACD is trending lower, while the Slow Stochastic did not confirm the recent high, leaving a bearish divergence in its wake. The only caution comes from the euro's push through the lower Bollinger Band (~$1.0070). Initially, parity may hold, but the risk is a retest on the mid-July $0.9950 low. A convincing break could target the $0.96-$0.97 area. As the euro has retreated, the US two-year premium over Germany has trended lower. It has fallen more than 30 bp since peaking on August 5. We find that the rate differential often peaks before the dollar.   Japanese Yen: The dollar will begin the new week with a four-day advance against the yen in tow. It has surpassed the (61.8%) retracement objective of the pullback since the mid-July high (~JPY139.40) found near JPY136.00. The momentum indicators are constructive, and the five-day moving average has crossed above the 20-day for the first time since late July. It tested the lower band of the next resistance bans seen in the JPY137.25-50 area at the end of last week. But it appears poised to re-challenge the highs. As volatility increases and yields rise, Japanese officials return to their first line of defense: verbal intervention.  British Pound: Sterling took out the neckline of a possible double top we have been monitoring that came in at $1.20. It projects toward the two-year lows set in mid-July near $1.1760, dipping below $1.18 ahead of the weekend. As one would expect, the momentum indicators are headed lower, and the five-day moving average has fallen below the 20-day moving average for the first time in four weeks. It has closed below its lower Bollinger Band (~$1.1910) in the last two sessions. A convincing break of the $1.1760 low clears the way to the March 2020 low, about 3.5-cents lower. Initial resistance is now seen around $1.1860 and, if paid, could signal scope for another 3/4 to a full-cent squeeze.  Canadian Dollar:  The Canadian dollar was no match for the greenback, which moved above CAD1.30 ahead of the weekend for the first time in a month. The momentum indicators suggest the US dollar has more scope to advance, and the next target is the CAD1.3035 area. Above there, the CAD1.3100-35 band is next. The high since November 2020 was recorded in the middle of July around CAD1.3225. After whipsawing in Q1, the five- and 20-day moving averages have caught the big moves. The shorter average crossed above the longer moving average last week for the first time since July 21. Initial support will likely be encountered near CAD1.2935.   Australian Dollar:  The Aussie was sold every day last week. It is the first time in a year, and its 3.4% drop is the largest since September 2020.   The rally from the mid-July low (~$0.6680) to the recent high (~$0.7135) looks corrective in nature. Before the weekend, it tested the rally's (61.8%) retracement objective. The momentum indicators are falling, and the Slow Stochastic did not confirm this month's high, creating a bearish divergence. A break of the $0.6850-60 area may signal follow-through selling into the $0.6790-$0.6800 band, but a retest on the July low is looking increasingly likely. Initial resistance is now seen near $0.6920.   Mexican Peso:  The peso's four-day slide ended a six-day run. The peso lost about 1.6% last week, slightly better than the 2.25% slide of the JP Morgan Emerging Market Currency Index. This month, the US dollar peaked around MXN20.8335 and proceeded to fall and forged a base near MXN19.81. It has met the (38.2%) retracement objective around MXN20.20 before the weekend. The next (50%) retracement is near MXN20.3230. The 200-day moving average is closer to MXN20.41. The dollar is probing the 20-day moving average seen a little below MXN20.24. The momentum indicators have only just turned up for the greenback. We suspect there may be potential to around MXN20.50 in the coming days.   Chinese Yuan:  The yuan was tagged with more than a 1% loss against the dollar last week, its biggest decline in three months. A combination of poor Chinese data, its small rate cut, and a resurgent US dollar spurred the exchange rate adjustment. At the end of July, China's 10-year yield was about 11 bp on top of the US. However, it switched to a discount after the US jobs data (August 5), and the discount grew every day last week, reaching 35 bp, the most since late June. After gapping higher before the weekend, the greenback reached nearly CNY6.8190, its highest level since September 2020. The next target is around CNY6.85, but given the divergence of policy, a move back toward CNY7.00, last seen in July 2020, maybe a reasonable medium-term target. The PBOC's dollar fix ahead of the weekend showed no protest of the weaker exchange rate.     Disclaimer   Source: Flash PMI, Jackson Hole, and the Price Action
Euro (EUR) And British Pound (GBP) Losing The Race Against U.S. Dollar (USD)! 1 Year Statistics

Euro (EUR) And British Pound (GBP) Losing The Race Against U.S. Dollar (USD)! 1 Year Statistics

Conotoxia Comments Conotoxia Comments 22.08.2022 16:44
The recent behavior of the euro and the British pound and their potential weakness against the rest of the world's major currencies is beginning to bring concerns about a sustained deterioration in the prospects for these currencies. As Bloomberg commentators note, the behavior of the pound and the euro are worrisome. We have recently seen large shifts in the euro and pound's short-term market interest rates against the U.S. dollar, with a simultaneous weakening of the GBP/USD and EUR/USD exchange rates. Last week was the worst week for the pound in nearly two years, and at the same time, the yield on the UK's 2-year bond rose by 50 basis points. Typically, the opposite happens in developed markets. Expectations of a central bank rate hike and thus an increase in short-term market yields generally strengthen the currency. The collapse in the correlation between the exchange rate and interest rates is usually associated with emerging markets, which may have lost the battle for the credibility of keeping inflation within the inflation target. The energy dependence of the UK and Europe as a whole means that their balance sheets could deteriorate in the near future, while energy commodity inflation shows no signs of abating. Rate hikes in such a situation may not stem the tide of depreciation of the aforementioned currencies, Bloomberg reports. Thus, it seems that the winter months for the EUR and GBP may be a kind of test of the credibility of the economies in the eyes of investors. Their abandonment of investments in the EUR and GBP despite rising interest rates could be potentially worrying. Moreover, it could change the entire scene of the foreign exchange market. In the dollar index, the euro has a weighting of more than 57 percent, while the pound has a weighting of more than 11 percent. Together, these two currencies alone have a weighting of almost 70 percent. Since the beginning of the year, the euro against the U.S. dollar has lost almost 12 percent, and the British pound almost 13 percent. In contrast, since August 2021, the euro has lost almost 15 percent to the dollar, and the British pound less than 14 percent. Of the major currencies, only the Japanese yen has fared worse and has weakened by almost 20 percent against the U.S. dollar over the year. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Pound and euro similar to currencies of emerging markets?
Ed Moya (Oanda) Comments On FedEx, Oil, Gold And Crypto

Shocking Forecast! Bank Of England (BoE) Is Expected To Hike The Rate By Over 2%!

ING Economics ING Economics 26.08.2022 13:16
UK households may collectively need up to £65bn extra in government support to offset the forthcoming rise in energy bills this winter. That would reduce the risk of a deep recession but would lead to extra Bank of England rate hikes. Markets are right to be thinking about more tightening  even if investor expectations are wildly overestimating its scale Demands for more government help with energy bills are rising UK markets now expect Bank Rate to exceed 4% next year Even by the standards of 2022, it’s been a crazy week in sterling interest rate markets. Swap rates now suggest that the Bank of England will need to hike rates as high as 4.2% (from 1.75% currently). Not only that, it implies the Bank will need to take rates even higher than the US Federal Reserve; it's the first time investors have taken that view since early this year. This trend has undoubtedly been exaggerated by very poor liquidity which means it's hard to gauge exactly how realistic investors think a 4%+ Bank Rate really is. Nevertheless, we think some of this recent reappraisal can be traced back to the eyewatering surge in gas prices and increased focus on how the government may be forced to react. The chain of logic goes something like this: higher energy costs increase the chances of a big support package from the government. And given it will hit households hard right across the income spectrum, blanket support measures (in addition to targeted payments to those on low incomes) may well be required. That, coupled with possible tax cuts depending on which candidate becomes Prime Minister in September, would materially reduce the risk of a deep economic downturn. But the Bank of England would also view it as inflationary, and may well be forced to increase interest rates even further in the autumn. Markets expect the Bank of England to hike beyond 4% next year Source: Refinitiv, ING, Macrobond   We tend to agree with this assessment – even if the scale of the rate hikes required will probably fall well short of what markets expect. We think a 50bp hike in September, coupled with another 25-50bp in November looks more likely at this stage. Let's break it down in more detail: So far, the government has announced £37bn worth of support, through a combination of direct payments to low-income households, coupled with a £400 discount for all households on their energy bills from October. When that support was announced in late May, energy bills were expected to peak at a little under £3000 in the autumn. Using that figure, a quick back-of-the-envelope calculation suggests that households would have paid roughly £65bn in aggregate on their energy bills in the period between October 2022-October 2023. For context that compares to roughly £30bn in the fiscal year 2020-21, which came before energy prices began increasing. In other words, the support measures announced to date looked, at the time anyway, like they would go some way to offsetting the energy bill increases coming down the track. Gas prices have reached dizzying levels Source: Macrobond, ING Consumers may need up to £65bn extra in government support Fast forward a couple of months, and the picture looks much more extreme. The energy regulator Ofgem has announced the average household bill will surpass £3,500 from October, and further sharp rises look inevitable. Indeed, our own estimates based on gas and electricity futures contracts this week point to an average annual household energy bill of around £5,300 across that same 12-month period from October (peaking at roughly £6,500 on an annualised basis in the three-month period between April-June 2023). That takes our aggregate household cost estimate up to around £130bn – a £65bn increase on May's projection - and this estimate is rising on an almost daily basis. Admittedly that figure is a bit of a simplification – it relies on a number of assumptions, not least that those wholesale futures contracts provide an accurate gauge of where prices will land this winter. Many of those contracts are trading fairly illiquid right now. But it gives a sense of what the new Prime Minister will be faced with when they take office in early September. Roughly speaking, the average household would see need almost £2,700 extra, were the government to match the level of support offered in June. One option would be to increase the value of payments being given to those on income support/benefits, and that seems quite likely. But in practice, a much broader response will also be needed. We’ve run a rough calculation in the chart below, and what’s striking is that across large parts of the income distribution, households may have to devote more than 10% of their disposable incomes to energy bills on average (between Oct 2022 and 2023), even accounting for existing support available. Some of these households will be able to tap savings accrued during the pandemic. That 'excess savings' level still stands at roughly 8% of GDP.  But it's hard for the government to target support on this basis, and it may find that the most practical option would be to dramatically increase the £400 energy bill discount being offered to all households. Households in most income deciles will be spending more than 10% of disposable incomes on energy Government support based on estimates produced by the UK Treasury as part of the 26 May Cost of Living package. For simplicity, we've used 2020/21 equivalised disposable income data, which in practice will have increased. Assumes energy prices increase by same percentage for all income deciles. Disposable income = after income tax/national insurance etc (but before accounting for housing and other costs) Source: ING analysis of ONS Living Costs and Food Survey, Effects of Tax and Benefits, Ofgem, UK Treasury Extra government stimulus would likely prompt additional rate hikes Whatever happens, the Bank of England will be looking at all of this through the lens of inflation. Broad-based government support would considerably reduce the chances of a recession - or at least of a deep downturn - especially given it may also be coupled with a cut to national insurance (a form of income tax) if Foreign Secretary Liz Truss becomes Prime Minister in September. The assessment also depends on what support is offered to businesses, something we've not discussed here. But broadly speaking, we agree with markets that the Bank of England would view reduced recession odds as raising medium-term inflation forecasts, and thus would likely feel obliged to hike rates further. To be clear, all of this is guesswork at this stage. Neither candidate, Rishi Sunak nor Liz Truss, have said in detail yet what level of support they’d implement this autumn. It’s not clear whether we'll get an emergency budget before the Bank of England's meeting on 15 September, but assuming we don't, we expect the Bank to opt for another 50bp then. We’ve recently argued that the Bank is reaching the latter stages of its tightening cycle. The BoE’s own August forecasts suggest inflation will be below target in a couple of years' time, regardless of whether it increases interest rates further. Inflationary pressures associated with 'core' goods are easing, given lower commodity costs, higher inventory levels and reduced consumer demand - even if wage growth will keep pressure on services inflation. But the arrival of fresh government support would provide the BoE with further impetus to hike rates aggressively in the near term, and probably into late autumn. We expect the Bank Rate to peak at roughly 2.5-2.75% in November, albeit far less than current market pricing is suggesting. Gilts are skidding off-road The jump in energy futures, as well as the surprise UK inflation report, are still being digested by the gilt market. These have brought about a rise in BoE hike expectations, an aggressive flattening of the gilt curve, and a sharp underperformance of gilts relative to US and European peers. In light of greater hike expectations, curve inversion is no surprise, and indeed the US curve has been there recently too. Worse inflation dynamics, as well as more immediate recession fears, should lead to a further flattening of the gilt curve compared to its US counterpart. With US inflation expectations looking more under control than in Europe, the spread between US and UK rates seems more directional to short-term European energy developments. The spread to EUR rates on the other hand is harder to explain. The UK is by no means the only country contemplating shielding its consumers from higher energy bills. Indeed, the measures floated so far in the UK pale in comparison to some continental alternatives. Similarly, energy inflation is a problem faced by all European countries. In short, the spread that has opened between GBP and EUR short rates has to narrow, and we think it will most likely be with lower GBP rates. The underperformance of 2Y gilts relative to Germany is overdone Source: Refinitiv, ING   The magnitude of these moves raises financial stability questions. We’ll refrain from drawing broader conclusions about the effect on the valuation of other assets beyond bonds but will simply stress that manageable rates volatility tends to be a pre-condition in many investment decisions. Closer to home, the latest moves will dash hopes of a return to more functional gilt markets. Gilt liquidity conditions continue to deteriorate Source: Refinitiv, ING   Bid-ask spreads have been propelled to new wides, and implied volatility continues to climb. These developments cast a long shadow on the Bank of England's plan to sell gilts out of its Asset Purchase Facility portfolio, even in small sizes. We don't argue that the plan should be shelved but a clearer circuit-breaker, which helps avoid adding to market stress, would make sense in our view. One could of course argue that the current episode is a one-off and that the BoE plans the sale of only £10bn per quarter in the first year. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
GBP/USD Pair: A Reversal Signal Will Be The Price Consolidating

British Pound (GBP) Is Affected By The Prospect Of British Economy

Kenny Fisher Kenny Fisher 30.08.2022 21:43
Sterling falls to 2.5 year low The British pound is down sharply today as the downward trend continues. In the North American session, GBP/USD is trading at 1.1629, down 0.65%. We haven’t seen the pound at such low levels since March 2020. A gloomy outlook for the UK economy continues to weigh on the pound. The Bank of England has projected that inflation will hit 13%, and some forecasts expect inflation to rise even higher. On Monday, Goldman Sachs said it expected the UK to tip into a recession in the fourth quarter of 2022 and projected that the economy would decline by 0.6% in 2023. The US dollar flexed some muscles on Friday, after a hawkish speech from Fed Chair Powell at the Jackson Hill Symposium. Powell’s brief speech went straight to the point, stating that the Fed would continue raising rates until inflation was brought under control. Powell pointedly said that one or two weak inflation reports would not cause the Fed to pivot on its aggressive policy, a veiled reference to the market euphoria which followed after July’s inflation rate dropped unexpectedly, as speculation rose that the Fed would make a U-turn on policy. Powell’s speech removed any doubts about the Fed’s plans to continue raising rates, but the size of the increases will depend on key economic data, not just inflation. Overshadowed by Jackson Hole, US Personal Income and Spending data was weaker than expected. As well, the Core PCE index, the Fed’s preferred inflation indicator, fell to 6.3%, down from 6.8% and below the forecast of 7.4%. The US economy is showing signs of slowing down, and the markets will be keeping a close eye on Friday’s non-farm payroll report. If NFP is weaker than expected, we could see the likelihood for a 50 basis point increase. Currently, the markets have priced in a 66.5% likelihood of a 75bp hike, versus 33.5% for a 50bp increase, according to CME’s FedWatch. GBP/USD Technical  GBP/USD is testing support at 1.1672. Below, there is support at 1.1604 There is resistance at 1.1786 and 1.1854     This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. British pound can't find its footing - MarketPulseMarketPulse
What Trend Is Forecast For The Pound To US Dollar (GBP/USD) Pair

GBP/USD Is Under Strong Bearish Pressure. Trading Suggestions: Sharp Break Above The Symmetrical Triangles Pattern

InstaForex Analysis InstaForex Analysis 01.09.2022 09:19
The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Early in the European session, the British Pound (GBP/USD) is trading at around 1.1574. We can see the formation of a symmetrical triangle on the 4-hour chart. If the pound manages to break above this pattern, we could expect a bullish acceleration towards the 21 SMA located at 1.1670. The British pound is under downward pressure due to the gloomy outlook for the British economy. Earlier this month, the Bank of England forecast that the British economy would enter a prolonged recession from the fourth quarter of 2022. This suggests that in the medium term the pound could reach the psychological level of 1.15 and even the low of 2020 at 1.1410. The GBP/USD pair is trading below the 21 SMA located at 1.1670 and below the 200 EMA located at 1.1957. Any technical bounce towards these levels will be seen as an opportunity to sell. On the 4-hour chart, we can see the formation of a downtrend channel since August 8. In case the downside pressure continues, a technical bounce around the bottom of the downtrend channel is expected around 1.1542. Technically, GBP/USD is under strong bearish pressure and is trading around -1/8 of Murray at 1.1598. This Murray level represents a technical reversal zone. In the event that the pound resumes its bullish cycle, we should expect it to trade above 1.1596 (-1/8 Murray), which could set the stage for a recovery in GBP and it could reach the top of the downtrend channel at around 1.1780. On the other hand, if the pound continues its downward acceleration, it is expected to fall towards the area of around 1.1542. There is daily support and it could even reach -2/8 of Murray located at 1.1475. Our trading plan for the next few hours suggests a sharp break above the symmetrical triangles pattern at around 1.1596 to buy with targets at 1.1670 and 1.1780.   Relevance up to 06:00 2022-09-06 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/290925
What Trend Is Forecast For The Pound To US Dollar (GBP/USD) Pair

Serious Pressure On The GBP/USD Pair. What Happens When The Pair Goes Down Or Up?

InstaForex Analysis InstaForex Analysis 01.09.2022 09:58
Only one signal to sell the pound was formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 1.1654 level in my morning forecast and advised making decisions on entering the market from it. A breakthrough and reverse test from the bottom up of this range gave a sell signal, which eventually resulted in a move down by more than 50 points. Before the test and false breakout of the level of 1.1654 in the afternoon, I lacked literally one point, so I couldn't get a point from there to open new short positions. When to go long on GBP/USD: Obviously, the pressure on the pound continues to increase, including due to the large spread in the interest rates of central banks. The cost of living crisis, high inflation and the British economy rapidly sliding into recession leave no chance for bulls on the pound. Against this background, it is time to talk about updating the low that was reached for the pair during the beginning of the coronavirus pandemic in 2020 - this is, for a minute, 1.1409. Today we expect the release of the index of business activity in the manufacturing sector in the UK for August this year. It is unlikely that it will be revised for the better, so there is no need to have much hope for the restoration of the pair. In case GBP/USD falls further, forming a false breakout in the area of the nearest support at 1.1540 will lead to the first signal to open long positions in anticipation of a correction to the area of 1.1595. A lot also depends on this level, since its breakthrough can pull stop orders from speculative bears. A test of 1.1595 from top to bottom will testify to a return of demand for the pound and creates a buy signal with growth to a more distant level of 1.1650, where moving averages are passing, playing on the bears' side. The farthest target will be the area of 1.1714, where I recommend taking profits. If the GBP/USD falls further, which is more likely, and there are no bulls at 1.1540, the pressure on the pair will increase. A breakthrough of this range will lead to the renewal of the next annual low. In this case, I advise you to postpone long positions until the next support at 1.1479, but you can act there only on a false breakout. I recommend opening long positions on GBP/USD immediately for a rebound from 1.1409, or even lower - around 1.1360, counting on correcting 30-35 points within the day. When to go short on GBP/USD: Bears continue to push the pound downward. The only problem for them now is the beginning of a new month, which may lead to a small upward correction in the pound, which many have been expecting for a long time. Therefore, selling on the breakdown of annual lows is a rather risky strategy. It is much better to act on the basis of an upward correction and weak fundamental statistics, which is expected today in the UK. In this case, you can put a short stop with a fairly extensive potential for the pound's decline. The optimal scenario for selling GBP/USD would be forming a false breakout at the level of 1.1595, which was formed at the end of yesterday. This will make it possible to achieve a new fall and renewal of annual lows around 1.1540. A breakdown and reverse test of this range will give a new entry point for selling with a fall to 1.1479, and the area of 1.1409 will be a further target, where I recommend taking profits. In case GBP/USD grows and there are no bears at 1.1595, there will be ghostly chances for an upward correction, and bulls will get an excellent opportunity to return to 1.1650, where the moving averages play on the bears' side. Only a false breakout there will provide an entry point into short positions based on the pair moving downward. If there is no activity there, I advise you to sell GBP/USD immediately for a rebound from 1.1714, counting on the pair's rebound down by 30-35 points within the day. COT report: The Commitment of Traders (COT) report for August 23 logged an increase in both short positions and long positions. And although the latter turned out to be a bit more, these changes did not affect the real current picture. Serious pressure on the pair remains, and recent statements by Federal Reserve Chairman Jerome Powell that the committee will continue to aggressively raise interest rates further have only increased pressure on the British pound, which has been experiencing quite a lot of problems lately. Expected high inflation and a looming cost-of-living crisis in the UK does not give traders room to take long positions, as a fairly large range of weak fundamentals is expected ahead, likely to push the pound even further below the levels at which it is currently trading. This week, it is important to pay attention to data on the US labor market, which, among other things, determine the Fed's decision on monetary policy. Continued resilience with low unemployment will lead to higher inflationary pressures going forward, forcing the Fed to further raise interest rates, putting pressure on risky assets, including the British pound. The latest COT report indicated that long non-commercial positions rose 14,699 to 58,783, while short non-commercial positions rose 9,556 to 86,749, leading to a slight rise in the negative non-commercial net position to -27 966 against - 33,109. The weekly closing price fell off from 1.1822 against 1.2096. Indicator signals: Trading is below the 30 and 50-day moving averages, which indicates further decline in the pair. Moving averages Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart. Bollinger Bands In case the pair goes down, the lower border of the indicator around 1.1570 will act as support. In case of growth, the upper border of the indicator around 1.1650 will act as resistance. Description of indicators Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart. MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between short and long positions of non-commercial traders.     Relevance up to 08:00 2022-09-02 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320520
Will The Outlook For The Pound-Dollar (GBP/USD) Currency Pair Be Positive

GBP/USD: Sell Or Buy? Trading Suggestion

InstaForex Analysis InstaForex Analysis 01.09.2022 11:32
Analysis of transactions in the GBP / USD pair Pound tested 1.1669 when the MACD line was just starting to move below from zero, which was a good signal to sell. Resultantly, the quote fell by 40 pips, updating the yearly low. As for long positions around 1.1628, they did not bring much result because the pair traded downwards in the afternoon. Also, no other signals appeared for the rest of the day. Pound continues to update yearly lows, so there are not many people who want to buy it. Even weak employment data in the US non-farm sector did not lead to its sharp increase yesterday afternoon. A report on business activity in the UK manufacturing sector is coming today, but it is unlikely to trigger a sharp jerk in pound. The only thing that could stop the bear market temporarily is a strong oversold for all indicators. In the afternoon, the focus will shift to the data on US jobless claims, ISM manufacturing index and speech by FOMC member Raphael Bostic. For long positions: Buy pound when the quote reaches 1.1622 (green line on the chart) and take profit at the price of 1.1683 (thicker green line on the chart). Although there is little chance for a rally today, an upward correction could still happen. Take note that when buying, the MACD line should be above zero or is starting to rise from it. It is also possible to buy at 1.1572, but the MACD line should be in the oversold area as only by that will the market reverse to 1.1622 and 1.1683. For short positions: Sell pound when the quote reaches 1.1572 (red line on the chart) and take profit at the price of 1.1525. Pressure could return at any moment, especially after weak statistics in the UK. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Pound can also be sold at 1.1622, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.1572 and 1.1525. What's on the chart: The thin green line is the key level at which you can place long positions in the GBP/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the GBP/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Relevance up to 09:00 2022-09-02 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320534
What Trend Is Forecast For The Pound To US Dollar (GBP/USD) Pair

How U.S. Unemployment Data Will Affect The Dollar And The GBP/USD Pair?

InstaForex Analysis InstaForex Analysis 02.09.2022 09:39
Yesterday, the British pound closed down 75 points. The lower shadow of the daily candle has broken through the target level of 1.1525. Consolidation below the level will open the next target – 1.1385. The Marlin Oscillator is close to the oversold zone, but still has room for decline. The price is consolidating above the support at 1.1525 on the four-hour chart, the decrease is taking place exactly, under the balance and MACD indicator lines. The Marlin Oscillator is declining in waves in downward trend territory. We are waiting for further development of the downward local trend. The US employment data for August is due out tonight, including nonfarm payrolls and the overall unemployment rate. The forecast for Nonfarm payrolls is 295-300,000, the unemployment rate is expected to remain unchanged at 3.5%. But the business media is raising fears about the data setback, as ADP Private Sector Employment Data came in at just 132,000 on Wednesday, versus an expectation of 300,000. And here we note two things: ADP Non-Farm Employment Change expectations were clearly too high, and , the second point is that ADP changed the data collection and analysis model in August, which led to a "weak" indicator. The most accurate predictive indicator of Nonfarm payrolls is still not ADP Non-Farm, but weekly claims for unemployment benefits - Unemployment Claims. And this indicator shows a decline from month to month; Thus, the sum of the latest applications for four weeks amounted to 987,000, and for the other previous four months in June and August - 1,011,000. At the same time, the employment index in the manufacturing sector (ISM Manufacturing PMI sub-index) showed an increase from 49.9 to 54, 2, and the ISM Manufacturing PMI itself for August remained at the previous 52.8 against expectations of a fall to 52.0. Thus, general market expectations for today's weak employment data in light of the looming global recession are likely to be disappointing. We are waiting for strong non-farms and the strengthening of the US dollar.       Relevance up to 05:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320621
Will The Outlook For The Pound-Dollar (GBP/USD) Currency Pair Be Positive

Will The GBP/USD Pair Indicate A Down Trend Or a Reversal Today?

InstaForex Analysis InstaForex Analysis 02.09.2022 10:53
Technical Market Outlook: The GBP/USD pair has made another fresh low at the level of 1.1498 and continues to move away from the trend line resistance. The nearest horizontal technical resistance is seen at the level of 1.1622 and this level is the next target for bulls in a case of a local pull-back. The next target for bears is located at the level of 1.1410 (2020 low). The momentum remains weak and negative on the H4 time frame chart, so the larger time frame trend (daily and weekly) remains down until further notice. Weekly Pivot Points: WR3 - 1.18043 WR2 - 1.17392 WR1 - 1.17002 Weekly Pivot - 1.16741 WS1 - 1.16351 WS2 - 1.16090 WS3 - 1.15439 Trading Outlook: The Cable is way below 100 and 200 DMA , so the bearish domination is clear and there is no indication of down trend termination or reversal. The bulls has failed big time to continue the corrective cycle after a big Bearish Engulfing candlestick pattern was made on the weekly time frame chart last week. The next long term target for bears is seen at the level of 1.1410. Please remember: trend is your friend.     Relevance up to 08:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/291131
The GBP/USD Pair Follows The Trend Of The EUR/USD Pair, Could This Change?

What To Expect From The GBP/USD In Short And Long Positions?

InstaForex Analysis InstaForex Analysis 02.09.2022 11:43
Several market entry signals were formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 1.1595 level in my morning forecast and advised making decisions on entering the market from it. A breakthrough and reverse test from the top down of this range gave a great buy signal, which, unfortunately, did not materialize due to rather weak statistics on activity in the UK manufacturing sector, which continued to decline in August this year. This was enough for the pound to fall to another annual low. In the afternoon, after the breakdown of the next support at 1.1540, a reverse test from the bottom up of this range took place with a sell signal, which resulted in the pound's decline by more than 40 points. When to go long on GBP/USD: Today there is nothing in the UK and it is obvious that the focus will be on data on the US labor market, which, with all the bears' hopes, can push the pound to rise by the end of the week, since whatever indicators come out, they are already taken into account in current quotes. Since the opening of the week, the pound has already lost more than 200 points, and it is unlikely that there will be those who want to continue selling the pair without a more or less upward correction. For this reason, I will bet on forming the lower boundary of the new rising channel around 1.1516 and on protecting this level after the release of US labor market reports. In case GBP/USD falls, forming a false breakout at 1.1516 will lead to the first signal to open long positions in anticipation of a correction to the 1.1562 area, where the moving averages pass, limiting the pair's upward potential. However, trading is now being carried out so close to this indicator, which indicates a clear lack of bearish desire to sell the pound further and an imminent correction. A lot depends on 1.1562, as its breakthrough may pull stop orders from speculative bears. A test of 1.1562 from top to bottom will testify to a return of demand for GBP/USD and creates a buy signal with growth to a more distant level of 1.1604. The farthest target will be the area of 1.1650, where I recommend taking profits. If the GBP/USD falls further and there are no bulls at 1.1516, the pressure on the pair will increase. A breakthrough of this range will lead to the renewal of the next annual low. In this case, I advise you to postpone long positions until the next support at 1.1473, but you can act there only on a false breakout. I recommend opening long positions on GBP/USD immediately for a rebound from 1.1409, or even lower - around 1.1360, counting on correcting 30-35 points within the day. When to go short on GBP/USD: Bears continue to push the pound down, making new daily lows every day, which indicates that they are still in control of the market. The only problem they may have now is the weak statistics on the US labor market, which, despite its strength, may begin to deflate after a series of fairly large interest rate hikes that took place this summer. Therefore, selling on the breakdown of annual lows is a rather risky strategy for today. It is much better to act based on an upward correction. The optimal scenario for selling GBP/USD would be forming a false breakout at the level of 1.1562, which was formed at the end of yesterday. This will make it possible to achieve a new fall and renewal of annual lows around 1.1516. A breakdown and reverse test of this range will give a new entry point for selling with a fall to 1.1473, and a longer target will be the area of 1.1409 – the low of 2020, when the coronavirus pandemic began, where I recommend taking profits. In case GBP/USD grows and there are no bears at 1.1562, there will be ghostly chances for an upward correction, and bulls will have an excellent opportunity to return to 1.1604, where the moving averages play on the bears' side. Only a false breakout there will provide an entry point into short positions based on the pair moving down. If there is no activity there, I advise you to sell GBP/USD immediately for a rebound from 1.1650, counting on the pair's rebound to the downside by 30-35 points within the day. COT report: The Commitment of Traders (COT) report for August 23 logged an increase in both short positions and long positions. And although the latter turned out to be a bit more, these changes did not affect the real current picture. Serious pressure on the pair remains, and recent statements by Federal Reserve Chairman Jerome Powell that the committee will continue to aggressively raise interest rates further have only increased pressure on the British pound, which has been experiencing quite a lot of problems lately. Expected high inflation and a looming cost-of-living crisis in the UK does not give traders room to take long positions, as a fairly large range of weak fundamentals is expected ahead, likely to push the pound even further below the levels at which it is currently trading. This week, it is important to pay attention to data on the US labor market, which, among other things, determine the Fed's decision on monetary policy. Continued resilience with low unemployment will lead to higher inflationary pressures going forward, forcing the Fed to further raise interest rates, putting pressure on risky assets, including the British pound. The latest COT report indicated that long non-commercial positions rose 14,699 to 58,783, while short non-commercial positions rose 9,556 to 86,749, leading to a slight rise in the negative non-commercial net position to -27,966 against - 33,109. The weekly closing price fell off from 1.1822 against 1.2096. Indicator signals: Trading is below the 30 and 50-day moving averages, which indicates the pair's succeeding decline. Moving averages Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart. Bollinger Bands In case the pair falls, the lower border of the indicator around 1.1516 will act as support. In case of growth, the upper border of the indicator around 1.1562 will act as resistance. Description of indicators Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart. MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between short and long positions of non-commercial traders.       Relevance up to 08:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320639
The Euro To The US dollar Pair May Move Upward

The Dollar Is At Highs And The Euro Is Retreating

InstaForex Analysis InstaForex Analysis 02.09.2022 11:51
The US currency is closing the week strongly higher, having confirmed its leading position once again. Its European rival is rapidly losing ground. According to analysts, EUR/USD will be retesting the parity level from time to time, which is not good for the euro. The greenback, which has reached its peak in the past 20 years, started its rally late on Thursday, September 1. On the first day of autumn, the US dollar posted the third week of continuous gains. So, on Friday, it recorded the highest value in the past two decades trading against the euro and the yen. The US dollar hit 20-year highs following the release of the manufacturing index in the US. The data showed that the ISM Manufacturing PMI stayed at the same level of 52.8 in August. Some analysts expected a drop to 52 points. Yet, as the data shows, activity in the US manufacturing sector has notably increased. The indicator has been showing strength for a long time already. In this light, the European currency is noticeably retreating against its American counterpart. The euro opened this week below the parity level but managed to win back some losses later on. In the middle of the trading week, EUR/USD recovered to 1.0078 amid lower gas and oil prices and hawkish comments from the ECB. For your reference, the euro first tested the party level in early July and then slumped to the critical level of 0.9903. The situation only worsened as EUR was struggling to leave the parity level and withstand the downward pressure. On Friday morning, September 2, the EUR/USD pair was trading near 0.9970. There is a possibility that the pair may slightly advance to 0.9980. Its breakout will open the way for sellers towards the area of 0.9800–0.9820. Monetary policy tightening of the US Federal Reserve provides significant support to the greenback. The dollar is getting stronger as the Fed's September meeting is approaching. At the same time, the European currency is in a much less favorable position as it is pressured by a protracted energy crisis in Europe. Market participants expect the Fed to maintain its tight monetary policy as this measure is necessary to tackle accelerated inflation. The rate is projected to increase by 75 basis points to 3-3.25%. On Friday, the employment data in the US will be released. Estimates suggest that the unemployment rate in August stayed close to 3.5% recorded in July. The nonfarm payroll employment has increased by 300K. The Federal Reserve will consider this data to evaluate the state of the labor market and make a decision on the key rate. Experts assume that strong macroeconomic data will greenlight the rate hike through 2023. Markets are sure that the Fed will raise the rate for the third time in September by 75 basis points. For a different scenario, the Fed will need to see a deep decline in the labor market. Yet, there are currently no signs that it is cooling down. This summer, the US economy performed relatively well despite the threat of a recession. However, analysts at Danske Bank are skeptical about the current policy of the Fed. They point out that headline inflation in the country has reached its peak while the labor market and inflationary pressure remain strong. This makes it harder for the regulator to avoid recession as this is where the US economy is headed in 2023, Danske Bank concludes.     Relevance up to 08:00 2022-09-05 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320649
The Bears Are In Full Control Of The Pound To US Dollar (GBP/USD) Market

The United States And The United Kingdom Are In Different Positions

InstaForex Analysis InstaForex Analysis 02.09.2022 13:15
Despite being oversold, GBP broke through 1.1530 on Thursday. The currency is likely to remain bearish although it is now retracing up. Meanwhile, USD could strengthen against the basket of major currencies should the jobs market report for August come in strong. Yesterday, GBP/USD fell below 1.1580, briefly touched 1.1499, rebounded, and consolidated at 1.1530. In the upcoming days, the pound is expected to fall below 1.1500 due to being oversold. Support is seen at 1.1460. The price is unlikely to show strong growth. However, should bulls gain control over the market and hit 1.1605, the pound could stabilize for a while. In the long term, GBP/USD is projected to remain bearish as well. A gloomy forecast has recently come from Capital Economics.In the coming months and next year, the pound is likely to hit its lowest level versus the greenback. Meanwhile, the euro is expected to show a modest fall. If the British economy contracts by 1% and inflation is at a record rate, the Bank of England will hardly provide any support, so the pound will probably extend the downtrend. We see GBP down by 5% by the end of 2022, experts at Capital Economics wrote. The current steep drop in the pound is due to the stronger US dollar. Still, there is also an internal factor, the sterling is weaker against other currencies, including the euro, being under pressure from sales. The United States and the United Kingdom are in completely different positions. The UK has already slipped into a recession, while the US has a chance to avoid it. The recent spike in UK wholesale gas prices indicates that the country is now dealing with a deep and prolonged recession. The greenback is also strong due to decreased risk appetite as investors fear a global economic downturn. It is commonly known that the greenback gains and the pound suffers losses during turmoil. The pound is acting more like a risk asset due to a massive current account deficit in the UK. The Bank of England's stance on interest rates is also weighing on the pound. The regulator can't afford to act even more aggressively. So, the pound is likely to lose even more. The Bank of England is planning a 50 basis-point rate hike, but markets hope for a bigger increase. They anticipate the Bank of England to be more decisive that any other central bank due to record inflation in the country. In order to raise interest rates by 180 basis points by the end of the year, the regulator should make at least one 75 basis-point move. However, there have been no signs of such a likelihood so far. In light of the continuing downtrend, the forex market seems to have long realized that the Bank of England will not live up to these expectations. According to Capital Economics, interest rates will be raised at a slower pace than investors hope. Meanwhile, the ECB's and the Fed's actions will satisfy market expectations. GBP/USD is seen falling to the all-time low of 1.0500 by the middle of 2023. EUR/USD could sink as low as 0.9000 by that time, Capital Economics said. Meanwhile, EUR/GBP could reach 1.1700.   Relevance up to 10:00 2022-09-05 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320671
Forecasts To Decrease. Russia PMI  index has already fallen

Forecasts To Decrease. Russia PMI index has already fallen

Kamila Szypuła Kamila Szypuła 05.09.2022 08:33
Retail Sales in Australia Today at 3:30 CET Australia released monthly retail sales data. Retail sales in Australia started the year high at 7.3%. Unsettled at the end of January, and at the beginning of February, it dropped sharply to the level of -4.4%. After that, it recovered significantly to 1.8%. In the steppe it slightly decreased to the level of 0.9% and in July to the level of 0.2%. At the end of last month, positive changes appeared and the index will reach 1.3%. It was much higher than forecasted, the weather forecast for this period was 0.3%. According to the data, the current change in the total value of sales adjusted for inflation at the retail level remains at the level of 1.3%. This is the expected level. Source: investing.com PMI Index will drop? The UK awaits Composite PMI Index results. The level of activity of purchasing managers in Great Britain remained at the level of 53.6 at the beginning of the year. It reached the highest level in March (60.9). After that, it began to decline gradually. In May it fell to 51.8. In the following two months, it remained at 53.1 and 52.8, respectively. Although the index was above 52, it is forecast to drop to 50.9. Official data will be released at 10:30 CET. Source: investing.com Read next: ECB Will Continue To Hike Rates To Slow Inflation? | FXMAG.COM The U.K. Services Purchasing Managers Index At 10:30 CET UK will also publish the results of the monthly activity level of purchasing managers in the service sector. For the first 3 months of this year, this activity was in a rising trend. In January, the index reached the level of 54.1, and then rose to the levels of 60.5 and 62.6, respectively. In April, it began to decline, reaching the level of 58.9. In May, it fell to 53.4. In June, it increased by 0.9. The lowest level of 52.6 was recorded in July. The current forecasts show a slight decrease in the ratio to 52.5. The visible decline, that will begin in April, may be largely due to the geopolitical situation. Source: investing.com Important Speech and Meeting Today at 17:30 CET there will be a speech from the Monetary Policy Committee of the Bank of England, Dr Catherine L Mann. Its public involvement is often used to throw up subtle hints about future monetary policy. OPEC is responsible for nearly 40% of the world's oil supplies. An OPEC meeting will be held at 12 CET in the United States. Representatives of 13 oil-rich countries take part in OPEC meetings. The situation of energy markets and the quantity of oil produced is most often discussed at such meetings. Will the indicator go down again ? The PMI monthly Composite Reports on Manufacturing and Services are based on research by more than 300 business executives at private manufacturing companies and 300 private service companies, due to be published today at 10 CET. In the initial periods, there was an increase. In January, the index was recorded at 52.3. Later, it also increased and fluctuated between 54 and 55. Since June, the trend was reversed, the indicator in this period reached the level of 52. In the following month it dropped below the level of 50. In July, the PMI monthly Composite Reports on Manufacturing and Services was 49.9. It is forecasted that the result will decrease to the level of 49.2. Source: investing.com The Russia HSBC Services PMI Index Russia today released HSBC Services PMI data at 8 CET. The results for the last period are much lower than before. The current reading is at 49.9. Meanwhile, the result for July was quite high at 54.7. Such a decrease is perceived negatively for the RUB. The HSBC Services PMI Index is developed for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. Source: investing.com Source: https://www.investing.com/economic-calendar/
The Recovery Of The GBP/USD Pair May Be Temporary, The Trend Remains Bearish

More Information About Liz Truss' Plan May Make Markets Become Calmer

ING Economics ING Economics 06.09.2022 11:00
European curves react to higher energy prices and to news of fiscal support in the same way, by bear-flattening. More yield upside is to be expected when more spending is announced but at least a lot of the bad news is out already for gas supply When fiscal gets involved Even if it doesn’t require further borrowing, rates markets immediately saw the hawkish implications to Germany’s third relief package. In keeping with ever rising European Central Bank (ECB) hike expectations, the prevailing view seems to be that any measure that limits growth downside would also free the central banks’ hand in tightening policy further. There are actually few on the record comments to that effect in the eurozone but, in a period of hyper sensitivity to inflation, we wouldn’t be surprised to see more yield upside as other governments unveil their own support packages. Remember that this cycle's high in 10Y Bund yields is only 20bp away around 1.77%. Details on Truss' fiscal plans could amount to a reduction of uncertainty for markets One potential exception to that rule may be the UK. The run-up to Liz Truss being announced as Prime Minister has been a very difficult period for gilts. We’ve written already of the deadly combination of fiscal spending, monetary tightening, and foreign outflows for sterling bonds. The lack of clarity about the extent, funding, and inflationary impact of fiscal support during the leadership campaign may have exacerbated the sell-off in gilts. Actual details on her fiscal plans are starting to emerge,with Bloomberg reporting a potential cost of £130bn over 18 months to cap energy bills at £2,000 per houshold. In time, this could amount to a reduction of uncertainty for markets, and could be greeted with more stable performance for gilts. 10Y gilts have lagged international peers during the leadership campaign Source: Refinitiv, ING Central banks waiting in the wings Of course, central banks have played a role in the market’s sensitivity to fiscal headlines. The Bank of England (BoE) for instance has explicitly said more fiscal spending may force it into more aggressive tightening… but it could also be responsible for a further reduction in market uncertainty soon. Our, admittedly optimistic, take is that in addition to more details about fiscal measures in the coming days, next week’s BoE meeting should also clarify its reaction. Paradoxically, the more hawkish the BoE, the more likely it is to regain a Fed-like degree of control on its domestic rate market. The more hawkish the BoE, the more likely it is to regain a Fed-like degree of control on its domestic rate market The market reaction to a full cut-off of Nord Stream gas flow from Russian is another place where central banks’ hand can be clearly seen. The ECB for instance has encouraged market participants to think that it will react to realised inflation, most of which is energy-driven, rather than rely on its forecast. Fears of second-round effects also participate in this overreliance on energy price developments in rates markets. Even if we do think this may be an overreaction, this reinforces our view that the EUR swap and German curves will invert this winter. The whole EUR swap curve will soon be inverted, and the German curve is set to follow suit Source: Refinitiv, ING Today's events and market view Germany is scheduled to sell inflation-linked bonds and Austria will carry out auctions in the 3Y and 10Y sectors, but this will be eclipsed by syndicated sales from France (new 20Y) and Italy (new 13Y green bond) ,which we expect the price today. The duration impact should be non-negligible in illiquid markets but we surmise that this has been largely played out in the run-up to the deals. We wouldn’t be surprised to see the curve flatten after pricing. The Italian sale comes in a context of a shrinking greenium across sovereign, sub-sovereign, supranational, and agency bond markets. Data is on the light side in Europe with mostly construction PMIs from Germany and the UK to look out for. US PMI and ISM services should gather more attention. In particular, a decline in the price components would be greeted as further evidence that the Fed is on its way to meeting its inflation target. An improvement in the growth-relevant indicators might overshadow this however, with markets currently minded to take a hawkish implication to most releases and events. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

Would Liz Truss (UK Prime Minister-Elect) Freeze Energy Bills? Bitcoin Jumped Above $20K, But Seems Not To Feel Strong.

Craig Erlam Craig Erlam 06.09.2022 11:50
It’s been a mixed start to trade on Tuesday, similar to what we saw in Asia overnight, and as we await the return of the US after the long bank holiday weekend. Europe in particular was rattled on Monday by the Gazprom announcement that came after the close on Friday in relation to Nord Stream 1. The latest move in the apparent weaponisation of energy supplies has once more created huge uncertainty ahead of the winter. Conveniently the announcement came hours after the G7 agreed to a Russian price cap and as Europe was boasting about being ahead of schedule on filling gas stores. RBA signals more hikes ahead The Reserve Bank of Australia raised the cash target rate by 50 basis points to 2.35% on Tuesday, in line with expectations, as it continues to aggressively push back against soaring inflation. The central bank reiterated that it is not on a pre-set path but will continue hiking interest rates with markets of the belief that there’s still plenty more to come including another 50bps next month and 25 at each of the following three. Read next: Russia Suspends Flow Through The Nord Stream 1 Pipeline, Cotton Futures, Gold Prices Increase For The First Time In 3-weeks| FXMAG.COM Of course, forecasting even that far ahead has become far more challenging in such an uncertain global environment but it’s clear that central banks around the world still have a massive job on their hands and the coming months will be tough. That said, the RBA is of the belief that inflation will peak later this year before returning to 3% in 2024. PBOC desperate to support CNY The PBOC once again set a stronger yuan fix today as it continues to push back against its decline. Controlling the decline in the yuan has clearly become a huge priority, with the 2% cut in the FX reserve requirement ratio intended to support that initiative. Rather than stop a decline in the yuan, these efforts may simply slow it with a move above 7 against the dollar looking like a matter of when rather than if, given the relentless rally in the greenback. Hit the ground running Liz Truss will be sworn in as Prime Minister today and will have to hit the ground running as the UK prepares for a brutal winter. Reports claim the new PM intends to freeze energy bills this winter at a cost of up to £130 billion, a move that would certainly fall into the bold category. The question is what impact it will have on inflation and gas demand. This will be a core part of what will need to be a much greater package to shield the economy from the grim forecasts we’ve seen in recent weeks. Struggling for rally momentum Bitcoin pushed briefly back above $20,000 today but is struggling to build on that. Broadly speaking, it’s trading in a range between $19,500 and $20,500 as it has for a little over a week now but rallies do appear to be increasingly struggling which may be a slightly bearish signal. A break of $19,500 would confirm that although with trading currently so choppy, it’s tough to read too heavily into today’s moves so far. The broader market environment also remains quite risk averse which could work against cryptos. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Steady after a rocky start - MarketPulseMarketPulse
Can We Expect Better Movements In The European Currency (EUR)?

More Rate Hikes Are Coming. The Increase In The USD/JPY Will Not Change The Political Position Of The Bank Of Japan

ING Economics ING Economics 03.09.2022 09:39
Expect more big rate hikes in September from the major central banks, even if many of them are closing in on the end of their respective tightening cycles In this article Federal Reserve European Central Bank Bank of England Bank of Japan   Federal Reserve Our call: A third consecutive 75bp rate hike in September with Fed funds hitting 3.75-4% in December. Rate cuts from summer 2023. Quantitative tightening (QT) to continue until rate cuts begin. Rationale: While there was a technical recession in the first half of the year this was attributed to volatility in trade and inventories. Consumer spending, business capex and job creation are firm, and with inflation remaining stubbornly high and financial conditions not tightening as much as the Fed would like, more rate hikes are coming. But the 2023 global outlook is deteriorating while higher interest rates and the strong dollar are set to weigh on domestic activity, which is already facing a steep downturn in the housing market. We expect rate cuts next summer. Risk to our call: Two-way. If the labour market remains tight and inflation doesn't fall as quickly as we expect then rate hikes will continue for longer.  Conversely, if the economy reacts badly to rate hikes a deep recession will likely prompt a more rapid reversal in Fed policy. James Knightley European Central Bank Our call: A 50bp rate hike in September and another 25bp in October, followed by a long pause.  Rationale: The eurozone is facing a longer recession and financing conditions have already tightened significantly in recent weeks. The ECB will try to bring its policy rate to the lower end of the range for neutral rates as quickly as possible. However, we think that the ECB is still underestimating the risk and severity of a recession. As soon as the recession becomes more evident, the ECB will also turn more dovish. Any neutral policy rate is much lower in a recession than in a strong growth environment.  Risk to our call: The paradigm shift in many central banks and a high acceptance of a worsening recession is the price to pay to fight inflation. The risk is that the ECB will continue hiking way into the recession and would deliver a total of 150bp rate hikes until Spring 2023. Carsten Brzeski Bank of England Our call: A 50bp rate hike in September and November Rationale: For the same reasons as the ECB, we think the Bank of England is closer to the end of its tightening cycle than the beginning. That said, there is scope for further aggressive action in the near term. While core inflation should fall throughout next year, the jobs market remains tight and the Bank is worried about the risk of persistent wage inflation. We also think a large government energy support package looks increasingly inevitable, and we think that could provide further impetus for the BoE to keep hiking in the near term. The recent weakness in sterling will bolster the hawks' case, even if in practice this isn’t likely to move the needle for inflation all that much. Risk to our call: Two-way. A lack of government support could force the Bank to stop hiking sooner. Equally a 75bp rate hike in September shouldn’t be totally ruled out given other central banks' actions, and neither should the risk of Bank Rate hitting 3% later this year. However, that would make rate cuts more likely in 2023 James Smith Bank of Japan Our call: Bank of Japan will maintain an accommodative policy stance. Rationale: CPI will likely stay above 2.5% till the end of 2022, but the BoJ will downplay it as 'cost-push' driven inflation that will prove to be temporary. Labour conditions are expected to become tighter as labour shortages persist, but it is still questionable that this will lead to meaningful wage increases over the coming months. Even if USD/JPY rises above 140, it won’t be a reason for the BoJ to change its policy stance. Risk to our call: If signs of wage growth are detected then the BoJ may reconsider its policy stance, but that will become more likely when Governor Haruhiko Kuroda retires next April. Min Joo Kang    Source: https://think.ing.com/articles/monthly-central-banks-our-main-calls/?utm_campaign=September-01_monthly-central-banks-our-main-calls&utm_medium=email&utm_source=emailing_article&M_BT=1124162492 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

British Pound (GBP) And UK Economy: Next Week Is Full Of Vital Releases - Inflation, GDP And Labour Market Data

ING Economics ING Economics 09.09.2022 15:38
Next week's US inflation numbers will need to be quite surprising for the Fed to deviate from a 75bp hike at its September meeting. The Bank of England's scheduled meeting has been postponed, and instead the focus will be on several pieces of key UK data In this article US: Core inflation likely to rise to 6.1% UK: Bank of England to stick to 50bp rate hike despite energy package Source: Shutterstock Article updated on 9 September to reflect the postponement of the Bank of England's scheduled meeting US: Core inflation likely to rise to 6.1% We have the last full week of economic data ahead of the September Federal Open Market Committee (FOMC) meeting, but it will take some surprising numbers to make the Fed deviate from a third consecutive 75bp rate hike. After all, the economy is posting decent growth, creating jobs in significant numbers, and Fed Chair Jerome Powell is arguing that “we need to act now, forthrightly, strongly as we have been doing and we have to keep at it until the job is done”. The data includes CPI, which should show headline inflation being depressed by lower gasoline prices, but core inflation is likely to rise to 6.1% from 5.9%. Retail sales should post flat growth, but remember this is a nominal figure and those falling gasoline prices will be a major drag. Real consumption is likely to be up in the third quarter. We also expect manufacturing output to grow further. The deteriorating global outlook and weakening domestic housing market combined with the cumulative impact of policy tightening and the strong dollar means we think the Fed will moderate its hiking to 50bp in November and 25bp in December. Weaker wage pressure and more limited month-on-month increases in CPI thanks to lower import and other input costs would certainly help this argument. UK: Bank of England to stick to 50bp rate hike despite energy package The United Kingdom will observe a period of mourning following Queen Elizabeth II’s death on Thursday, and Parliament will be adjourned during this time. The Bank of England's scheduled meeting has also now been postponed to the following week, but the ONS has confirmed that several pieces of important data will still be released. Here's what we expect: July GDP (Monday): Expect a large bounce-back from June, where the addition of an extra bank holiday artificially distorted the monthly GDP numbers. Depending on the arrangements during the period of mourning, the addition of an extra bank holiday in September is possible, and this would factor into the GDP numbers for the current month. We’ll therefore have to wait until the fourth quarter to get a clearer idea of how the economy is faring in GDP terms, and we suspect there’s still a risk of a negative growth figure. However, the announcement of an energy price guarantee by the government considerably reduces the risk of a deep downturn, and potentially also a technical recession. Jobs (Tuesday): Hiring demand is falling, though recent data and surveys have suggested that the worker shortages plaguing the jobs market have only improved slightly over recent months. The announcement of an energy price cap for businesses should help limit what otherwise could have been a more immediate rise in redundancies as firms’ costs increased. We expect the unemployment rate to remain stable next week, but we’ll also be watching closely for signs of a more pronounced return of inactive workers to the jobs market. Inflation (Wednesday): A 6% fall in petrol/diesel prices through August will drag headline inflation slightly lower. That doesn’t mean we’re past the peak, though the introduction of the energy price cap means inflation is less likely to materially surpass 11% in the autumn. Without the cap, we’d forecast inflation would go to 16% or above in January. This is a double-edged sword for the BoE. On one hand, the reduced the peak in headline inflation should ease concerns about consumer inflation expectations becoming even less anchored. That points to another 50bp rate hike when the BoE meets later in September, despite the Fed and ECB going more aggressively. The BoE has shown in past meetings that it isn’t pressured to follow those other central banks, albeit the hawks will be worried about the recent slide in sterling. They will also argue that the government’s action increases the risk of inflation staying elevated in the medium-term, given the reduced risk of recession, Some members are therefore likely to vote for a 75bp hike at the next meeting. But ultimately with a lot already priced into markets for the BoE, policymakers will be wary about adding fuel to the fire. As we saw with the ECB on Thursday, the decision to go with a 75bp hike saw markets price that as the default move at the next meeting. Key events in developed markets next week Source: Refinitiv, ING This article is part of Our view on next week’s key events View 3 articles   TagsUS Bank of England   Read this article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    
GBP/USD Pair: A Reversal Signal Will Be The Price Consolidating

UK GDP Grew Only 0.2%! British Pound May Expect A 50bp Rate Hike. Would Labor Market Get Better Thanks To The Energy Price Cap?

ING Economics ING Economics 12.09.2022 10:00
The absence of a post-bank holiday rebound means July's GDP grew by only 0.2%, and we should expect further volatility over the next few months. But big picture, the announcement of an energy price guarantee should materially reduce the depth of a downturn this winter, even if it doesn't totally rule out the risk of a technical recession UK growth should be volatile in the months ahead July's GDP figures are disappointing The UK economy expanded by 0.2% in July, which was less than might have been expected. June had featured an extra bank holiday in recognition of the Queen’s Jubilee, and that had triggered an artificial drop in activity in some key sectors – albeit less pronounced than during the equivalent holidays in 2002 and 2012. However, July’s figures are largely absent of the mechanical rebound one might have expected, not least because that's what we saw after those previous jubilee holidays. For instance, manufacturing output grew only 0.1% in July, having fallen by 1.6% in June. It was a similar story in wholesale/retail and construction. We’re reluctant to pin any particular economic narrative to that, and instead, we think we’ll need to take this and indeed the next few months’ figures with a slight pinch of salt. The extra bank holiday this month, which coincides with Queen Elizabeth II’s funeral on Monday, means we’re likely to see similar volatility in the data during September and October. That means we’ll most likely need to wait until later in the fourth quarter to get a clearer sense of where the economy is headed, at least looking through the lens of the GDP numbers. For now, it looks like third-quarter growth will be largely flat, and the fourth quarter slightly negative. Government energy price guarantee should reduce the depth of a downturn Bigger picture, the announcement of an energy price cap by the government last week should make a material difference to the outlook this winter. The average household will see their energy costs capped at £2500 for the next two years, which when you factor in some existing support, should mean bills stay roughly the same as they are now for the time being. Businesses will also receive similar support for an initial six-month period. While we’d caution about automatically assuming this means the economy avoids a technical recession, it should help limit the depth of any downturn over winter to a few tenths of a percent. We’re also hopeful that the announcement of business support can help insure against a material rise in unemployment. Hiring demand has been slowing, and the clear risk was that the sharp rise in energy bills would see redundancies (which are currently at their lows) begin to rise. Incidentally, with the GDP figures looking volatile, we suspect the Bank of England will put slightly more emphasis on other data, including tomorrow’s jobs figures. We expect a 50bp rate hike when the Bank meets next week, and we’re pencilling another such move in November. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Will Bank Of Japan Remain Committed To Its Easy Policy?

Power Producers Need To Buy Carbon Permits, In China Loans To Households Remained Sluggish

Saxo Bank Saxo Bank 12.09.2022 10:01
Summary:  Ukrainian success in taking back significant territory from Russia over the weekend has driven a cautious further recovery in the euro and sterling at the open of trade this week. Elsewhere, yields have jumped higher, helping drive new yen weakness and taming risk sentiment as the US 10-year treasury benchmark trades near the cycle highs since June. Focus this week is on tomorrow's US August CPI release, the most important data point ahead of next week’s FOMC meeting.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities Friday on a strong note up 1.5% and S&P 500 futures have extended their gains overnight touching the 4,100 level because before receding to around the 4,085 level in early European trading hours. The US 10-year yield continues to move higher trading at 3.34% and if it sets a new high for the recent cycle it will probably cause headwinds for US equities so watch the US bond market. Next big macro event is tomorrow’s US August CPI report which is expected to print –0.1% m/m suggesting inflation is beginning to cool. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong, Shanghai, and Shenzhen are closed today for the mid-autumn festival holiday. Last Friday, Hang Seng Index soared 2.7%, snapping a six-day losing streak following China’s August inflation data surprising to the downside and raising hope for more monetary easing to come from the Chinese policymakers. Chinese property names rallied on market chatters about unconfirmed stimulus measures from policymakers to boost the ailing property sector. Ahead of the mid-autumn festival, catering stocks gained. CSI 300 climbed 1.4%, led by property, dental services, infrastructure, and digital currency.  Northbound inflows into A-shares reached USD2.1billion equivalent last Friday, the largest inflow in a single day since the beginning of the year. Ukrainian success on the battlefield drives EUR and GBP strength The surprise offensive and the re-capture of a key transport hub in the northeastern sector of the front after recent focus on operations in the south caught the market by surprise and has seen the euro and sterling rebounding versus the US dollar in early trading this week, with EURUSD trading to new local highs well clear of 1.0100 briefly overnight before edging back lower. Likewise, GBPUSD pulled north of 1.1650 before treading water back toward 1.1600. It will take some time and further developments to assess whether Ukraine can capitalize on its gains and this in turn triggers a new stance from Russia on its energy policy. JPY crosses back higher as yields rise The USDJPY correction on Friday inspired by somewhat stern language from Bank of Japan Governor Kuroda has mostly faded, as USDJPY bobs back above 143.00 overnight on US treasury yields challenging cycle highs. EURJPY pulled back close to the cycle high well above 144.00 overnight on hopes that the war in Ukraine is turning in the Ukrainians favour. New highs in USDJPY may bring more two-way volatility again if Japanese officialdom backs up its concern on the situation with market intervention (buying JPY). Crude oil (CLV2 & LCOX2) Crude oil starts the week in defensive mode with the focus staying with demand concerns amid continued lockdowns in China hurting demand from the world's top importer and a rapid succession of interest rates from major central banks negatively impacting the global economic outlook. Into the mix a US-backed plan to cap prices on Russian oil sales from December 5, a stranded Iran nuclear deal, strong demand for fuel products such as diesel at the expense of punitively high gas prices and a softer dollar. In addition, the collapse of Russian defenses in Ukraine and the response from Moscow will be watched closely. Monthly oil market reports from OPEC tomorrow and IEA on Wednesday should provide some further guidance on the supply/demand outlook. Brent’s current range: $92.75 and $87.25 US Treasuries (TLT, IEF) The 10-year US Treasury benchmark edged higher toward the local range high north of 3.3% overnight, with only the June peak at 3.50% remaining as the focus to the upside (this was the highest yield for the cycle since early 2011 and the run higher in yields in June coincided with the major low of the equity bear market this year. Tomorrow’s US August CPI number is the next key test for sentiment and yield direction, while the US Treasury will also auction both 3-year and 10-year treasury notes today and will auction 30-year t-bonds tomorrow. What is going on? France’s manufacturing production contracted in July According to the latest estimate released by the French Institute of National Statistics (INSEE), the manufacturing production decreased by a stunning 1.6 % month-over-month in July. It remains in expansion on a yearly basis (+0.2 %). Without much surprise, the drop is mostly explained by higher prices, especially higher energy prices. The INSEE does not forecast a recession in France this year. Nonetheless, growth is likely to decelerate very sharply in the coming quarters. The institute forecasts that growth will be around 0.2 % in Q3 and will be stagnant in Q4 2022. India’s rice export ban risk aggravating global food crisis After a ban on wheat exports earlier this year, India has now announced restrictions on rice exports, aggravating concerns of a global food crisis. Bloomberg reported India imposed a 20% duty on white and brown rice exports and banned shipments of broke rice. The new curbs apply to about 60% of India's rice exports and go into effect Friday. India’s rice output has been depressed due to the severe heatwaves, but also possibly to cap domestic price pressures. If these measures are duplicated by other key rice exporting countries like Thailand and Vietnam, there could potentially be a severe grain shortage globally, especially weighing on poor rice importing nations. We continue to see a threat of climate change to global agricultural output, which along with a prolonged energy crisis, suggested price pressure will stay in the medium-to-long term despite some cooling off from the recent highs. European carbon price drops as EU considers sale of permits from reserves The December ECX emissions contract (EMISSIONSDEC22) has fallen by around one-third since hitting a record high last month above €99 per tons. Given the current energy crisis, EU energy ministers are moving towards a deal to sell surplus permits from its Market Stability Reserve (MSR) in order to support a reduction in the cost of producing power and heating within the region. Power producers need to buy carbon permits to offset the polluting impact of using coal and gas over renewables. Occidental Petroleum shares rise on Berkshire accumulation In a filing on Friday, Berkshire Hathaway announced that it has lifted its stake to 26.8% in Occidental Petroleum. The move comes after the investment firm got regulatory approval for increasing the stake to over 50%. Berkshire’s move in Occidental Petroleum shares is seen as a move of confidence in the oil and gas industry as a much-needed industry for bridging the gap during the green transformation. Semiconductors are in focus as the US is expected to announce more curbs on exports The US Commerce Department is expected to publish new regulations curbing exports of semiconductors to China with companies such as KLA, Lam Research, and Applied Materials likely being impacted by the upcoming regulation. The move by the US further confirms the deglobalisation under the rule of self-reliance applied by increasingly more countries. China’s medium to long-term corporate loans picked up in growth  Over the past months, Chinese policymakers instructed policy banks and gave window guidance to commercial banks to extend credits to support infrastructure construction and key industries of the economy. Some results showed up in the August loan data which recorded a growth of 16% m/m annualized in the outstanding medium to long-term loans to the corporate sector. The amount of new medium to long-term loans to corporate was RMB 735bn in August versus RMB 346bn in July and RMB 522bn in August 2021. Loans to households remained sluggish. PBoC issues a list of 19 systemically important banks The People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a list of 19 systematically important banks.  These 19 banks will face between 0.25% and 1% higher minimum capital requirements and additional leverage requirements. They are also asked to prepare contingency plans for major risk events. These 19 banks are Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, China Minsheng Bank, China Everbright Bank, Ping An Bank, Hua Xia Bank, Ningbo Bank, China Guangfa Bank, Jiangsu Bank, Bank of Shanghai, Bank of Beijing; China CITIC Bank, China Postal Savings Bank, Shanghai Pudong Development Bank, Bank of Communications, China Merchants Bank, and Industrial Bank. The CPC is set to amend the party constitution at its upcoming national congress The Political Bureau of CPC Central Committee said in a readout last Friday that the Communist Party of China (CPC) is set to “work out an amendment to the Party Constitution that facilitates the innovative development of Party theories and practices and meets the need of advancing the great new project of Party building in the new era” at the CCP’s national congress to convene starting on October 16.  It further elaborates that “the latest adaption of Marxism to China's context and new circumstances will be fully epitomized and so will the new ideas, new thinking and new strategies of governance developed by the CPC Central Committee since the Party's 19th National Congress in 2017. What are we watching next? The Bank of England (BoE) will need to go big on 22 September The meeting initially scheduled for this week is postponed following the Queen Elizabeth II. Last week, both the Bank of Canada and the European Central Bank hiked their benchmark interest rate by 75 basis points. All eyes are turning to the BoE now. Pressure is mounting for the BoE to go big this week – meaning a 75-basis points hike. In August, the central bank hiked rates by 50 basis points to 1.75 %. Despite prime minister Liz Truss’s new anti-inflation plan (which will likely lower the peak in inflation), we think the BoE will need to show its commitment to fight inflation. The Bank forecasts that UK CPI will increase to 13.3 % year-over-year in Q4 2022. But the peak in inflation is only expected in 2023. This means that the cost of living will continue increasing in the short term, anyhow. Fed speakers stay hawkish before the blackout period begins and ahead of US CPI release tomorrow Fed rate hike expectations have picked up strongly since Jackson Hole, and we have heard an extremely unanimous voice from the Fed speakers since then. Some of them have clearly made the case for a 75bps rate hike in September, with Bullard on Friday even saying that Tuesday’s CPI report is unlikely to alter the incoming 75bps rate hike in September. Governor Waller leaned hawkish as well, but did not specify the size for September’s decision, but a “significant” hike still points to that. Esther George stayed away from guiding for individual meetings but made the case for sustained rate hikes. Ethereum merge The second-largest cryptocurrency, Ethereum, is scheduled to undergo a major upgrade this week (estimated on Thursday) which, if successful, will fundamentally change the way the cryptocurrency is working. It will go from the computationally intensive proof-of-work consensus to the more energy-friendly proof-of-stake, as well as introducing a mechanism to limit the inflation in Ethereum. The crypto community is looking very much forward to this upgrade, although some are concerned about the security in the new framework. Earnings to watch Today’s key earnings release is Oracle which a better-than-expected earnings result on 13 June surprising the market on EPS by 12% as the legacy database and software maker is gaining momentum in its cloud offering. Analysts expect FY23 Q3 (ending 31 August) revenue growth to accelerate to 18% y/y, which includes its recent acquisition of Cerner in the health care sector, which is impressive for the previously low growth company despite some of the growth being driven by acquisitions. If the outlook remains strong a longer-term repricing of the company’s valuation could be in the making. Today: Oracle Tuesday: DiDi Global Wednesday: Inditex Thursday: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0730 – ECB's Guindos to speak 0800 – Switzerland Weekly SNB Sight Deposits 1200 – ECB’s Schnabel to speak 1530 – US 3-year Treasury auction 1700 – US 10-year Treasury auction 2100 – New Zealand Aug. REINZ House Sales 0030 – Australia Sep. Westpac Consumer Confidence 0130 – Australia Aug. NAB Business Conditions/Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean engraver Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-12-2022-12092022
Can We Expect Better Movements In The European Currency (EUR)?

Market View On The EBC Decision And The Euro Situation(9.09)

ING Economics ING Economics 11.09.2022 09:43
The ECB has chosen a path of agressively frontloading its policy tightening, which sets EUR curves up for further flattening and eventually inversion should the economic outlook not keep up with the ECB's relative optimism. For now, broader upward pressure on rates should persist,  with larger hikes from the BoE and Fed to follow soon.  In this article ECB: 75bp and more to come EUR curves set up for inversion Temporary relief for the collateral scarcity issue Large rate hikes also coming from the BoE and Fed Friday’s events and market view Source: Shutterstock ECB: 75bp and more to come The hawks won the front-loading argument and the ECB’s council unanimously decided to raise all key rates by 75bp. More hikes are likely as inflation risks are seen as still skewed to the upside. The ECB's own inflation forecasts have increased, warranting a more aggressive approach. The growth forecasts, while lowered, do not project a recession next year and thus provide the leeway for more forceful action. Quantitative tightening will reportedly also be part of the discussion at the next non-policy setting meeting The broad support for the ECB’s hawkish turn was later confirmed by press reports that even the Council’s doves are not opposed to repeating yesterday’s action in October. Chief Economist Lane’s presentation to the council reportedly struck a decidedly more hawkish tone than his latest public speech, which was then widely viewed as an attempt to counterbalance the prior hawkish barrage. What is more, quantitative tightening will reportedly also be part of the discussion at the next non-policy setting meeting in early October. That cuts into one of the rare dovish undertones of yesterday’s meeting –  that reinvestment guidance was left unchanged and quantitative tightening hadn’t been discussed yet. Lagarde had said rates were the preferred instrument. 2Y German yields should soon catch up to 10Y, inverting the curve as a result Source: Refinitiv, ING EUR curves set up for inversion Against that hawkish backdrop, President Lagarde specifying that the stated expectation to “raise rates over the next several meetings” will mean hikes at the next two, three or four meetings, looked like an attempt to prevent market hike expectations from running all too wild. Markets now see a 50% probability of another 75bp in October. The pace is then expected to slow, but by the end of Q1 the ECB is seen increasing the deposit facility rate to at least 2.25% before pausing – timing thus in line with Lagarde’s specification. Near term do not exclude further upside to rates led by front-end speculation Reflecting this ramp-up in hike expectations the broader EUR curve has bear-flattened in reaction to the meeting. Near term we would not exclude further upside to rates, led by front end speculation. For the long end that still means we do not dismiss the possibility of the 10Y Bund yield touching the 2% handle. We remain wary of the ECB’s still rose-tinted outlook for the European economy. While our economists are now seeing the ECB to hike by another 75bp in total this year, they still see energy crisis pushing the eurozone into a recession eventually. That means the ECB may not deliver quite as much as is currently priced. After all, the ECB is employing a meeting-by-meeting strategy, its outlook to hike for the next several meetings is based on current information – and that is subject to change. We think the ECB’s aggressive front loading sets the stage for EUR curves to eventually invert. The squeeze on short-dated German paper is finally easing Source: Refinitiv, ING Temporary relief for the collateral scarcity issue We have highlighted the potential for government cash management to aggravate the current collateral scarcity issue given a 0% remuneration cap for government deposits held at the central bank. The ECB has acknowledged the issue and its potential to impede the transmission of its policy changes into the market. The 0% cap is replaced by a cap at the deposit rate or €STR, whichever is lower. It was this decision that elicited the largest market reaction, including a tightening asset swap spreads. The change is only valid until the end of April next year The caveat is that this change is for now only valid until the end of April next year. Until then government debt agencies have time to think of alternatives for their roughly €500bn in central bank deposits. While fears of an immediate crunch on the back of a hike and sudden shift in these deposits is alleviated, the scarcity issue is not going away. We will be watching for hints of how debt agencies will adjust, which might already become evident  when bill issuance calendars are updated for the upcoming quarter. Running large cash buffers will have to be weighed against the costs starting to bite next year. Large rate hikes also coming from the BoE and Fed The upward pressure on rates from monetary policy remains broad-based. Markets are bracing for the Bank of England to potentially follow the lead of the Fed and now the ECB in deploying 75bp hikes. While our economist is still inclined to see the BoE hiking by only 50bp, the new government’s extra support measures are proving to be a double-edged sword for the Bank which is trying to tame inflation. Over in the US the Fed’s Powell latest comments are seen as supportive for another 75bp hike on 21 September. The need to act now on inflation outweighs any doubts about the economic outlook. To the contrary, robust data of late also provide the Fed with the room for aggressive action, Next week’s CPI data should seal the deal for a 75bp hike. While headline inflation rate is seen falling to 8.1%, the core is actually expected to accelerate again.     Friday’s events and market view For now the upside to rates propagating out the curves from aggressive policy tightening intentions remains in place. Not only does the ECB's stance leave room for markets to price in more, but markets are also bracing for large hikes from the BoE and Fed over the coming weeks. But beware, that is only a near term view.   The main focus of Friday will be on central bank speakers with final comments before the Fed's quiet period kicks in coming from the Fed's Evans, Waller and George. European market may see their share of the usual post ECB meeting commentary and reports, though also Lagarde herself is scheduled to speak.   TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Tips For Traders On Short And Long Positions Of The GBP/USD Pair

UK Job Market Means More To Bank Of England (BoE) Than You May Think

ING Economics ING Economics 13.09.2022 11:24
The number of workers classified as long-term sick has jumped dramatically in the past couple of months, and that's one reason why firms are still struggling to source the staff they need. While worker demand has cooled, Bank of England hawks will be worried that these shortages will continue to push up wage growth   At a headline level, the latest UK jobs numbers don’t look too bad. Unemployment fell by two-tenths of a per cent to 3.6%, the lowest level since 1974. But this is driven not by an increase in the number of people in employment, but primarily by another dramatic rise in those classified as inactive – that is neither in work nor actively seeking it. Alarmingly, the number of people classifying as not working due to long-term sickness is up by almost 400,000 since late 2019, and almost 150,000 in the last two months' worth of data alone. It’s hard to escape the conclusion that this is linked to the pressures in the NHS (National Health Service). The Bank of England will view all of this through the lens of the worker shortages that have plagued the jobs market for the past year or so. While some causes of that shortage appear to be abating – e.g. inward migration of non-EU workers has increased noticeably this year – other factors are, if anything, getting worse. A look at the survey evidence suggests firms are finding it no easier to find staff than they were a few months ago either. Both the BoE’s Agent’s survey and the ONS’ bi-weekly business survey have shown no improvement in the number of firms saying they are struggling to source workers. UK jobs market dashboard Worker shortages is taken from a question in the ONS bi-weekly business survey Source: Macrobond, ONS, ING   At the same time, demand for employees does appear to be cooling, though not necessarily very quickly. The level of job vacancies has fallen from its high, but the number of redundancies is low and stable (even if the level increased slightly in this latest data). The question now is whether the pressure from energy prices will force companies to revisit these plans and make more material changes to their workforce. We would expect a more visible impact on the jobs market over the next few months, but the government’s newly-announced pledge to cap corporate energy bills as well as households’ should help avoid a sharp rise in unemployment this winter. Persistent worker supply constraints coupled with so far only modest signs of reduced hiring demand will provide further ammunition for Bank of England hawks to push ahead with further tightening. We expect a 50 basis-point rate hike next week, and another in November. While markets may be overestimating how far the Bank will take interest rates over the coming months, we think the BoE is less likely to be cutting rates early into 2023 than some other global central banks. Read this article on THINK TagsUK jobs Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
UK Economy: Mixed Data. British Pound (GBP) Amid Foreign Trade Slippage

UK Economy: Mixed Data. British Pound (GBP) Amid Foreign Trade Slippage

Alex Kuptsikevich Alex Kuptsikevich 13.09.2022 10:53
Monthly estimates showed that the UK economy added 2.5% over the three months to July vs the same period a year earlier. The negative surprise was a 0.3% decline in Industrial Production in July compared to expectations of a 0.4% gain after a 0.9% slip in June. Production added a modest 1.1% compared to July last year. Construction and industrial production indices are back in the 2019 range after a quick dip and subsequent recovery due to the pandemic. And they are stagnating for some time around these levels. Manufacturing and construction are at the forefront of the economic cycle, and their message is not optimistic at all. Foreign trade is much more dynamic. Import values have fallen for two months after ballooning during the first five months of the year, while exports have remained close to the highs. These local dynamics have reduced the foreign trade deficit to its lowest level since December 2021. What does the current status of foreign trade mean to Sterling? The narrowing of the foreign trade deficit is positive for the Sterling as it reduces capital outflows from the country. On the other hand, if the weakness in imports is linked to stagnant domestic demand and production, it does not carry anything good in the medium term. GBPUSD seems to have pushed back from the bottom in the middle of last week, but this dynamic is more attributed to the USD profit-taking after the rally rather than investments in the pound.
How Much Have European Governments Invested In Supporting Businesses And Consumers, The Demand For Copper And More

Energy Crisis Cause Recession In The European Union And Great Britain

InstaForex Analysis InstaForex Analysis 13.09.2022 13:21
Goldman Sachs say a difficult macroeconomic environment in Europe may continue to put pressure on assets, even despite a positive risk/reward ratio, financial support and measures to reduce energy demand. They remarked that they remain wary due to the energy crisis, monetary tightening and the political backdrop around Italy's elections, and only signs of an "imminent market downturn" could change their view. "Our economists expect the energy crisis to push both Europe and the UK into recession, albeit relatively mild, and forecast an acceleration in policy tightening by both the ECB and the Bank of England," Goldman Sachs strategists wrote. The technical picture also points to at least another wave of decline in European indices, which should lead to an update of the yearly lows. European equities have lagged the S&P 500 this year in dollar terms as euro weakened more than 10%. Meanwhile, the region's credit markets continue to be much more stressed than stocks. On the bright side, Europe's 12-month earnings projections are yet to see any major downsides. Although the region's income-based estimates have fallen this year, they still remain above levels reached during the 2008 financial crisis. Relevance up to 11:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321558
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

United Kingdom: Inflation Is Expected To Hit 11% As Energy Price Cap Is Set To Be Applied

ING Economics ING Economics 14.09.2022 13:37
Headline inflation will rise a little further having eased back below 10% in August, and it's likely to stay around 11% into early next year before falling back more dramatically. However, the Bank of England is watching wage growth more closely, as the hawks worry that worker shortages could lead to core inflation staying more persistently above target The introduction of a government cap on household energy prices means that we should now be fairly close to the peak in these headline figures The absence of another upside surprise to UK inflation this month takes a bit of pressure off the Bank of England to move even more aggressively when it meets next week. Headline CPI came in a touch lower than both consensus and last month’s level, at 9.9%, and that’s largely because of a near-7% fall in petrol/diesel prices during August. We expect another 2% decline in next month’s figures. The introduction of a government cap on household energy prices means that we should now be fairly close to the peak in these headline figures. The fact that electricity/gas bills won’t be rising by around 80% in October and a further 30-40% in January means that the peak in CPI should be around 5 percentage points lower. With the government due to cap the average household energy bill at £2500, up from around £2000 now, we expect a peak in the region of 11% in October. That's compared to 16% in January which is what we’d forecasted before the support was announced. UK inflation now set to peak at around 11% after energy price support Source: Macrobond, ING forecasts   We’d expect inflation to stay around there until early next year, before cooling more quickly as energy base effects kick-in. We think it could be more-or-less back to the Bank of England’s 2% target by the end of next year, crazy as that currently seems. But what policymakers are more interested in is core inflation – or to put it more accurately, the more persistent parts of the inflation basket. Here the news is mixed. On a month-on-month price basis, the increases we saw in August do seem fairly broad-based. However, there are signs that ‘core goods’ inflation is easing off, linked perhaps to the rise in retailer inventory levels relative to sales. That’s a function of supply chains beginning to improve, and in some cases commodity prices having fallen, which is coinciding with reduced demand for goods. Higher inventories and lower sales reducing pressure on goods prices Source: Macrobond, ING   However, the Bank is more focused on wage growth, and as we noted yesterday, the worker shortages that have plagued the jobs market for several months now don’t appear to be resolving themselves very quickly. The BoE’s hawks are concerned that this will translate into persistent pressure on wage growth. We aren’t totally convinced this will be enough to swing the pendulum in favour of a 75 basis-point rate hike next week, despite both the ECB and Federal Reserve going down this path. It’s a pretty close call, not least because the hawks will be worried about the recent slide in sterling, and markets are closer to pricing a 75bp move than a 50. But for now, we think another 50bp move next week is the most likely outcome, followed by another such move in November. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Recovery Of The GBP/USD Pair May Be Temporary, The Trend Remains Bearish

It's Going To Be A Thrilling Week For Euro, Dollar And British Pound (GBP)! Bank Of England And Fed Decide On Interest Rates!

ING Economics ING Economics 16.09.2022 11:54
The prospect of lower near-term inflation takes some of the pressure off the Bank of England to move even more aggressively on Thursday. We expect a second consecutive 50 basis point rate hike, although it's a close call between that and a 75bp move Our Bank of England call We narrowly favour a 50bp hike on Thursday, taking the Bank Rate to 2.25%, although 75bp is clearly on the table and we would expect at least a couple of policymakers to vote for it. It's even possible we get a rare three-way vote – the first since 2008 – if dovish committee member Silvana Tenreyro votes for a 25bp hike as she did in August. If our call is correct, then we expect another 50bp move in November and at least another 25bp in December. That would take Bank Rate to the 3% area. It's a tough meeting to call... Next week’s Bank of England meeting is crucial. It will tell us not only how worried policymakers are about the slide in sterling and other UK markets, but also how the government’s decision to cap household/business energy prices will translate into monetary policy. It has also, undeniably, become a close meeting to call. Hawks at the Bank of England will undoubtedly be concerned about the independent sterling weakness we've seen recently (down 4% in trade-weighted terms), even if in practice it’s unlikely to make a huge difference to the big-picture inflation outlook. Both the Fed and ECB will have also done (at least) 75bp hikes by Thursday, and markets are increasingly concluding the BoE will do the same. But we’d caution against assuming UK policymakers will ramp up the pace of rate hikes simply because that’s what everyone else is doing – or indeed because that’s what markets are pricing. As recently as June, the BoE hiked by ‘only’ 25bp, despite the Fed having done 75bp the night before, and defying market expectations for more. Indeed, there are good reasons to think the Bank will ‘stick to its guns’ and simply repeat the 50bp hike it executed in August. Government energy price guarantee means inflation unlikely to go much higher Source: Macrobond, ING forecasts   One immediate consequence of the government’s decision to cap household electricity/gas bills this winter is that headline inflation should be dramatically lower. We now expect CPI to peak at 11% in October, only slightly above where it is now, compared to 16% in January had the government not intervened. It also means headline inflation should be back around the BoE’s 2% target at the end of next year, crazy as that sounds. All of that should help keep consumer inflation expectations in check, and in fact, we’ve already seen a noticeable pullback in long-term price expectations according to the latest BoE survey. Admittedly there appears to be a wide range of views at the BoE about how much all of this actually matters. But we know from recent comments, notably from hawk Catherine Mann, that some policymakers have had a keen eye on consumer expectations over recent months. By the BoE's own measure, consumer inflation expectations have dipped Source: Macrobond   The flip side, of course, is that extra government support potentially means higher medium-term inflation, even if headline rates are lower in the very near term. We think this is ultimately what most committee members will be more interested in. The hit to GDP this winter is likely to be more moderate than the 2% cumulative decline the BoE forecast in August, while the sharp rise in unemployment it projected is less likely to materialise too. With worker shortages proving to be a long-running issue in the jobs market, the risk is that higher wage growth could become a persistent feature that requires more central bank tightening. That doesn't necessarily have to manifest itself as a radically higher policy rate, and we still believe investors are overestimating the tightening to come. The swaps market is pricing a terminal rate in the region of 4.5% next year. Hiking by 75bp risks adding even more fuel to the fire, something we suspect the committee will be wary of doing, even if there are advantages in front-loading hikes. But even if the Bank doesn’t hike as far as markets expect, we do think the arrival of government stimulus means the BoE won’t be racing towards rate cuts next year, unlike some of its developed market counterparts. Gilts, looking for some clarity Gilts are looking for a much-needed reduction in uncertainty next week. Clearly, a 50bp hike would be a dovish surprise and help reverse some of the front-end’s weakness but even in the case of a 75bp move, the BoE clarifying its reaction function with regards to the energy package would be helpful. Fiscal and monetary policy competing with each other is an unnerving thought for bondholders. The Treasury’s fiscal event next week should also help answer any lingering questions about the size and financing of the energy support measures. Gilts should widen to 200bp against Bund on a generous fiscal package Source: Refinitiv, ING   Even if the gilt ‘fear factor’ eases next week, it doesn’t answer the key question: who will buy all these gilts? A deficit-financed energy package will add to supply and to the BoE reducing the size of its portfolio. Private investors will have to make up the shortfall. This is not impossible but they will likely be some reluctance initially given the amount of new debt released into the market. The BoE’s plan to start outright sales of gilts, albeit in small amounts initially, is an additional source of concern. On Thursday, the Bank is expected to vote in favour of starting this process, despite concerns about stress in the UK bond market. Divergence in the size and financing of energy packages in the UK and the eurozone means the spread between 10Y gilts and bund should widen to 200bp. Read this article on THINK TagsUK fiscal policy Inflation Central banks Bank of England Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Tips For Traders On Short And Long Positions Of The GBP/USD Pair

UK Sales: British Pound (GBP) Most Probably Doesn't Like August Prints

Alex Kuptsikevich Alex Kuptsikevich 16.09.2022 12:30
A package of retail sales statistics in Britain appears to have removed the last layer of support for the Pound, sending it into a dive. GBPUSD earlier today renewed its lows since 1985, dropping to 1.1350. Sales Drop Fresh data showed a 1.6% m/m and 5.4% y/y drop in sales, which was noticeably weaker than the expected 0.5% m/m and 4.2% y/y decline. This upsetting surprise has added to the pressure on Pound, which has been losing 0.9% against the dollar and yen and 0.6% against the euro after the report. Where Can GBP/USD Go? There has been an almost non-stop, albeit very measured, sell-off in the Pound since August 11, with a brief pause for a shake-out of the dollar bulls' positions. In turn, this momentum looks to be part of a downward wave since March. In that case, the GBPUSD can fall to 1.06, where the 161.8% Fibonacci mark passes from the February peaks to the July lows. It is also worth noting that this technical target is very close to the historical lows of the GBPUSD at 1.0520, which only adds to its attractiveness for the rest of the year. Bank Of England Due to inflation being off the charts by historical standards, the Bank of England has much more motive to make currency or verbal interventions to buy the collapse of the Pound. This is especially true given the recent one-way movement in the British currency. As such, traders and investors should be prepared for a rate hike of more than 50 points next week, as previously done and expected. A tightening of monetary authority rhetoric is also likely.
Investors' Concerns About The Coming Recession In The UK, Will GBP/USD Pair Reach Its Lowest Level In History?

British Pound (GBP) Has Decreased By 15 Percent So Far!

Conotoxia Comments Conotoxia Comments 16.09.2022 15:19
The UK economy, including the British pound's quotations, has had a very turbulent year. The authority of the British currency may have first been undermined by the exit from the European Union, and then the British economy suffered a blow from a pandemic. The British Isles' severe energy crisis and high inflation may be adding to this. Read next: China Positive Reports,Drop In Retail Sales, Waiting For European CPI| FXMAG.COM Since the beginning of this year, the British pound has lost more than 15 percent of its value against the U.S. dollar. This makes the GBP the second weakest of the world's major currencies, just after the Japanese yen, losing more than 19 percent. In addition, if someone was taking the 2014’s peak as a reference point, the GBP's loss against the USD could reach more than 30 percent. As a result, the market has reached levels last seen in 1985. Source: Conotoxia MT5, GBP/USD, MN The British pound after a rough ride Observed in the chart above, the two significant lows in the region of $1.1400 were first the impact of brexit on GBP quotes, and the second was the impact of the pandemic. Currently, this level seems to be tested for the third time. Today, further disappointing data from the British economy may have contributed to the pound's weakness.  The volume of UK retail sales in August fell 1.6 percent from the previous month, the Office for National Statistics reported on Friday. The regression was larger than analysts had expected. Sales fell on a monthly basis for the first time since July 2021.  Non-food store sales slid 1.9 percent month-on-month, auto fuel sales fell 1.7 percent and grocery store sales were 0.8 percent lower, according to the data, which is summarized by BBN's website. As a result of weakening consumer demand and thus possibly the overall British economy, investors seem abandoning the GBP, which this morning is at its weakest since the 1980s against the USD. Rate hikes are not helping the GBP Expectations of interest rate hikes in the UK at this point also do not seem to be helping the pound. Some analysts note that even the GBP is moving like an emerging market currency. These could be characterized by the fact that the higher the investment risk, the lower the exchange rate, despite interest rate hikes. While interest rates in the UK may be higher than in the US over time, investors seem to be turning away from the pound anyway. It seems that under these circumstances, the British currency might have a hard time regaining investor confidence.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. Read article on Conotoxia.com
Fed Decides On Interest Rate, So Does BoE - The Coming Week Is Simply Action-Packed

Fed Decides On Interest Rate, So Does BoE - The Coming Week Is Simply Action-Packed

Craig Erlam Craig Erlam 16.09.2022 23:35
US Many on Wall Street are watching the Fed’s rate hiking cycle and are getting nervous they will tip the economy into a recession.  With scorching inflation, the FOMC may consider a full-point rate hike but will likely settle on delivering its third consecutive 75 basis-point increase. At Wednesday’s policy meeting, Fed Chair Jerome Powell will likely acknowledge downside risks to growth are here and unrelenting inflation is forcing them to maintain an aggressive pace of tightening.  Inflation risks are still tilted to the upside and will likely keep the Fed from providing any hints that a “Fed put” is coming. EU  The ECB appears to be one of the few major central banks not holding a monetary policy meeting next week but that won’t keep them out of the headlines. Policymakers are scheduled to make regular appearances including Philip Lane on Saturday which may present some weekend risk. On Friday, the flash PMIs could give an idea of how the economy is coping and whether it is heading for a recession in the fourth quarter, as some fear. UK Monday is a bank holiday in the UK as the country pays its respects to Queen Elizabeth II on the day of her funeral. After being pushed back a week due to the 10-day period of national mourning, the BoE will meet on Thursday and it has a big decision to make. Inflation is running extremely hot – although it did drop back below 10% last month – and while it has likely not yet peaked, the high should be much lower now that the new government has announced a cap on energy bills.  That may come as a relief to many but it could mean higher core inflation and interest rates further down the road. How the BoE responds to all of this without the aid of new economic projections is what will interest investors. The week draws to a close with PMIs on Friday. Russia Markets continue to monitor the situation in Ukraine amid a strong counteroffensive that saw Russia concede a lot of ground while raising the prospect of defeat and waning support for Vladimir Putin. The only economic release next week is PPI inflation on Wednesday.  South Africa The SARB is expected to hike rates by another 75 basis points to 6.25% on Thursday as inflation continues to rise. The CPI is currently well above the 3-6% target range at 7.8% and the central bank will get an update on this the day before their decision, which could play a role in just how aggressive they’ll be this month.  Turkey One central bank that almost certainly won’t be raising interest rates next week is the CBRT. Last month, it unexpectedly cut rates by another 100 basis points to 13% despite inflation running at almost 80%. That has risen further since but the central bank will not be deterred. No change is expected from the CBRT next week but clearly, another rate cut should not be ruled out. Switzerland Inflation continues to run hot which makes a large rate hike on Thursday from the SNB highly likely. Markets are pricing in at least 75 basis points, maybe even 100, taking the policy rate out of negative territory for the first time since early 2015. The central bank loves to spring a surprise though, the biggest recently perhaps being that it’s waited until a scheduled meeting to act. We’ll see how bold it’s prepared to be on Thursday.  China China is expected to keep rates unchanged at 3.65%, as the 1-year LPR (Loan Prime Rate) was just recently adjusted down from 3.7%. If the Chinese central bank unexpectedly adjusts rates to a lower level again, it may be detrimental to the yuan. The PBOC’s fixings are must-watch events now that the yuan has weakened beyond the key 7 against the dollar.   India Traders will pay close attention to the second quarter current account data.  Expectations are for the current account deficit to widen from $13.4 billion to $30.36 billion.  India has been weakening as trade balances balloon and foreign investment takes a big hit.   Australia & New Zealand Traders are awaiting the release of the minutes of the RBA meeting next Tuesday and upcoming speeches by RBA’s Kearns and Bullock. The RBA seems poised to move forward with smaller rate hike moves, but traders will look to see if the latest round of RBA speak confirms the downward shift discussed by central bank chief Lowe.  It will be a busy week in New Zealand as a steady flow of economic data is accompanied by a couple of RBNZ speeches by Governor Orr and Deputy Governor Hawkesby.  The big economic releases of the week are Wednesday’s credit card spending data and Thursday’s trade data.     Japan The FX world is closely watching everything out of Japan. Traders are waiting to see if policymakers will intervene to provide some relief for the Japanese yen. What could complicate their decision is that Japan has a holiday on Monday.   The divergence between the Fed’s tightening cycle and the Bank of Japan’s steady approach continues to support the dollar against the yen. The BOJ is widely expected to keep rates on hold even as core inflation extends above the BOJ’s 2% target.    Singapore The focus for Singapore will be the August inflation report that should show pricing pressures remain intense.  The year-over-year reading is expected to rise from 7.0% to 7.2%.  Economic Calendar Saturday, Sept. 17 Economic Data/Events Thousands pay their respects to Queen Elizabeth II at Westminster  European Central Bank chief economist Lane speaks at the Dublin Economics Workshop in Wexford, Ireland Monday, Sept. 19 Economic Data/Events World leaders attend Queen Elizabeth II’s funeral in Westminster Abbey in London UK Bank Holiday Japan Bank Holiday New Zealand performance services index RBA’s head of domestic markets Kearns delivers the keynote address at the Australian Financial Review Property Summit in Sydney ECB’s de Guindos speaks at the annual Consejos Consultivos meeting   Tuesday, Sept. 20 Economic Data/Events US housing Starts Canada CPI China loan prime rates Japan CPI Mexico international reserves Spain trade Sweden rate decision: Expected to raise rates by 75bp to 1.500% UK Parliament in session Annual UN General Assembly in New York Dockworkers at the UK’s Port of Liverpool are expected to begin a two-week strike Norges deputy central bank Governor Borsum speaks German Economy Minister Habeck speaks at the congress of municipal energy suppliers RBA releases minutes from its September policy meeting. BOC Deputy Governor Beaudry delivers a lecture on “pandemic macroeconomics” at the University of Waterloo in Ontario Wednesday, Sept. 21 Economic Data/Events FOMC Policy Decision: Fed expected to raise rates by 75bps US existing home sales Argentina unemployment, trade Australia leading index New Zealand credit-card spending South Africa CPI Big-bank CEOs testify before the US House Financial Services Committee at a hearing titled, “Holding Megabanks Accountable.” RBA Deputy Governor Michele Bullock speaks at a Bloomberg event in Sydney ECB’s de Guindos to speak at Insurance Summit 2022 organized by Altamar CAM in Cologne, Germany EIA crude oil inventory report Thursday, Sept. 22 Economic Data/Events US Conference Board leading index, initial jobless claims China Swift global payments Eurozone consumer confidence BOJ rate decision: No changes expected with rates and 10-year yield target Japan department store sales New Zealand trade, consumer confidence Norway rate decision: Expected to raise rates by 50bps to 2.25% South Africa rate decision: Expected to raise rates by 75bps to 6.25% Switzerland rate decision: Expected to raise rates by 75bps to 0.50% Taiwan jobless rate, rate decision, money supply Thailand trade Turkey rate decision: Expected to cut rates by 100bps to 12.00% UK BOE rate decision: Markets remain split between expectations for a half-point or a three-quarter-point hike. US Treasury Secretary Janet Yellen addresses the Atlantic Festival in Washington. The UN Security Council holds a meeting on Ukraine   BOE’s Tenreyro speaks at a seminar at the San Francisco Fed on “climate-change pledges, actions and outcomes.” Friday, Sept. 23 Economic Data/Events US Flash PMIs Australia prelim PMI Canada retail sales European Flash PMIs: Eurozone, Germany, France, and the UK Singapore CPI Spain GDP Taiwan industrial production Thailand foreign reserves, forward contracts Norway Central Bank Governor Wolden speaks Sovereign Rating Updates Germany (S&P) Hungary (Moody’s) Sweden (Moody’s) European Union (DBRS) Finland (DBRS) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Week Ahead - Aggressive tightening - MarketPulseMarketPulse
Tips For Traders On Short And Long Positions Of The GBP/USD Pair

Let's Look At Euro To British Pound, AUD/JPY And GER 40

Jing Ren Jing Ren 19.09.2022 08:22
EURGBP breaks key resistance The pound tumbles as the UK’s August retail data disappoint. The buying pressure has been building up under June’s peak at 0.8720. The breakout prompted the last sellers to cover. As the euro’s rally gains momentum, this could open the door for a sustained climb towards 0.8900, which is a supply area from January 2021’s sell-off. 0.8800 is the intermediate resistance ahead. The RSI’s overbought situation could temporarily trim the buying and 0.8700 would be the first support in case the euro takes a breather. Read next: How High Will The Bank Of England Raise Rates?| FXMAG.COM AUDJPY seeks support The Australian dollar softens as investors shun risk assets. The pair is looking to hold onto its recent gains after rallying above June’s high at 96.60. However, short-term price action may struggle as there is no sign of committed buying yet. A break below 96.70 has forced leveraged buyers to bail out. The daily support and psychological level of 95.00 is a major area to gauge buying interest. A bounce will need to lift 96.40 before it could take hold. Failing that, a bearish breakout would deepen the correction below 94.00. GER 40 tests critical floor The Dax 40 slips as high interest rates prompt investors to take refuge in cash. After hitting the supply zone around 13500, the index has given up all gains from this month’s rally. This is a strong indication of the prevailing bearish bias. 12610 is the next support and its breach would bring the index back to the critical level of 12420. Then a bearish breakout may cause the remaining bulls to abandon the ship, resuming the downtrend towards 11900 in the medium-term. 12900 is a fresh resistance in case of a bounce.
A Gloomy Outlook For The Global Economy, Do We Have To Prepare For The Worst?

Only Turkey And Japan Are Expected To Keep Rates Unchanged?

Saxo Bank Saxo Bank 19.09.2022 11:01
Summary:  Markets trade nervously ahead of the FOMC meeting this week, as a minority consider it likely that last week’s hotter-than-expected US August CPI data could see the Fed hiking 100 basis points at Wednesday’s FOMC meeting, driving further painful USD strength. Other notable central bank meetings this week include the Bank of Japan, Swiss National Bank, Norges Bank and Bank of England meetings, all on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were lower on Friday but managed to stage a pullback in the later part of the trading session with S&P 500 closing at 3,890. Sentiment remains weak this morning with US equity futures trading lower and Friday’s low in S&P 500 futures at the 3,853 level is the key critical downside level to watch. Financial conditions are still tightening, VIX curve is flattening, and the US 10-year yield is trending higher pointing to weaker equities ahead., The next big level in S&P 500 futures is the 3,800 level. This week the key event risk for US equities is naturally the FOMC meeting which will provide another tightening of policy rates and potentially a hawkish tilt on the guidance due to the latest inflation figures in the US. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index dropped nearly 1%, dragged by technology stocks, with Hang Seng Tech Index (HSTECH.I) declining 2%, Alibaba (09988:xhkg) falling 3.3%, Tencent (00700:xhkg) down 1%. EV makers underperformed, with NIO (0986), Li Auto (02015:xhkg), and Xpeng (09868:xhkg) declining 4% to 6%. Following the news that the Hong Kong Government is reviewing and considering plans to end the hotel quarantine requirements for inbound travellers, tourism and retail stocks rallied, Cathay Pacific Airways (00293:xhkg) up nearly 2%, travel agent EGL surging 11.5%, Chow Tai Fook Jewellery (01929:xhkg) rising 6.6%. CSI 300 was little charged, with coal, and beverage names outperforming. USD traders mull FOMC meeting this Wednesday The US dollar has remained rangebound in most pairs ahead of this Wednesday’s FOMC meeting, but did break higher recently versus GBP, CAD, and NZD. Whether the Fed hikes 100 basis points (a minority looking for this after the hot CPI print for August last week) may prove less important than the Fed’s guidance on its forecasted “terminal rate” in the quarterly refresh of its accompanying “dot plot” forecasts for the Fed rate and as the market reads the tone of the statement and draws conclusions from the latest economic projections. The June PCE inflation forecasts, for example, still see 2023 inflation falling back to 2.7% and 2024 inflation to 2.3%. That latter forecast has only been raised 0.2% from the year-earlier level, suggesting that the Fed still sees the inflationary threat as something that its current path of tightening will make a transitory phenomenon. Gold (XAUUSD) Gold remains below $1680 and may struggle ahead of Wednesday’s FOMC rate decision given its potential impact on the dollar and Treasury yield as well as its impact on the terminal rate, currently priced around 4.5% by next March.  Speculators flipped their gold position to a net short in the week to September 13 and it highlights the upside risk should the price manage to break above the twice rejected support-turned-resistance level at $1680. Strong short covering from speculators in silver, supported by copper market tightness, has seen its relative value as seen through the XAUXAG ratio rise to a three-month high. Below $1854, last week's low in gold, the market may target the 50% retracement of the 2018 to 2020 rally at $1618.    Crude oil (CLV2 & LCOX2) Crude oil remains rangebound with Brent continuing to find support ahead of $90 and WTI around $84.50. Prices are being supported by the reopening of Chengdu in Sichuan, boosting the outlook for demand. Overall, however, the potential negative impact on demand from a global economic slowdown will not go away, and the market will be watching central bank decisions from the US to Europe and Asia and their overall impact on the dollar. Production from the OPEC+ alliance fell 3.6 million barrels/day short of its target level in August according to delegates and with Russia’s production at risk of falling by 1.9 million barrels per day once the EU embargo starts in December, the risk to supply remains equally high and price supportive. US Treasuries (TLT, IEF) US treasury yields trade near the cycle highs ahead of the FOMC meeting on Wednesday, with focus on the 10-year benchmark at 2.50%, the cycle high from June and on guidance from the Fed, as a minority are looking for a 100 basis point hike this week, while the terminal rate for next spring has risen almost to 4.50% recently, up more than 100 basis points from early August. What is going on? Dreadful UK retail sales in August There is no other word to qualify the latest retail sales report in the UK. Retail sales (important to note: UK Retail Sales are reported in volume, not price) contracted by minus 5.4 % year-over-year versus expected minus 4.2 %. Excluding fuel bills, it was out at minus 5 %. Just for the sake of comparison, UK retail sales fell 3.8 % year-over-year at the worst point of the Global Financial Crisis. High inflationary pressures coupled with the upcoming recession will certainly pose a serious challenge to the Bank of England (BoE). The market participants expect the central bank will hike rates by at least 50 basis points later this week (a stronger hike of 75 basis points is possible on cards). But we wonder how long the tightening cycle can last in the UK given the rapid deterioration of the situation on the growth front. On a flip note, the EZ CPI for August was confirmed at 9.1 % year-over-year. This is painfully high. Expect the ECB to hike interest rates by at least 50 basis points at its October meeting. In her last appearance last Friday, ECB president Christine Lagarde did not give much clue about the pace of the tightening cycle in the eurozone. She only mentioned that “hikes should send a signal that we’ll meet price goals”. US University of Michigan survey remains optimistic The preliminary September University of Michigan sentiment survey saw the headline rise to 59.5 from 58.5, just short of the expected 60, but nonetheless marking a fourth consecutive rise. Notably, the rise in forward expectations was starker than in current conditions, with the former also coming in above consensus expectations. Also, key were the inflation expectations, which echoed what was seen in the Fed surveys last week. The 1yr slowed to 4.6% from 4.8% and the 5yr expectations slowed to 2.8% from 2.9%.  EU recommends withholding EUR 7.5B from Hungary on rule of law violations The specific accusation is one of corruption in Hungary’s awarding of public contracts. The amount of budget funds to be withheld represents some one-third of the budget for Hungary during the current 7-year budget period. A majority of EU member states will have to approve the recommendation for the funds to be withheld. Hungary has scrambled recently to address the EU’s concerns, with new laws to be debated next week as the country has until November 19 to make changes and inform the commission. What are we watching next? Japan’s CPI and central bank decision to signal concerns on yen weakness Japan has key data on August inflation due Tuesday followed by the Bank of Japan decision a day after the FOMC on Thursday. Consensus estimates for August CPI are touching close to 3% levels, with core higher as well at 1.5% YoY from 1.2% previously. Upside pressures continue to persist from high food and energy prices, while the soft year-ago base also means mobile phone charges are likely to pick up. While it is still hard to expect a pivot from the Bank of Japan this week, given that Governor Kuroda remains focused on achieving wage inflation, the meeting will still likely have key market implications. Raft of central bank meetings this week It isn’t just FOMC week, we also have a bevy of other central banks up with rate decisions this week, including Sweden’s Riksbank tomorrow, which is expected to hike 75 basis points to take the policy rate to 1.50%. The FOMC meets Wednesday, followed by a historic Thursday in which the Bank of Japan, Norges Bank of Norway, Swiss National Bank and Bank of England meet among G-10 currencies, with the Central Bank of Turkey and South Africa’s Reserve Bank also meeting that day. Of those, only Turkey and Japan are expected to keep rates unchanged, with all others looking to continue tightening policy. Porsche IPO set for €70-75bn valuation The Porsche brand is set to be spun out from the Volkswagen group on September 29, with 12.5% of the shares to be floated. VW shareholders will be awarded a special dividend on half of the proceeds from the IPO, with the remaining half targeted for investing in the transition to EVs. The IPO comes with a greenshoe option of 10-15% dilution. Earnings calendar this week This week our earnings focus is on Lennar on Wednesday as US homebuilders are facing multiple headwinds from still elevated materials prices and rapidly rising interest rates impacting forward demand. Later during this week, we will watch Carnival earnings as forward outlook on cruise demand is a good indicator of the impact on consumption from tighter financial conditions. Today: AutoZone Tuesday: Haleon Wednesday: Lennar, Trip.com, General Mills Thursday: Costco Wholesale, Accenture, FactSet Research Systems, Darden Restaurants Friday: Carnival Economic calendar highlights for today (times GMT) 0800 – Switzerland Swiss National Bank Sight Deposits 0900 – ECB’s Guindos to speak 1200 – ECB's De Cos to speak 1245 – ECB's Villeroy to speak 1400 – US Sep. NAHB Housing Market Index 2330 – Japan Aug. National CPI 0115 – China Rate Announcement 0130 – Australia RBA Minutes of Sep. Policy Meeting  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-19-2022-19092022
Rate Hike Announcements Throughout This Week

Rate Hike Announcements Throughout This Week

Swissquote Bank Swissquote Bank 20.09.2022 14:03
FOMC begins its two-day policy meeting today, and is expected to deliver the third 75-bp hike tomorrow. Activity on Fed funds futures gives more than 80% chance for a 75bp hike this morning, and less than 20% chance for a 100bp hike. Although the probability of a full percentage point hike spiked up to 35% after last week’s disappointing inflation reports, we still believe that the Fed has nothing to gain by surprising the market with a bigger than expected rate hike. The strength of the US dollar is too threatening for the Fed to pull out the bazooka. Banks will announce their latest decisions  Therefore, a 75bp hike at tomorrow’s announcement has the potential to give some relief to the US dollar and the equity markets, as it would help de-pricing the scenario of 100bp hike. Yet, the size of an eventual relief, or whether we would see a relief or not will also depend on the economic projections and the dot plot. And the global tightening winds will continue to blow beyond the US this week. The Bank of Japan, Sweden, Norway, Brazil, South Africa, Philippines, Indonesia, Taiwan, Turkey, the Bank of England and the Swiss National Bank will announce their latest decisions throughout this week. Most of these banks are expected to raise their interest rates, and/or sound hawkish in an effort to slow the depreciation of their currencies against the Fed-boosted US dollar. The Swiss National Bank (SNB) is one of them. We discuss why the SNB should follow the Fed with a 75pp hike, and what would be the impact on the Swiss markets. Watch the full episode to find out more! 0:00 Intro 0:32 Market update 1:25 Fed will likely hike by 75bp this month… 4:05 The Swiss National Bank will likely follow! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #meeting #SNB #rate #decision #jumbo #hikes #USD #CHF #EUR #SMI #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
The Bears Are In Full Control Of The Pound To US Dollar (GBP/USD) Market

Could There Be A Corrective Increase In The British Pound After The BoE Meeting?

InstaForex Analysis InstaForex Analysis 22.09.2022 08:06
As a result of yesterday, when the Russian President announced the mobilization of 300,000 military from the reserve (the number may be reduced depending on the situation in Ukraine) and the Federal Reserve raised the rate by 0.75%, the British pound lost 109 points. The Bank of England will hold a meeting today, and the rate can also be raised by 0.75%. The change in the rate is significant, and it can stop, or even turn the pound rate into a correction. From a purely technical point of view, we expect the support price to work out at 1.1170, then convergence with the Marlin Oscillator and recovery to 1.1385 is likely. Consolidating below 1.1170 is undesirable for the pound, as it will lose market support and will fall until investors get tired of selling (the target at 1.0830 is a technically powerful support for higher timeframes). The price is completely in a downward position on the four-hour chart, but here, too, the price is converging with the Marlin Oscillator. We are waiting for the BoE meeting and look forward to corrective growth of the British pound.   Relevance up to 05:00 2022-09-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322353
Chaos And Rising Volatility Are Present In Market Mood

Yesterday's Decisions Strongly Influenced The Situation In The Market, How Will Today's Decisions Affect The Market?

Swissquote Bank Swissquote Bank 22.09.2022 10:28
We thought that the Federal Reserve (Fed) decision would be the highlight of yesterday but news from Russia came to eclipse the FOMC. Putin’s announcement and Fed decision Vladimir Putin declared partial mobilization yesterday morning. Putin’s announcement, which fell like a bomb on investors who were already stressed out due to the Fed decision, sent capital to safe haven assets yesterday, but gains elsewhere than the US dollar remained short-lived.On the FOMC front, the Fed delivered the third 75bp hike yesterday, as expected, but the dot plot revealed that the officials’ rate projections went well above the market expectations. Banks' decisions The Bank of Japan (BoJ) maintained its policy unchanged. The Swiss National Bank hiked by 75bp hike*. The Bank of England (BoE) could opt for 50bp hike, instead of 75bp, as Liz Truss’s energy package could help taming inflation. While the Central Bank of Turkey (CBT) should keep its rate at 13%. BUT WHO KNOWS! Watch the full episode to find out more! 0:00 Intro 0:28 Russia escalates tensions in Ukraine 2:35 Fed hikes 4:34 BoJ maintains status quo 5:42 SNB hikes, as expected*  6:12 BoE could hike by 50bp 7:30 Turkey: God knows. *decision came after the shooting of the show Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #SNB #BoE #BoJ #CBT #rate #decision #jumbo #hikes #XAU #USD #JPY #GBP #CHF #TRY #BIST #Russia #Ukraine #war #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Investors' Concerns About The Coming Recession In The UK, Will GBP/USD Pair Reach Its Lowest Level In History?

The Bank of England Is Widely Expected To Take Decisive Action

InstaForex Analysis InstaForex Analysis 22.09.2022 13:42
By the end of this week, the pound sterling drifted lower. It lost its early gains in anticipation of the Bank of England meeting. However, it may resume steady growth following the BoE's key rate decision. Today, the pound sterling reached a new 37-year low against the greenback amid geopolitical tensions that fueled demand for safe-haven assets, especially the US dollar. The GBP/USD pair has fallen to its lowest level since 1985, touching a critically low level of 1.1235. On Thursday morning, the GBP/USD pair was trading at 1.1226. Shortly after, it was fluctuating in the range of 1.1300 -1.1400. Analysts at Scotiabank believe that the GBP/USD pair could extend more losses in the medium term. Now, the pound sterling is weakening due to risk aversion. Traders are flocking back to safe-haven assets, especially the US dollar. Besides, the greenback is rising across the board. The pound sterling will eventually recover yet its growth will be unsteady. Investors are now anticipating the upcoming meeting of the BoE, scheduled for September 22. According to Reuters, a chance of a 75 basis point rate hike totals 75%. Analysts reckon that this is the most appropriate size of the rate hike. The Bank of England is widely expected to take decisive action against inflation. Some analysts assume that the regulator may raise the interest rate by another 125 basis points at the next two meetings before the end of 2022. Currently, it stocks to a dovish stance. The watchdog is reframing from switching to aggressive tightening. For this reason, some economists criticize the regulator for a slower response to inflation and monetary policy adjustments. According to FX strategists at Barclays Bank, it is pushing the pound sterling down. To facilitate its growth, the central bank should raise the benchmark rate more aggressively. This move may help revive demand for the British currency. If the BoE hikes the cash rate by 100 basis points instead of an expected 75 basis point increase, the pound sterling will rise sharply, analysts at Barclays stated. Market participants are also concerned about the possibility of a recession following the release of the UK's fresh macro stats. Retail sales contracted by 1.6% in August compared to a 0.4% increase in July. On an annual basis, this indicator sank by 5.4%, logging the worst performance since 2008. At the same time, in August, the budget deficit stood at £11.8 billion ($ 13.38 billion) amid the rising cost of servicing government debt. According to the Office for National Statistical (ONS), since April 2022, British public borrowing has amounted to £58.2 billion, a decrease of £21.4 billion compared to 2021. Earlier, the BoE repeatedly warned about the high risks of a recession in the fourth quarter of 2022. According to experts, it may begin to subside no earlier than 2024. At the same time, some analysts revised upward their outlooks for inflation in the UK amid the adoption of the Energy Price Guarantee. In August, the Bank of England predicted that inflation would peak at more than 13% in October. Yet, the reading, on the contrary, declined. Therefore, analysts recommend holding short positions on the GBP/USD pair with the target level of 1.1250.   Relevance up to 09:00 2022-09-25 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/322377
A Vote Of No Confidence In The New UK Prime Minister And The Pound's (GBP) Situation

Is BoE Able To Conduct A FX Intervention? Bank Of England Hiked The Rate By 50bp, What Can We Expect From GBP/USD And EUR/GBP?

ING Economics ING Economics 22.09.2022 14:59
The Bank of England has stuck to its guns and hiked rates by a further 50bp, less than markets had been pricing and defying some expectations that UK policymakers might be forced into a larger move given what other central banks have done recently. Gilts and sterling are failing to find support and remain vulnerable before Friday's 'fiscal event' Bank of England Governor, Andrew Bailey A divided central bank What stands out most from this decision is that the Bank of England's Monetary Policy Committee is becoming more divided. It’s no surprise that three hawks voted to hike rates by 75bp, not least given some have been vocal about the implications of sterling's weakness this year. But for the first time since the great financial crisis, we have a three-way split. One dove, Swati Dhingra, voted to hike by ‘only’ 25bp, signalling she’s worried about the demand outlook. For investors, this increasing divide should be seen as a sign that market expectations are unlikely to be met. Swap markets are now pricing a peak for the Bank Rate close to 5% next year. This increasing divide is a sign that market expectations are unlikely to be met Admittedly the statement makes it clear that extra government spending, and we'll get more details on that tomorrow, will lead to higher medium-term inflation, given that it should dramatically lower the risk of a deep recession. But the accompanying meeting minutes also explicitly highlight that the government’s energy price guarantee - which caps prices for households and businesses this winter - reduces the risk of inflation expectations becoming de-anchored. Headline inflation will be around 5pp lower by January compared to a scenario without the price cap.  A 75bp move later this year can’t be ruled out, and it’s clear the bank is delaying some judgement on the government’s fiscal plans until it has had a chance to update its forecasts ahead of the November meeting. But Thursday’s decision makes us more comfortable with our existing call that the BoE will simply hike by 50bp again in November, and by at least 25bp if not 50bp again in December. That would take Bank Rate a little above 3%. Undeterred, Sonia swaps are now pricing a terminal rate near 5% Source: Refinitiv, ING Gilts: no relief from the 50bp hike A smaller than expected 50bp hike (markets were pricing 70bp ahead of the meeting) failed to provide any relief to gilts. The swap curve continues to price a terminal rate near 5% and the curve’s knee-jerk reaction was to invert further. The tone of the statement is expectedly hawkish in highlighting strong inflation dynamics and in noting that the energy price guarantee would add to inflationary pressure in the medium term. That three MPC members voted for a 75bp hike is leading markets to expect larger rises than the 50bp delivered today in the future, seeing as this has become the standard increment at both the Fed and the ECB. It should also come as no surprise that the BoE is pressing ahead with its active quantitative tightening (QT) plans, through bonds maturing and through active sales to start next month, by £80bn in the first year. We understand the Bank's willingness to show that its balance sheet reduction plan won’t be scuppered by market volatility but we continue to argue that current gilt market conditions warrant greater attention. The BoE and the Treasury are  competing for private investor demand  Attention now turns to tomorrow’s ‘fiscal event’. Market expectations are for the majority of new energy-related spending to be financed via gilt issuance. Given that future wholesale gas prices are unknown, this amounts to an open-ended liability for the Treasury. The BoE didn’t step off the brink today on QT and will add to the number of gilts private investors have to buy. The BoE and the Treasury competing for this private investor demand is the key reason why gilt yields have risen faster than their peers. We continue to expect 10Y gilts to trade 200bp above Bund yields. This could put gilt yields at 4% in the near future. Fiscal support and QT mean private investors will have to absorb a record amount of gilts Source: Refinitiv, ING BoE can only stand and stare at the weaker pound With the market split on whether the BoE would tighten 50 or 75bp , the smaller 50bp adjustment has seen sterling sell-off by roughly 0.5%. Reading through the statement and the minutes it is quite remarkable how little the pound featured. Businesses are concerned that the weak pound is adding to their input costs. But the Bank had very little to say on sterling beyond that it had fallen 4.5% since its August meeting.  The lack of comment probably reflects the realpolitik of linking sterling weakness to growing fiscal concerns in the UK. It is quite remarkable how little sterling featured Ssterling will go into tomorrow’s ‘fiscal event’ on a fragile footing. The 4% sterling sell-off since August did go hand-in-hand with the sell-off in gilts. Concerns over unfunded government giveaways and debt sustainability challenges could well see the pound continue to underperform this year. A stronger dollar also favours GBP/USD to 1.10, while even EUR/GBP can press 0.88. And don’t expect UK authorities to emulate their Japanese counterparts by trying to support the pound with FX intervention. The UK doesn’t have sufficient FX reserves for that.     Read this article on THINK
Securing Italy In Case Russia Cuts Off All Gas Supplies| Eyes On Elections In Brazil And More

The Italian Elections And Their Impact On The Euro, Interest Rates Around The World

Swissquote Bank Swissquote Bank 23.09.2022 10:24
A busy week for central banks come to an end with plenty of rate hikes, increased prospects of slowing growth, that leave investors with a bad taste in their mouth. Eyes on rate hike The Swedish Riksbank was the first major central bank to surprise with a 100bp rate hike. The US Federal Reserve (Fed) delivered its third 75bp hike. But the dot plot hinted at another jumbo hike before the year-end. The Bank of Japan (BoJ) maintained its policy rate unchanged at -0.10%, but intervened directly in the FX market to buy yen to fight back the strengthening dollar. The Swiss National Bank (SNB) raised its policy rate by 75bp. The Bank of England (BoE) opted for a 50bp hike, combined with an £80 billion Quantitative Tightening, and said the UK is now in recession. The UK will reveal the ‘mini’ budget today. Norges Bank also increased its policy rate by 50bp but signaled that tightening may be coming to an end. Indonesia and the Philippines also hiked by 50bp. Taiwan raised by a modest 12.5% as expected, Vietnam opted for a 100bp hike, South Africa raised by 75bp… …and Turkey… cut its rate by 100bp for the second consecutive meeting! But the week is not over. The Italian elections due Sunday will likely continue pressuring the euro lower. Watch the full episode to find out more! 0:00 Intro 0:26 Keeping up with the central banks 4:37 UK 'mini' budget is all but mini. 6:15 Continue keeping up with the central banks 7:22 Market update 8:42 Into the Italian elections Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #SNB #BoE #BoJ #CBT #rate #decision #jumbo #hikes #USD #JPY #GBP #EUR #CHF #TRY #BIST #UK #mini #budget #Italy #elections #crude #oil #FedEx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Forex: Euro To US Dollar (EUR/USD) - Let's Have A Technical Look - 29/09/22

"Fed Listens" Takes Place Today! In Europe, Eurozone PMIs Are Released And ECB's, Bundesbank's And SNB's Members Are Set To Speak

ING Economics ING Economics 23.09.2022 11:14
Rates push higher and curves flatten as the hawkish message from the latest central bank meetings sinks in. The decisions have also highlighted policy transmission issues that have to be overcome as negtiave rates are left behind. Today's eurozone PMIs underscore the growing economic pain the ECB is willing to tolerate, as it focuses on inflation  Gilts lead the sell off, caught between BoE and fiscal measures As the hawkish message of this week’s raft of central bank meetings sinks in, rates markets remain under pressure with front to intermediate rates underperforming initially. The German 2Y 10Y curve came close to inversion, re-steepened only as 10Y Bund yield pushed towards 2%. Yet it was Gilts that led the sell-off. At first sight, it was surprising as the Bank of England underwhelmed market expectations with a smaller than expected 50bp hike, but the Bank later added that the impact of the government’s fiscal package would only be considered at the next meeting. With the promise to act forcefully if necessary that leaves the door open to substantial increases further down the road – 75bp not excluded with three Monetary Policy Committee votes in favour already this time around. It gets uncomfortable for Gilts amid quantitative tightening and fiscal spending  However, it is also the Gilt supply dynamics weighing heavily. The BoE announced yesterday its plans to kick off active sales of its bond holdings in October. This would amount to the portfolio shrinking by £80bn over the next 12 months, half of that sales, the other half passive roll off. Those numbers were not entirely unexpected, but amid current market conditions and given that the government's energy-related spending plans could create unpredictable upside risks for Gilts issuance, this puts private Gilt investors in an uncomfortable position. We would not exclude 10Y Gilt yields at 4% soon. Fiscal measures and QT add up to a daunting amount of Gilt supply Source: Refinitiv, ING Transmission and cost issues as rates are hiked A more technical aspect faced by central banks as policy rates are lifted from zero or below into positive territory was highlighted by the Swiss National Bank yesterday. It hiked the key rate by 75bp to 0.5%. But to ensure that the market rate actually follows the policy rate higher, it introduced what essentially boils down to a reverse tiering system. Sight deposits are now remunerated at the key rate up to a multiple of individual banks’ reserve requirements, and anything above does not earn interest. Crucially, that will compel banks to participate in the SNB’s repo and bills issues have been introduced alongside to mop up this remaining excess liquidity, ensuring that the overnight rate actually trades at the policy rate. Rate hikes are not properly transmitted into all corners of the money market The European Central Bank has also faced the problem that its rate hikes are not properly transmitted into all corners of the money market. Collateral scarcity is affecting core rates with Germany’s 3m treasury bills still trading some 40bp below ESTR OIS (euro short-term rate overnight indexed swap) for instance. The ECB has prevented at least a worsening of the situation by remunerating the vast government cash holdings at national central banks that would have otherwise pushed into the tight market for collateral. But it is only a temporary fix and the ECB may eye other central banks’ approaches, in this case, the SNB's issuance of central bank bills – which is essentially converting excess liquidity into collateral. It does not address the issue of the ECB being left with rising interest costs as it has started to remunerate banks’ excess liquidity holdings.     Collateral scarcity means higher ECB rates don't transmit fully to German bonds and bills Source: Refinitiv, ING Today's events and market view The eurozone PMIs are expected to drop further below the 50 threshold as high energy prices bite and force manufacturing production cuts. Yet ECB officials have already started to prepare markets for upcoming pain, signalling their intent to remain focused on inflation and hike rates despite an economic downturn. This had boosted the flattening dynamic of yield curves, and while yesterday it was already close, the Bund curve should eventually follow the OIS and swap curves into inversion.   Gilts markets will focus on today's fiscal event and what it will mean for issuance. At least equally important will be the implications for the upcoming BoE policy decisions, with the Bank having already warned that the government's energy package will increase medium-term inflation pressure. Elsewhere, we will follow comments from the ECB's Martins Kazaks as well as Bundesbank's Joachim Nagel alongside the SNB's Thomas Jordan. Later in the day, Fed Chair Jerome Powell will open a "Fed Listens" event with Vice Chair Lael Brainard and the Fed's Michelle Bowman. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The UK Assets Will Be Pressured| Japan And Its A Huge Foreign Debt

Banks In The Old Continent Are Doing Their Best To Fight Inflation

ING Economics ING Economics 24.09.2022 08:18
The Swiss National Bank’s decision to introduce bank reserve tiering sheds light on similar potential decisions at the Bank of England and European Central Bank. Central banks have to balance monetary policy transmission, interest costs, and incentive structures for banks In this article SNB: actively moving to absorb liquidity BoE: saving money where it can ECB: peering into pandora’s box Source: Shutterstock European central banks are gradually adjusting their policy setting to a world of positive interest rates but with still abundant liquidity. The common theme here is that hundreds of billions, or trillions in the ECB’s case, of bank reserves will be remunerated at positive interest rates, at a cost for their central banks, and ultimately their domestic government treasury. SNB: actively moving to absorb liquidity The Swiss National Bank (SNB) was the first one to actually implement a reserve tiering system at its September meeting. In a nutshell, banks’ sight deposits at the SNB up to a certain threshold will earn the SNB policy rate, currently 0.5%, and 0% on balances above that threshold. This, however, is only part of the story. In parallel, the SNB announced it will conduct liquidity-absorbing operations (Open Market Operations or OMOs). With a threshold set at an elevated 28 times banks required reserves, it won’t take much effort for the SNB to absorb enough liquidity so that all that remains is remunerated at the SNB. In effect, the SNB rate should remain the marginal rate in CHF money markets, and tiering should act as an incentive for banks to participate in liquidity-absorbing operations. The SNB's goal seems to be to make sure higher policy rates are transmitted to the economy The upshot is that the main feature of the new liquidity set-up at the SNB will be to remove liquidity from the system as it tightens policy in order to get inflation under control. There is likely to be only marginal interest rate savings for the central bank on its CHF640bn of sight deposits, if at all, but this doesn’t seem to be the point of the policy change. Rather the SNB's goal seems to be to make sure higher policy rates are transmitted to the economy. Bank reserves at the BoE will decline with QT, but not fast enough to save much interest cost to the BoE   Source:Refinitiv, ING BoE: saving money where it can There have been persistent press reports that the UK is looking to reduce the amount of interest it pays to banks. This is a more pressing issue in the UK because bank reserves now approach £945bn and the swap curve is implying that the Bank Rate could climb to 5% next year. This is something of a worst-case scenario, but this would result in an interest rate bill approaching £50bn per year. In practice, we think that rate hike expectations are exaggerated, and the BoE intends to reduce its bond holdings, and so the amount of reserves, by £80bn per year at least. At a time of large open-ended fiscal support to energy consumers, the Treasury could be forgiven for trying to save on this interest rate bill. The Treasury could be forgiven for trying to save on its interest rate bill Two options present themselves to the BoE. Designing a reserve tiering system akin to the SNB would allow it to gradually reduce the amount of liquidity in the system. Interest cost saving would probably be underwhelming at first, but it could attempt to gradually increase the amount of liquidity withdrawn from the system, thus also supporting its monetary tightening stance. Inversely, it could determine a fixed amount of reserves that is remunerated at 0%, with balances above that threshold earning the Bank Rate. If that threshold is set too high, this measure would incentivise banks to get rid of their liquidity and would push money market rates lower, thus contradicting the BoE’s monetary policy stance. Setting the threshold lower would mean a lower interest rate saving from the BoE but also probably less disruption in GBP money markets. We think this is the option that would likely deliver the best near-term compromise for public finances. Its market impact should be limited at first. The distribution of bank liquidity and TLTRO borrowing is uneven across the eurozone Source: Refinitiv, ING ECB: peering into pandora’s box The European Central Bank’s motivation could be similar to the BoE's. As policy rates rise, the interest banks earn by placing liquidity at the ECB will gradually rise above the rate they are paying on their targeted longer-term refinancing operations (TLTRO) loans, presenting them with an interest rate gain. If this is the sole problem it is intending to solve, one option would be to retroactively change the TLTRO terms by raising its interest rate. This would be detrimental to the predictability, and so attractiveness of future TLTRO operations, however. With the brunt of TLTRO loans due to expire by the middle of next year, one could also question the need to come up with risky solutions to a problem that will disappear in nine months. The ECB has effectively allowed banks to borrow money at a lower rate than they earn when they place it back at the ECB If on the other hand, the goal is to reduce its interest bill over the longer term, it could borrow one of the two designs described above. A set-up similar to the SNB’s, where a fixed amount of reserves earns the policy rate and the amount in excess earns 0%, would imply that it intends to actively withdraw liquidity. This could be achieved if banks rush to repay TLTRO loans, but this is likely to result in at least a temporary drop in money market rates. To prevent this temporary disruption, the ECB could bridge the period until the next quarterly TLTRO repayment opportunity with ad hoc liquidity draining operations, or simply make the tiering apply on the same date as TLTRO repayment. If this is the option retained by the ECB, the reduction in excess liquidity resulting from early TLTRO repayments, and other liquidity draining operations, would push money market rates higher relative to the ECB deposit rate. Interbank lending rates would be the first area where we expect a reaction as banks move to replace TLTRO funding. In time, we'd also expect greater competition among banks to attract wholesale deposits. Both would push Euribor fixings higher relative to euro short-term rate (Estr) swaps. This should also contribute to pushing Estr fixings above the deposit rate, and closer to the refinancing rate. Draining liquidity would eventually push Estr above the ECB deposit rate Source: Refinitiv, ING   A design similar to the one described above for the BoE, where a fixed amount earns 0% and balances above that threshold earn the policy rate, would guarantee some interest rate saving but wouldn’t provide an incentive for banks to repay TLTRO funds if the threshold is set low enough. If the threshold is set high, then the risk is that 0% becomes the marginal interest rate for many banks and that some countries end up being net lenders, and others net borrowers. The result would be a drop in money market rates in some countries, and a rise in others. TagsSNB ECB BoE   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The GBP/USD Market And The Next Target For Them Is The Parity Level

Will The Bank Of England Be Able To Maintain Financial Stability?

ING Economics ING Economics 24.09.2022 08:40
Price action in UK gilts is going from bad to worse. A daunting list of challenges has arisen for sterling-denominated bond investors, and the Treasury’s mini-budget has done little to shore up confidence. Widening rate differentials are no consolation for the pound, with FX remaining the main vehicle to price UK country risk In this article 2022 mini-budget: blank cheques (Monetary) context matters Financial stability in question GBP: The glass is half empty 2022 mini-budget: blank cheques It was largely expected that the bill for the government’s energy price guarantee would run in the 12-digits (over £100bn) over its life and that most of this would be financed with extra issuance from the Debt Management Office (DMO). And yet, the mini-budget unveiled by the new chancellor added fuel to the fire already burning on the gilt market. The updated DMO remit for FY2022-23 includes an extra £72bn of borrowing, £10bn in T-bills and the balance in gilts. In our view, this is well within expectations but the current environment isn’t favourable to gilt sales. Investors are worried the Treasury has effectively committed to open-ended borrowing Alongside the confirmation of additional borrowing this year, the raft of tax cuts unveiled today clearly implies that it will not be contained to just this fiscal year. The cost of the newly-announced measures is reported to be £160bn over five years but, with the cost of the energy price guarantee highly dependent on wholesale energy prices, investors are worried the Treasury has effectively committed to open-ended borrowing. Markets are expecting a forceful BoE response to the new announced fiscal package Source: Refinitiv, ING (Monetary) context matters Of course, the additional borrowing comes at an inopportune time for gilts. Bond holders are already rattled by inflation and by the prospect of more Bank of England (BoE) hikes. Even if the central bank hiked only 50bp yesterday, compared to market pricing of 75bp, markets are betting that the pace of hikes will have to accelerate. The recent jump in yields implies that Bank Rate will peak next year well above 5%. That in itself is not a great backdrop for bonds but what has rattled investors is the prospect of the BoE hiking more in response to generous fiscal policy. Markets are jumping to the conclusion that the BoE will have to respond in kind with even higher rates Effectively, the BoE has reserved judgement on the inflationary implications of the energy price guarantee until its November monetary policy report but noted that the net effect will likely be to boost inflation over the medium term. Given the extra tax cuts announced, markets are jumping to the conclusion that the BoE will have to respond in kind with even higher rates. The prospect of the BoE and the Treasury competing with each other is a particularly unnerving one for bond investors. The already impaired gilt market is no longer able to accommodate more supply and quantitative tightening Source: Refinitiv, ING Financial stability in question To us, the magnitude of the jump in gilt yields has more to do with a market that has become dysfunctional. If a sell-off in gilts is rational in response to more fiscal spending, tax cuts, and higher inflation, the magnitude of the move should give policymakers pause for thought. This is particularly true of the BoE which is about to ramp up its quantitative tightening (QT) programme with outright gilt sales at £10bn per quarter. We have written at length before that trading conditions in the gilt market call for the BoE to tread very cautiously when it comes to adding to the selling pressure already evident in gilt markets. A number of indicators, from implied volatility to widening bid-offer spreads, suggest that liquidity is drying up and market functioning is impaired. A signal from the BoE that it is willing to suspend gilt sales would go a long way to restoring market confidence, especially if it wants to maximise its chances of fighting inflation with conventional tools like interest rate hikes. The QT battle, in short, is not one worth fighting for the BoE. The spread between UK gilt and German bund yields widest in over two decades Source: Refinitiv, ING   Barring a change of direction on QT, we expect 10Y gilt yields to cross 4% and for the spread to German bunds to widen 200bp. The fact that the DMO’s additional borrowing is skewed to the front end of the curve, the sector most affected by expected BoE hikes, has added to the curve flattening dynamics. GBP: The glass is half empty Sterling has had another wild ride on today’s fiscal event – initially rallying on the biggest tax cut since the 1980s, but subsequently falling hard as the UK gilt market reacted to the prospect of a heavy new supply slate. Sterling has been trading off fiscal concerns since early August. Expect this to remain the dominant theme as international investors again consider the right price, both in terms of sterling and gilt yields, to fund the UK’s widening budget deficit. FX is probably the easiest vehicle to trade UK country risk We have to remember that FX is probably the easiest vehicle to trade UK country risk – given that there is not much liquidity in sovereign credit default swaps for the UK. On this subject, investors will take great interest in what the rating agencies have to say about UK fiscal plans. The UK's long-term sovereign outlook is currently stable at all three of the rating agencies, S&P (AA), Fitch (AA-) and Moody’s (Aa3). The risk of a possible shift to a negative outlook will come when the ratings are reviewed on 21 October (S&P and Moody’s) and 9 December (Fitch).   Notably as well has been sterling’s disregard for interest rate differentials, where the very aggressive re-pricing of the BoE tightening cycle has provided no support to the pound. This leaves the BoE in a quandary but presumably would have to be even more hawkish if the weaker exchange rate were to damage the UK inflation profile still further. Unless something can be done to address these fiscal concerns, or the economy shows some surprisingly strong growth data, it looks like investors will continue to shun sterling. For reference, the FX options now prices the chances of GBP/USD hitting 1.00 by year-end at 17%. That is up from 6% in late June. Given our bias for the dollar rally going into over-drive as well, we think the market may be underpricing the chances of parity.   TagsGBP Fiscal Policy Bank Of England   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Investors' Concerns About The Coming Recession In The UK, Will GBP/USD Pair Reach Its Lowest Level In History?

Investors' Concerns About The Coming Recession In The UK, Will GBP/USD Pair Reach Its Lowest Level In History?

InstaForex Analysis InstaForex Analysis 26.09.2022 08:05
How low can the exchange rate fall? Will the Bank of England take measures to support the pound? At the end of last week, bearish positions on the British pound sharply intensified. Traders seem to have tried to resist such a powerful downward movement until the last moment, but it did not work out. Events are developing in such a way that the pound in the future can not only update distant historical lows, but also risks setting a new anti-record. The BoE's decision on the rate and the announcement of the interim budget, to put it mildly, did not impress the markets. The central bank raised the rate by only 50 bps, accumulating a backlog from the Federal Reserve. The new economic plan failed to allay investors' concerns about the approaching recession in the country. The collapsed economic indicators were also another reason for short positions. The GfK consumer confidence indicator plunged to -49 from -41, updating the historical record. The last time such figures could be seen was in 1974. The CBI retail activity indicator fell to -20 in September from 37 in August. Preliminary PMI estimates could not act as a kind of reassurance for the market. The composite index fell to 48.4 from 49.6 due to the deterioration in the service sector, where the corresponding indicator fell to 49.2 from 50.9. At first, the GBP/USD pair fell to the area of 1.1020, which is the low since 1985. Then shorts intensified and the quote easily broke down the 1.0900 mark. Since the beginning of the year, GBP/USD has lost approximately 20%. Given inflation of 10%, nervousness should be not only among market players, but primarily among the government and the BoE. If officials do step up their efforts to maintain the pound, volatility in the foreign exchange market risks being prohibitive or getting out of control. What's Wrong with Government Measures? The pound was mostly brought down by new government measures. The authorities have announced significant tax cuts since 1972 in an attempt to push the country's economic growth to 2.5%. At least some, but actions and in theory, and even according to the government's plan, it was supposed to support the mood. However, investors have their own vision of the situation and they did not believe that the British authorities, led by Liz Truss, would be able to finance these measures without hindrance. Radical changes to the tax code imply a reduction in the basic income tax rate from 20p to 19p from April 2023. The highest income tax rate has been reduced from 45p to 40p, while the increase in national insurance contributions this year will be canceled in November. In addition, the planned increase in corporate tax has been postponed indefinitely. At the same time, Brits buying housing for the first time will be able to see a noticeable weakening of the state fee. The cost of all the announced tax cuts, according to the authorities, is 45 billion pounds. At the same time, the government's decision to limit electricity bills will cost much more, approximately 130 billion pounds. In general, this means that the British government will need to borrow more, increasing the supply of gold on the market. What will Happen to the Pound? The panic selling of the pound made many think about the future prospects of the British currency. What is it: a temporary turbidity and an excessively strong and completely unreasonable reaction of worried investors, or is the pound really on the path of a great crisis? Will there be parity with the dollar for the first time in history? Indeed, the pound is now under the strongest pressure, including due to the incessant advance of the dollar. The fall of the pound coincides with the time when there was a significant sell-off on world markets. Even in normal times, this creates obstacles for the national currency of Britain. Parity with the dollar is considered by analysts as an extreme measure, which is still far from reality. At the same time, new record lows are quite possible. It is unlikely that government measures will lead to a collapse of the pound or create problems when selling gold coins. "Given that the economy is flirting with recession, tax cuts supporting demand are not necessarily a bad idea. But this tax cut should be permanent, not temporary," Oxford Economics believes. The pound is expected to continue to decline to about 1.0500 against the dollar in the short term. Meanwhile, the BoE will have no choice but to raise the size of the rate hike. At the November meeting, the central bank should increase the rate by 75 bps. Thus, the markets will raise the forecast for the maximum bank rate from 3% to 4%.   Relevance up to 23:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/322592
The Same Time In 2021 S&P 500 And Nasdaq Amounted To Ca. 25% And 32% More Respectively

Very Dramatic Moves In Forex Markets With The Euro (EUR) And The Pound (GBP)

Swissquote Bank Swissquote Bank 26.09.2022 11:13
The FX markets kick off the week on an extremely chaotic note. Both the pound and the euro are being severely punished for the political decisions that are taken in the UK and in Italy respectively. Elections in Italy As expected, the far-right candidate Giorgia Meloni won a clear majority in Italy at yesterday’s election, with Brothers of Italy gaining more than 25% of the votes. And Meloni’s right-wing alliance with Salvini’s League and Berlusconi’s Forza Italia got around 43% of the votes: the terrible consequence of the pandemic, the war and the energy crisis. Situation the major currency  The EURUSD has been shattered this morning. The pair dived to 0.9550. But it’s almost worst across the Channel, if that’s any consolation. Investors really hated the ‘mini budget’ announced in UK last Friday. Investors were expecting to hear about a huge spending package from Liz Truss government, but the package has been even HUGER than the market expectations. UK’s 10-year yield jumped more than 20% since last week, the FTSE dived near 2% and Cable tanked below 1.0350 in Asia this morning. Elsewhere, the US dollar index took a lift, and the dollar index is just crossing above the 114 mark at the time of talking. Stock market Outlook Gold dived to $1626 on the back of soaring US dollar. US crude oil plunged below $80 per barrel. The S&P500 fell to the lowest levels since this summer, whereas the Dow Jones fell below the summer dip. Happily, the European equities are better bid this morning, but investors remain tense and worried. Watch the full episode to find out more! 0:00 Intro 0:24 Italy turns right, euro gets smashed 4:15 UK assets treated like EM after the ‘MINI’ budget 7:45 USD rallies, XAU, oil under pressure 8:49 US stocks dive to, or below summer lows on Fed fear Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Italy #election #Meloni #UK #mini #budget #EUR #GBP #selloff #USD #rally #crude #oil #XAU #BP #APA #XOM #recession #energy #crisis #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
A Look At Today's Decisions And Comments On Yesterday's Events

Podcast: Very Weak Global Sentiment And View Of Gold, Shares And Crude Oil

Saxo Bank Saxo Bank 26.09.2022 11:52
Summary:  Today we look at very weak global sentiment as the US dollar and US treasury yields continue to soar, taking US equities to the key cycle lows as we wonder what shape the capitulation will take - a quick test and reverse or a more profound move driven by poor liquidity? Elsewhere, we note sterling's historic drop and suggest that it is time for the Bank of England to step in with an emergency rate hike - or else. Crude oil, gold, stocks to watch today (including Apple with some concern around iPhone 14 orders) and more are on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean engraver If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-sep-26-2022-26092022
The UK Assets Will Be Pressured| Japan And Its A Huge Foreign Debt

The Collapse Of The Pound (GBP) And Lack Of Market Confidence In The New UK Government

InstaForex Analysis InstaForex Analysis 26.09.2022 14:20
Pound has already lost nearly 400 pips on Friday, then this morning sank further by 5%. The reason was the new Chancellor of the Exchequer Kwasi Kwarteng's vow to continue cutting taxes, which raised fears of another sharp increase in inflation and public debt. The decline was the biggest intraday drop since March 2020, when investors panicked over the emerging Covid-19 pandemic. A number of economists have urged the Bank of England to take actions, but this will only exacerbate the fears in global financial markets and put the administration of Liz Truss at risk as the UK continues to grapple with the cost-of-living crisis. Nevertheless, the collapse of the pound indicates that markets do not trust the new UK government, especially since the national currency is rapidly moving towards parity and there is a huge chance that the situation will only worsen further. Kwarteng laid out the UK's most drastic tax relief package since 1972 yesterday, cutting fees on both workers' and companies' wages in an effort to boost the long-term potential of the economy. He also lowered stamp duty on property purchases, lifted a cap on bank bonuses and reaffirmed support for households and businesses on rising electricity bills over the next six months. Although pound bounced up earlier, traders are set to further decline as the options market is currently showing a 60% chance of it weakening to parity against dollar this year. A massive sell-off is sure to force the Bank of England to act more aggressively, and if the situation continues to go downhill, there will be an extraordinary increase in interest rates between meetings. Pound has so far collapsed to an unprecedented level - 1.0360, which creates quite a few problems. A correction will occur only when buyers become more active this week. It will surely open a direct path to the highs of 1.0700, 1.0760 and even 1.0805. But if pressure continues, GBP/USD will fall to 1.0500 and 1.0430. In terms of EUR/USD, a lot depends on 0.9605 because a drop below it will push quotes lower to 0.9560, 0.9510 and 0.9455. Price will increase only when buyers manage to bring the pair to 0.9710, then push it to 0.9770, 0.9810 and 0.9860.   Relevance up to 09:00 2022-09-27 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322632
The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

Saxo Bank Saxo Bank 26.09.2022 14:41
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, September 20, a week leading up to the FOMC meeting, Bank of Japan intervention, a Sterling crisis and the dollar surging to levels not seen in decades. Ahead of these events speculators chose to cut their dollar long by one-third, increasing their gold short to a four year high while adding exposure in grains and crude oil Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, September 20. A week that saw financial market adjust positions ahead of the FOMC meeting on September 21. In anticipation of another 75 basis point rate hike, the market sold stocks, bonds and commodities while the dollar was bought. As it turned out, the FOMC was the starting shot to a very volatile end of week that saw heightened recession worries, Bank of Japan intervention to support the yen for the first time in 24 years, and an unfolding crisis in the UK sending the Sterling towards an all-time low.   Commodities The Bloomberg Commodity Index dropped 2.3% during the week to last Tuesday with losses seen across most sectors, the exception being grains and livestock. Selling was particularly felt across the energy sector and in precious metals. Money managers responded to these heightened growth and strong dollar concerns by cutting length in energy and softs while adding to already short positions in precious metals. The only sector continuing to see demand were grains where the speculators have now been net buyers in all but one of the last eight reporting weeks. Energy Money managers raised their combined crude oil net long to a seven-week high despite the recessionary clouds growing ever darker and the dollar continued to strengthen. During the reporting week when oil dropped around 3% the total net long in WTI and Brent was raised by 13.5k contracts to 355k lots. The ICE gas long meanwhile slumped by 30% to a 22-month low while in New York the ULSD (diesel) length was cut by 17% to 15.7k contracts. Despite falling by around 7% only small changes were seen in natural gas. Metals Gold selling accelerated last week with the net short jumping by 225% to 33k contracts to near a four-year low. This the culmination of six consecutive weeks of selling driven by a stronger dollar and rising Treasury yields as well a firm belief the FOMC will successfully manage to bring inflation under control next year. Silver saw no major net change with reductions in both long and short positions offsetting each other. The copper net short was unchanged at 4k contacts, the weakest belief in lower prices since June while platinum’s 3.5% rally supported an 82% reduction in the net short to just 2k contracts, again weakest short bet since June. Agriculture The grains sector saw continued demand with speculators having been net buyers in all but one of the past eight weeks. The increase last week was led by a 16% increase in the soymeal long to 102k contracts, a seasonal high while corn buying extended to an eight week. The wheat market which found support from renewed threats to the Ukraine grain corridor saw net buying of both Chicago and Kansas wheat. Overall however the net exposure remains close to zero with a 16k contracts CBT net short partly offsetting a 19k contracts long in KCB wheat. Renewed selling of sugar cut the net long by 72% to 8.6k contracts, the cocoa net short extended to a fresh 3-1/2 year high while long liquidation continued in both coffee and cotton.   Forex Ahead of the post-FOMC dollar surge to a fresh multi-year high against several major currencies, and the first intervention from the Bank of Japan to support the yen in 24 years, speculators had reduced bullish dollar bets by 35% to $13.9 billion, a six month low. The bulk of the change was driven by the biggest amount of short covering in the euro since March 2020, a change that flipped the position back to a long of 33k lots or €4.2 billion equivalent, up from a €6 billion short three weeks ago.The net short in sterling was reduced by 13k lots to 55k lots just days before tumbling to a 37-year low following the announcement of a historic debt financed tax cuts. The yen meanwhile saw no major changes ahead of Thursday’s USDJPY surge and subsequent    What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Source: https://www.home.saxo/content/articles/commodities/cot-specs-sold-dollar-and-gold-ahead-of-fomc-26092022
Intervention In The Yen (JPY) Still Remains A Far Cry| The Pound (GBP) Is The Weakest Against The Dollar (USD)

Intervention In The Yen (JPY) Still Remains A Far Cry| The Pound (GBP) Is The Weakest Against The Dollar (USD)

InstaForex Analysis InstaForex Analysis 27.09.2022 11:04
Summary:  Havoc has spread to the markets, not just with the Fed staying the hawkish course, but with the collapse in confidence in the UK economy after a fiscal policy and lack of monetary policy response adding into the mix with a massive bond selloff. Meanwhile, the surge in the US dollar continued taking its toll on several currencies, and the effect of Japan’s intervention from last week has also faded. Earnings pressure may be the next shoe to drop, and recession concerns also still need to be priced in more broadly. Fed’s high-for-longer message is now being taken seriously The September FOMC meeting was not precisely a pivot point for the Fed, but more so for the markets which finally understood the Fed’s message on inflation. The dot plot, particularly, conveyed two key messages as listed below. Even though the accuracy of the dot plot remains in doubt, given a very weak correlation with what actually transpired previously, it is a great signalling tool to understand the intentions of the FOMC members. Terminal rate is seen at ~4.6%, which was above what Fed funds futures were pricing in before the meeting. Even slower growth and higher unemployment levels, as conveyed by the Fed’s projections, would not deter the central bank from hiking rates There was some pushback on premature easing, with the dot plot showing a 4.5-5.0% rate even at the end of December 2023. Alongside that commitment to tighten, the Fed is now at the full pace of its quantitative tightening program, which is sucking liquidity out of financial markets at a rapid pace. The aim is to shrink the Fed’s balance sheet by $95bn a month — double the August pace. While quantitative tightening strongly influences liquidity conditions and asset markets, it is less useful in directly impacting inflation. While systemic risks from QT may remain contained, it ramps up the rise in Treasury yields as the Fed’s balance sheet shrinks and the amount of Treasuries in private hands increases. Trussonomics pushing UK to an emerging market status Sterling has fallen close to 10% on a trade-weighted basis in a little under two months, and has surpassed the Japanese yen to be the weakest against the US dollar year-to-date. An immediate response from the Bank of England may have saved some face, but remember that last week’s BOE decision was a pretty split vote as well with two members voting for 75bps rate hike and one calling for a smaller 25bps rate hike as well. So, it remains hard to expect a prudent policy response from the BOE, and a parity for GBPUSD in that case may not prove to be the floor. UK’s net forex reserves of $100bn are also enough to only cover two months of imports, or roughly equal to 3% of GDP as compared to Japan’s 20% and Switzerland’s 115%. But it’s not just about the sterling crisis in the UK, but more generally a crisis of confidence. Not to forget, inflation forecasts for end of the year are already at 10%+ levels and the market is now pricing in over 200bps of rate hikes by the end of the year, with two meetings left. The central bank will need to deliver this massive tightening simply to keep the sterling where it currently is and that won’t reverse the impact of the government’s decisions on UK markets. The scale and speed of the hikes could also do significant damage to the economy. The iShares MSCI United Kingdom ETF (EWU:arcx) traded lower by another 1.8% on Monday and is now down 7.3% over the last one week. Bank of Japan’s patience will keep getting tested We wrote earlier about what will need to change to call it a top in the US dollar, and nothing seems to be in order yet except some of the non-US officials starting to get concerned about currency weakness. Still, the intervention from Bank of Japan didn’t have long lasting effects on USDJPY, even as it helped to strengthen the yen against some of the other currencies such as the EUR, GBP or AUD. It may have also helped to stop some speculative shorts. But a coordinated intervention in the yen still remains a far cry, with the weakness in the Japanese yen being BoJ's own-doing due to the yield curve control policy. Japanese government bonds will likely continue to test the patience of Bank of Japan with its yield curve control policy. Downside for Japanese government bonds (JGB1c1) will potentially spike exponentially if the BOJ pivots at some point. Earnings pressure may be next While the Q2 earnings season proved to be more resilient than expectations, intensifying inflation concerns have turned corporates more cautious on the outlook and less optimistic for the near-term earnings performances. We have seen some downward revision of EPS estimates for the third quarter in July and August, and we still cannot rule out further grim outlook and margin pressures. Estimates for S&P 500 earnings in 2022 stood at $226.15 per share as of August 31, according to FactSet. This is down 1.5% from the $229.60 per share estimate as of June 30. For 2023, analysts now expect EPS of $243.68, down 2.8% from the June estimate of $250.61. So far, companies dealt with rising inflation by passing on increased costs to consumers, given the pandemic-era fiscal support measures underpinned strength in the consumer side. These increased pass-through was also visible in higher CPI prints. But with the economic outlook getting duller by the day, there is bound to be some pushback from the consumers and that will likely show up in the earnings report card. From a sectoral perspective, tech stocks will likely be battered as tight corporate budgets weigh and the US 10-year yields are in close sights of 4%. Semiconductors, a barometer of global economic health, could also face further pressure. Meanwhile, the oil and gas sector was the saviour of the Q2 earnings season, but would also likely see some pressure in Q3, unless the outlook starts to look slightly more upbeat with improving capex plans. Dollar pivot is the next key catalyst to watch The majority of the market downfall we have seen so far has come from a rapid shift in cost of capital and correcting peak valuation. The next leg, as discussed above could be the earnings recession. Still, economic recession risks remain and history suggests that the market lows do not come until after the recession begins (see chart below). Still, with the US 10-year yields approaching 4% - which maybe a likely ceiling – the focus turns to a reversal in the US dollar as the next pivot, not the Fed. Testing those key levels could mean a short-term bounce in equities which may be favourable for building new short positions as the trend still remains down. Alternatively, for investors, it would rather be optimal to look for signs of selling exhaustion to accumulate long positions, such as VIX above 40. Historically, a decline in stocks of the order of 20% makes it buying stocks after they have been down 20% from record highs has been a good risk/reward proposition for longer-term investors.     Source: https://www.home.saxo/content/articles/macro/macro-insights-approaching-a-breaking-point-but-not-without-more-pain-first-27092022
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

GBP/USD Is Expected To Trade Between 1.07 And 1.09 Today. Could British Pound Touch 1.0350 In Next Month? Fed And ECB Members Speak Today

ING Economics ING Economics 27.09.2022 11:08
September has proved an exceptional month for the dollar. In the G10 space, the dollar has rallied anywhere from 1% against the Swiss franc to as much as 7% against sterling. Events in the UK highlight the pressure-cooker conditions facing non-USD currencies. Expect a day of consolidation today and a focus on central bank speakers in the US, UK, and Europe USD: An array of Fed speakers today Monday was a wild day in FX markets. Sterling was falling heavily and the dollar was firmer across the board as both bond and, to a much lesser degree, equity markets were under pressure. G7 FX volatility is now back to levels last seen in March 2020. Interestingly EMFX volatility is higher too, but still below the highs of this year. Sterling is clearly making a difference here. The narrative remains the same. Central bankers remain wholly focused on taming inflation – even at the expense of recession. We think last week's economic's projections from the Fed will still take some time to sink into the market's consciousness. The Fed projects that the US unemployment rate will rise to 4.4% by the end of next year from 3.7% today - but will still be raising rates to 4.50/4.75% in the process. Overnight the Fed's Loretta Mester reiterated that a more restrictive policy was needed for longer. Mester was also asked about the strong dollar and understandably replied that the Fed does take it into account when setting policy and also looks at the dollar's impact on financial market volatility. On the latter subject we suspect the 12 October meeting of G20 central bankers and finance ministers will garner more attention than usual – e.g. does the FX language in the Communique get tweaked to express concern over disorderly FX moves? For today's session, the focus will be on Fed speakers and second-tier data. On the roster, we have Evans (0930, 1115CET), Powell (1330) and Bullard (1555). We also have durable goods orders, new home sales, and consumer confidence. Any upside surprise in US consumer confidence only makes matters worse for the rest of the world, in that the Fed will have to tighten harder to bring aggregate demand lower. DXY may hold support at 113.00 since we look to be in a powerful phase of a dollar bull trend. Chris Turner EUR: One way traffic EUR/USD touched a new low for the year near 0.9550. Looking at a EUR/USD chart it has been pretty much one-way traffic since the summer of 2021. Question: what changed then? Answer: The Fed, which shifted from its super-dovish experiment with average inflation targeting to more conventional tightening. Events in Ukraine have only managed to cement the Fed's inflationary concern while hitting Europe's growth prospects. In short, do not expect a turn in EUR/USD until the Fed's work is done – and that doesn't look like it's happening until 1Q23 at the earliest. Separately, European growth prospects remain challenged as clearly demonstrated in some very concerning German IFO data released yesterday.   Expect intra-day EUR/USD rallies to stall in the 0.9700 region again and we doubt much hawkish ECB speak makes much difference here.  Elsewhere, we still like EUR/CHF lower. The dollar is the second-largest weight in the Swiss National Bank's (SNB's) Swiss franc trade-weighted index. A higher USD/CHF means the SNB will tolerate a lower EUR/CHF as it seeks to guide the nominal Swiss franc stronger. 0.93 is the direction of travel for EUR/CHF. Chris Turner  GBP: Buying time for the pound For a major reserve currency, it is typically hard to maintain these high levels of volatility for prolonged periods – but sterling may well try to defy that. We say that because UK policymakers have tried to buy time for the pound by: a) the UK Treasury promising a proper budget assessment on 23 November from the Office for Budget Responsibility (OBR) alongside a medium-term fiscal plan and b) the BoE promising to take all market moves into account when it decides on monetary policy on 3 November. But six-to-nine weeks is a long time in FX markets and on Monday investors were disappointed about the lack of an emergency rate hike from the BoE. We had felt that the BoE would prefer to avoid getting sucked into defending the pound with rate hikes. The delay in a policy response until November, therefore, leaves sterling vulnerable – though we would prefer to describe it as sterling finding the right level such that the Gilt markets clear. We are not sure we are there yet, however. FX markets feel like the dollar is going into early 1980s over-drive territory and barring a stark reversal in hawkish Fed expectations or slowing growth dynamics, we would say Cable could retest 1.0350 over the next month. UK markets will now be hyper-sensitive to any communication from UK policymakers. Today at 13:00CET sees BoE chief economist, Huw Pill, speak on the well-timed subject of 'Economic and Monetary Policy challenges ahead'. We doubt he will offer more than what was in yesterday's BoE statement, but on a day in which the dollar is consolidating, GBP/USD could trace out something like a 1.07-1.09 range. Chris Turner  HUF: Is the hiking cycle coming to a peak? The National Bank of Hungary's (NBH) monetary policy meeting takes place today and we expect another strong 75bp rate hike to 12.50%. Surveys are leaning more towards a 100bp step but market pricing is a bit more complicated. Short-term expectations in the one-month horizon (1x4 FRA) are pricing in just over 150bp, however they do include the October meeting as well. On the other hand, market expectations have cooled in recent weeks and while the terminal rate was still priced in at around 14.50% in early September, at the moment markets are expecting the peak of the hiking cycle to be just over 13.50%. Thus, it should not be a problem for NBH to support hawkish expectations. On the other hand, since the publication of our preview, we have heard several statements from NBH officials that the hiking cycle is coming to an end. From this perspective, this would make our 75bp hike call look hawkish. However, the forint is once again approaching the 410 EUR/HUF level and a dovish surprise would not be good news for the forint. Moreover, markets are increasingly questioning whether Hungary will get an injection of EU money, which Fitch highlighted as a risk to the sovereign rating on Friday, and more headlines should emerge in the coming days. So overall the picture is very mixed and it is hard to find a clear path on what to do next. However, our call for today's NBH decision should mean positive support for the forint. Frantisek Taborsky Read this article on THINK TagsFX Daily FX Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Weakening Of Confidence In The British Government| Oil Prices Extended Gains And More

Could GBP/USD Hit 1.00? There Are Several Solutions To Fight GBP (British Pound's) Weakness (26/09/22)

ING Economics ING Economics 27.09.2022 11:29
Sterling has fallen close to 10% on a trade-weighted basis in a little under two months. That's a lot for a major reserve currency. And traded volatility levels for the pound are those you would expect during an emerging market currency crisis. We take a look at the (unpalatable) policy options available to stabilise sterling British pound hits all time low against US Dollar, London, United Kingdom - 26 Sep 2022 Source: Shutterstock Defining a crisis Unlike equity markets where in excess of a 20% fall from a peak is called a bear market, definitions in FX markets are a little looser. Suffice to say that GBP/USD is the worst performing G10 currency this year at -20% year-to-date, just pipping the Japanese yen to that position. (Japan intervened last week to support its currency for the first time since 1998). Typical emerging market currency crises since the early 1990s have seen exchange rates fall anywhere near 50-80%. The large size of these adjustments has typically been a function of the breaking of an exchange rate regime/peg. The UK has learned from its experiences in ERM II in 1992 and has operated a free-floating FX regime ever since – arguing against sterling following some of the outsized EM FX adjustments outlined above. However, the 3.5% decline in Asia overnight and the now 28% levels for one week traded GBP/USD volatility (close to the highs in March 2020) certainly marks trading out as ‘disorderly’. Disorderly markets normally prompt a response from policymakers. As we go to press, headlines suggest that the Bank Of England (BoE) is considering making a statement later today. Below we take a look at the possible policy responses and their likelihood. GBP/USD sinks towards parity - one week volatility surges Source: ING, Refinitiv Sterling stabilisation measures – a look at the policy options Fiscal U-turn. Comments from the UK government over the weekend that the Treasury is mulling further tax breaks in coming months, would suggest ministers are unlikely to change course imminently. But mounting pressure, perhaps coupled with comments from rating agencies over coming weeks, means investors will be looking for signs of at least a partial policy U-turn. Ministers may emphasise that tax measures will be coupled with spending cuts, and there are hints at that in today’s papers. We also wouldn’t rule out the government looking more closely at a wider windfall tax on energy producers, something which the prime minister has signalled she is against. Such a policy would materially reduce the amount of gilt issuance required over the coming year. BoE to suspend QT. First inflation, then fiscal concerns, and finally a broader run on sterling and sterling-denominated assets. In all three cases, gilts have been at the wrong end of the stick. One particular concern for gilts is policy cooperation between the Bank of England and the Treasury. Be it on inflation, fiscal, or on confidence in the currency, markets have the distinct, and unnerving, impression that the two institutions in charge of economic management in the country are working at cross purposes. Gilts are caught in the crossfire. Despite this list of legitimate macro concerns, we also suspect that the magnitude of the move in gilts these past days (adding up to roughly 100bp moves at the front-end of the curve in two days) has been magnified by worsening liquidity. We have been highlighting the deterioration in gilt trading conditions all year. The BoE has added fuel to the fire by seeking to reduce its gilt holdings. In an environment where private investors are justifiably nervous about greater gilt issuance, and also greater gilt riskiness, the BoE is adding to gilt supply, and will soon engage in outright sales. A low-hanging fruit, in our view, would be to suspend quantitative tightening until market conditions improve.  Emergency BoE rate hike. The collapse in sterling over recent days has unsurprisingly sparked expectations of an inter-meeting rate hike. That should not be ruled out, though we suspect the committee will be reluctant. Thursday’s BoE decision suggests the BoE is – rightly or wrongly - less concerned about sterling than a lot of market commentary is suggesting they should be. As a rough guide, the 7-8% fall in trade-weighted sterling since the start of August, if persistent, would add somewhere between 0.6-0.8ppt to inflation at its peak. That’s not insignificant, but is it enough in itself to necessitate an inter-meeting hike? Probably not. But the key question is whether an emergency rate hike would do all that much. Certainly, it would need to be bold, and likely in excess of 75bp. A bold rate hike would prompt further complications, too. Rate hikes of the magnitude now being priced by investors would start to be highly problematic for mortgage holders and corporate borrowers. While the vast majority of UK mortgages are fixed, around a third of those are locked in for less than two years. For corporates, the BoE estimated last year that 400bps worth of rate hikes (from near-zero) would take the proportion of firms with low-interest coverage ratios to a record high. In the first instance, we’re more likely to see BoE hawkishness channelled through speeches this week, emphasising that it can move more forcefully if needed in November. Indeed, the pendulum is increasingly swinging towards a 75bp hike (or perhaps more) at that meeting. We would also say that the BoE may be psychologically scarred from the events in 1992, where defensive rate hikes failed to keep sterling in the ERM II mechanism. FX Intervention. Last week Japan intervened to support their currency for the first time since 1998. We do not think FX intervention is a credible option for the UK. The UK only has net FX reserves of $80bn, less than two months’ worth of import cover. The adage in FX markets is that no intervention is better than failed intervention. Instead, we may see building interest in the G20 central bankers and finance ministers meeting on 12 October. Will the FX language in the Communique get tweaked to show concern over disorderly dollar strength and hint at joint FX intervention?   Dollar swap lines. Typically in a currency crisis, we hear about the need for additional access to dollar funding through dollar swap lines. For reference, the BoE already has a permanent and unlimited dollar swap with the Federal Reserve. However, these lines are designed to provide support for dollar funding challenges and not for Balance of Payments needs. Dollar funding does not seem to be a problem for UK banks, but the BoE could make a pre-emptive move here by re-introducing an 84-day dollar auction in addition to the current 7-day facility.    IMF Flexible Credit Line. Given many references to Friday’s UK budget being the most generous since the Barber budget of the early 1970s, there will, unfortunately, be comparisons drawn to the UK seeking an IMF bailout in 1976. We assume the stigma of going to the IMF would prompt some aggressive UK policy adjustments beforehand, but just for reference, a good quality credit, Chile, (sovereign-rated A/A-) recently received an $18bn ‘precautionary’ Flexible Credit Line (FCL) from the IMF, joining the likes of Colombia, Mexico, Peru and Poland. Chile’s FCL was eight times its IMF quota. The UK receiving eight times its IMF quota ($200bn) would seem unlikely in that the IMF already has a total of $144bn lent out according to some estimates and the lack of conditionality of an FCL may not be a good signal given the nature of the sterling crisis. Capital controls. Highly unlikely. Capital controls have been used by Russia this year to support the rouble. But Margaret Thatcher dismantled capital controls in the UK in 1979. A reversal of such measures would be a complete anathema to the new Truss government’s agenda of deregulation and liberalisation. GBP/USD May Reach Parity, EUR/GBP To Near 0.95? At this stage, we think UK authorities will probably just have to let sterling find its right level. The UK has a reserve currency so it can always issue debt – it’s just a question of the right price. We are still bullish on the dollar this year as Fed leads the deflationary charge and global growth slows. That means GBP/USD is now vulnerable to a break of parity later this year, while - quite unexpectedly - EUR/GBP can make a run towards the March 2020 high of 0.95, with outside risk to the 2008 high of 0.98.  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
British Pound: Oanda Expects That If Liz Truss Doesn't Change The Plan, The UK Inflation May Go Up!

British Pound (GBP) May Be Helped With Forex Intervention, But It May Take A While. Bank Of Japan Supported Yen This Way, Swiss National Bank May Do The Same

Alex Kuptsikevich Alex Kuptsikevich 27.09.2022 12:01
The US dollar is under some pressure on Tuesday morning, which can be attributed to the dollar's local profit-taking after substantial gains on previous days. European equities and US index futures are also getting some relief, pulling back from lows. Read next: GBP/USD Is Expected To Trade Between 1.07 And 1.09 Today. Could British Pound Touch 1.0350 In Next Month? Fed And ECB Members Speak Today| FXMAG.COM The dollar has been in increasing demand in recent months, as comments from the Fed are methodically pushing higher the expected interest rate ceiling and for longer However, until we see a change in the fundamentals, bounces like today's are likely to be nothing more than local retracements of established trends - bullish for the dollar and bearish for equities. There is little doubt in the markets now that the main driving force behind the markets is the continuing tightening of current and, most notably, expected conditions. The dollar has been in increasing demand in recent months, as comments from the Fed are methodically pushing higher the expected interest rate ceiling and for longer. Not all major central banks have the ability or the courage to maintain the same pace, which is taking the dollar's main competitors out of the game. But these same conditions require regulators to act more aggressively. Last week, Japan began its interventions to defend the yen exchange rate. The Swiss National Bank has repeatedly warned that it is ready to intervene. Observers have also demanded action from the Bank of England. But the latter has yet to budge, taking a week to assess the situation. In the words of the ECB officials, there is more and more evident dissatisfaction with the ongoing weakening of the euro. Because a sharp rise in interest rates in over-leveraged economies may come as a shock, the central bank may intervene to stop the unilateral weakening of national currencies. Right now, it seems unlikely that the major central banks would be willing to press on the dollar in a coordinated way as they did in 1985 with the secretly prepared so-called Plaza Accord. It hardly fits with US priorities to lower inflation and weaker commodity prices. At the same time, there are increasing risks that the major central banks, one by one and acting on the situation, may use this almost forgotten instrument to stop unilateral speculation against their currencies. Among the other majors, the GBP has the highest currency intervention risks right now, with EUR and CHF slightly less so In our view, since last week and for the foreseeable future, Japan has already included interventions in its active policy, potentially limiting the USDJPY from rising above 145. It is unlikely to be an easy ride for Japan's Ministry of Finance, but it has the strength to fight back. Among the other majors, the GBP has the highest currency intervention risks right now, with EUR and CHF slightly less so. In Canada and China, the monetary authorities are not concerned about the exchange rate, as inflation is slowing down there. Hence, it is unlikely that we will see interventions in the CAD and the CNY. Although the Australian dollar has lost 6% since the beginning of the month, it is now 18% above the 2020 'bottom', so in our view, monetary authorities can use traditional rate hikes and quantitative tightening for now.
A Vote Of No Confidence In The New UK Prime Minister And The Pound's (GBP) Situation

British Pound (GBP) Hasn't Been Significantly Supported So Far, What Do We Know About The Potential Move Of BoE?

Craig Erlam Craig Erlam 27.09.2022 14:37
Bank Of England "Ready To Act" Stock markets have steadied in Asia and early European trade on Tuesday but that is not reflective of the mood in the markets at the moment so it may struggle to hold. The volatility in FX markets at the start of the week has been extreme but it’s also been building for weeks as authorities desperately try to arrest the decline in their currencies, particularly against the US dollar. On Monday it was the UK that was front and centre following the mini-budget on Friday that showed total disregard for the environment in which it was being implemented. Promising much higher borrowing to fund huge tax cuts at a time of double-digit inflation that hasn’t even peaked is beyond bold and the backlash is well underway. There’s nothing wrong with being ambitious on the economy but timing is everything and when the cost is much higher interest rates, there won’t be many winners and the economy simply won’t see the benefit. The question now is whether the pressure both externally and from within will force a rethink in order to settle things down. Read next: The Weakening Real Estate Market In The USA And More Speeches| FXMAG.COM The Bank of England did little to help. After speculation all day of an impending announcement, the central bank only sought to reassure markets that they stand ready to act but probably not until the next meeting in early November when it is armed with new macroeconomic projections. Needless to say, that reassured no one and sterling plummeted again after recovering amid the rumours of the announcement. BoJ intervenes amid rising yields It’s not just the UK that’s contending with a haemorrhaging currency, the Japanese Ministry of Finance was forced to intervene last week for the first time in 24 years in order to support the yen. Of course, while the UK’s problems appear largely self-inflicted, Japan is suffering as a result of a growing rate divergence that is worsening month to month. So much so that the Bank of Japan was forced to intervene itself overnight with another bond-buying operation to the tune of 250 billion yen. The problem with yield curve control is that when yields are rising everywhere, pulling those in Japan with them, the upper limit is frequently tested necessitating intervention which in turn weakens the currency. It seems Japan is now stuck in an intervention doom loop until central banks elsewhere see peak inflation and therefore rates, or the BoJ loosens its grip and allows yields to move a little higher. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. More turmoil to come? - MarketPulseMarketPulse
The GBP/USD Pair Was Trading Calmly But The Volatility Still Remained Very High

Morgan Stanley Expects GBP/USD To Reach 1.00 In 2022 And EUR/GBP To Hit 0.95

Conotoxia Comments Conotoxia Comments 27.09.2022 15:27
The end of last week and the beginning of this week have been a veritable rollercoaster in the financial markets. The volatility experienced by the currencies of developed countries during this time, especially the British pound, could be compared to the period of the Great Financial Crisis, the Brexit referendum or the pandemic hitting the financial markets. Current overview of financial markets Today, financial markets seem to be trying to catch their breath after the recent turmoil. The U.S. dollar seems to be slightly losing value in the broad market, which may also be caused by the phenomenon of profit realization from sudden dollar trends. As of 09:300 GMT+3 on the Conotoxia MT5 platform, the EUR/USD was up 0.57 percent to $0.9663 today. The GBP/USD rallied 1.3 percent to $1.0821, while bitcoin returned above the $20000 level, rising just under 6 percent. Stock index contracts also rebounded. The DAX rose less than 1.5 percent to 1,377 points, and the S&P500 rose 1.48 percent to 3704 points. The dollar index, on the other hand, retreated 0.65 percent to 113.57 points. It had earlier set a new peak in a multi-month trend above 114.60 points. Source: Conotoxia MT5, USDIndex, H4 Financial markets race to peak interest rates The market at present, seems to be outdoing itself in betting on which level and country would peak in interest rates. The British pound may come out on top due to the fact that the Bank of England might be forced to counter the British government's fiscal easing and may raise interest rates faster and more than previously expected. Currently, the market is assuming that interest rates in the UK could rise as much as 175 bps and only until November, while the market sees the peak of the cycle in the region of 6%. Meanwhile, in the US, the interest rate market is assuming that the Fed funds rate range could reach its peak in February 2023. This could be between 4.5 and 4.75 percent. Thus, the U.S. bond market may also be close to the full discount of hikes, as yields on 2-year bonds reached 4.3 percent yesterday. In the Eurozone, on the other hand, the EUR could be above 3 percent in six months. Thus, lower than the pound and the dollar, while higher than the Japanese yen. For the JPY, interest rates are expected to remain unchanged over the year, according to the market's valuation of interest rate levels. Source: Conotoxia MT5, GBP/USD, m30 What's next for the British pound? According to Citigroup, parity on GBP/USD looks "quite likely," as there are no clear valuation thresholds for the pound, but "I still wouldn't go so far as to say it's inevitable," Ebrahim Rahbari, global head of FX analysis at Citigroup, said on Bloomberg TV. "We are looking at parity as the next big level," he added. While conventional valuation suggests that sterling doesn't need to get much weaker, "it's really that risk premium that comes with some of the policy measures that makes it so likely that we'll drift, perhaps beyond parity." Currency troubles are unlikely to escalate into a crisis, he said, because the UK doesn't have much debt denominated in foreign currencies. He added that: "The threat of default is much less significant." Meanwhile, Morgan Stanley has revised its forecast for the pound and now sees it reaching parity with the dollar by the end of the year, as neither currency interventions nor emergency rate hikes by the Bank of England will stop the sterling's weakening. "Recent price action suggests that the GBP is under pressure," - Morgan Stanley analysts wrote in a Monday note. The bank's previous forecast for GBP/USD was 1.02. It is now 1.00. The analysts also revised their forecast for EUR/GBP to 0.9500 by year-end from 0.9100 previously. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. Read article on Conotoxia: Stock market news: The financial market tries to take a breather. What's happening to the pound? (conotoxia.com)
The GBP/USD Pair Gained Bullish Pace,  September PMI Indices And Continued Volatility In The Markets

Bank Of England Intervention Boosts Risk Appetite And The Possible End Of The iPhone Era

Swissquote Bank Swissquote Bank 29.09.2022 10:39
The Bank of England (BoE) jumped in the UK’s shattered sovereign market to buy long-term UK bonds yesterday, because apparently, they have been warned that collateral calls on Wednesday afternoon could force investors to further dump their UK sovereign holdings. And the UK could no longer afford another heavy selloff wave on its sovereigns. Will the enthusiasm last?  The British 10-year yield fell 10% yesterday, and the pound jumped past the 1.08 mark against the US dollar and consolidated below 0.90 against the euro. The FTSE recovered early losses and closed the session 0.30% higher, gold recovered to $1662 an ounce, American crude rallied past the $80 per barrel, also boosted by the Hurricane Ian’s negative impact on supply. Around 11% of the Gulf of Mexico production was halted due to the storm.The S&P500 gained almost 2% yesterday to above 3700 level, while Nasdaq jumped more than 2%. Will the enthusiasm last? Not so sure. Yesterday’s price action was a sugar rush, triggered by the BoE intervention. Enthusiasm will likely fall as the level of blood sugar falls across the financial markets. Amazon is on the rise Amazon jumped 3% as investors liked the new devices at Wednesday’s annual device event, and Apple slipped on announcement that it will, finally, not produce more iPhones compared to last years.In Europe, all eyes are on Porsche that starts flying with its own wings today! Watch the full episode to find out more! 0:00 Intro 0:27 BoE finally jumps in 3:24 BoE intervention boosts risk appetite, but for how long? 5:30 Amazon convinces, Apple disappoints 8:54 Porsche is now up for grab! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #BoE #intervention #UK #gilt #GBP #Hurricane #Ian #crude #oil #energy #crisis #XAU #FTSE #sovereign #bonds #rally #Apple #Amazon #Porsche #IPO #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
The Same Time In 2021 S&P 500 And Nasdaq Amounted To Ca. 25% And 32% More Respectively

On Thursday S&P 500 (SPX) Lost 2.11%, Nasdaq Went Down By 2.84%

ING Economics ING Economics 30.09.2022 08:27
Equities and FX decouple as we end the quarter Source: shutterstock Macro outlook Global markets: The bounce didn’t last long. Both S&P500 and NASDAQ fell sharply again on Thursday, the S&P by 2.11% and the NASDAQ by 2.84%. That puts year-to-date losses at respectively 23.62% and 31.37%. And we’d be inclined to argue that we haven’t yet seen the bottom. The S&P500, for example, is sitting just around its June lows, so any break below this level sets the scene for some substantial further declines. On the positive side, equity futures are pricing in small gains at today’s open, but that's a long way from saying that stocks will rally into the weekend and the end of the quarter. UK Gilts gave back some of their gains yesterday on the Truss government’s insistence on sticking to its mini-budget, and yields have risen across the UK curve, though this doesn’t seem to have the market’s eye in the same way it did earlier this week. 2Y US Treasury yields headed up 5.8bp to 4.192% and the yield on the 10Y bond rose a similar amount to 3.786%. 10Y Bunds rose 5.8bp to 2.14%, hurt by a 10% YoY September inflation print (10.9% for the harmonized index). And while this is cementing thoughts of a 0.75% rate increase at the next ECB meeting, that seems like a lame response in a month where the price index rose by 2 percentage points. For now, currency markets seem to disagree, and the EURUSD has risen to 0.982, though this seems a little incongruous against the data backdrop. Other G-10 currencies also did better against the USD. The AUD is now back up above 65 cents, while the GBP has risen to 1.1145 – a long way from the 1.035 low of the week (and approx. last 4 decades!). Can this last? It seems a long shot as there’s plenty more bad news to be priced in. The JPY has also had a reprieve, and is back to 144.42, while the CNY led APAC’s FX gains, gaining by more than a per cent to 7.1249 onshore. G-7 Macro: Besides the unpleasant German inflation data, the macro picture was quite thin, with some marginal upward revisions to 2Q22 US GDP, and a lower than expected initial claims figure suggesting that the Fed still has its work cut out to slow the economy enough to bring inflation down. Today, we see the full European inflation picture for September, which is likely to exceed the 9.7%YoY consensus estimate. This won’t have been adjusted yet for the German figures. US Personal income and spending data will show how consumer spending held up in August together with the latest PCE inflation figures.  And we round off the week with the University of Michigan consumer sentiment (and inflation expectations) figures. China: We expect the manufacturing PMI to be under 50 as manufacturing for real estate construction will still be in monthly contraction. Furthermore, export demand is waning and that could affect manufacturing activity for holiday-season exports. However, services should continue to pick up as Covid measures become more localised. India: The Reserve Bank of India (RBI) meets today to decide on rate policy and the following three factors are relevant to that decision: 1) Inflation is 7.0%, a full per cent above the top of the RBI's target range 2) it is heading in the wrong way. 3) RBI commentary has been clear about the need to focus on fighting inflation. Put that all together and it looks likely that the RBI will deliver a further 50bp of tightening today, taking the repo rate to 5.9%. Later this evening, we will also get India’s fiscal deficit figures for August. Although all major rating agencies have India’s long-term foreign credit rating at "stable', and the deficit data year-to-date seem on track to meet the government’s 6.4% (GDP) target, it wasn’t that long ago that Fitch raised their outlook from negative. The deficit numbers have been whipped around by government subsidies and attempts to limit the pass-through of high energy prices to the consumer, so these are still worth a quick look. South Korea: Industrial production dropped more than expected in August, recording a -1.8%MoM decline (vs -1.3% in July and -0.8% market consensus). Automobile production rebounded (8.8%) but the declines in semiconductors (-14.2%) and petrochemicals (-5.0%) were bigger. We believe that re-opening will support 3QGDP, but thereafter, there should be a sharp deceleration. We also now expect only a 0.1% QoQ gain in 3Q22 (vs 0.7% in 2Q). Yesterday’s business survey outcomes were also quite weak, with manufacturing sentiment rapidly deteriorating to the lowest level since October 2020. Also, today’s forward-looking construction orders data were soft, suggesting more recessionary signals in the coming quarters. Japan: Japan’s data releases surprised the market on the positive side. The jobless rate edged down to 2.5% (vs 2.6% in July), in line with the market consensus. The Jobs-to-applications ratio continued to rise (has risen for several months in a row). And industrial production in August not only recorded a third monthly rise (2.7% MoM sa), but also beat the market expectation significantly (0.2%). We will revise up third quarter GDP soon based on today’s releases. The stronger jobs market is also a good sign for wage growth together with solid production gains. However, we think it is still too early to tell because Japan is reopening at a slower pace than other Asian countries and the reopening effects are just kicking in. With growing global recession headwinds, the BoJ will likely take its time to see whether Japan can still produce solid outcomes in a sustainable way. What to look out for: US core PCE, personal spending and Michigan sentiment South Korea industrial production (30 September) Japan labor market data (30 September) China official and Caixin PMI manufacturing (30 September) India RBI meeting (30 September) Hong Kong retail sales (30 September US personal income, personal spending and core PCE (30 September) US University of Michigan sentiment (30 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Euro Will Strengthen, But Questions Remain About What To Do Next

The Euro Will Strengthen, But Questions Remain About What To Do Next

InstaForex Analysis InstaForex Analysis 30.09.2022 09:00
The euro has strengthened its position against the dollar and continues to grow amid repeated statements by European politicians this week that the European Central Bank should raise interest rates by another 75 basis points at the next meeting, which is scheduled for October this year. Data on inflation in the eurozone will be released today, which will surely confirm the correct attitude of European politicians to the current situation, it was just necessary to act a little earlier – the Federal Reserve went too far, which led to such a gap in interest rates and a strong weakening of the euro against the US dollar. In his recent speech, member of the Board of Governors Martins Kazaks stated: "In the current situation, we can still do much more. The next step still needs to be quite large, because we are far from the rates corresponding to 2% inflation. I would support a 75 basis point increase — let's take a bigger step and raise rates." European Central Bank and rate The Latvian official said that this does not mean that 75 basis points are now the "golden mean", and that, probably, as soon as rates will be more in line with the inflation target, future steps need to be done more carefully. His calls for decisive action are supported by other officials from the Baltic region. European Central Bank President Christine Lagarde and other officials from the board of governors told us about something similar this week. The surge in prices caused by Russia's military special operation in Ukraine and the resulting energy crisis prompted ECB officials to start raising rates for the first time in more than a decade — this month rates were raised immediately by a historic three-quarters of a point. Now they are weighing how to proceed, as the price increase is accompanied by ever-increasing forecasts of a recession. Lagarde told European Union lawmakers this week that officials will start considering cutting trillions of euros worth of bonds it accumulated during recent crises only after rates reach that point. Traders estimate the probability of another 75 basis point move next month at 40%. An increase in this amount will double the deposit rate to 1.5% — the highest level since 2009. The opinion of a Latvian politician As for Kazaks' speech, in his opinion, the cost of borrowing will reach a "neutral" level, which does not stimulate or limit the economy by the end of the year. "Of course, we should discuss all the tools so that when it is necessary to make a tough decision, we are ready," Kazaks said. "The ECB should delay its balance sheet reduction program, or quantitative tightening, until next year." According to the Latvian politician, this will prevent the European crisis from flowing into recession. Given that the main source of inflation is the crisis in the energy market, which is of a geopolitical and structural nature, an extremely rapid tightening of monetary policy will simply push the economy into recession. The Technical Outlook  As for the technical picture of EURUSD, the bulls have regained their advantage and the market under their control, which they lost at the beginning of the week, and are now aiming to break through the nearest resistance of 0.9840. It is necessary to do this if they expect the upward correction to continue at the end of this month. A breakdown of 0.9840 will take the trading instrument even higher to the area of 0.9890 and 0.9950. But despite the good upward prospects, protecting the nearest support of 0.9780 is still an important task for the bulls. Its breakthrough will push the euro to a low of 0.9730, but there will be nothing critical in this situation either, since there is the lower boundary of the new ascending channel. Only after missing 0.9730 will it be possible to start getting nervous, as the pair will easily fall into the area of 0.9680 and 0.9640. The Pound (GBP) The pound continues to win back positions one by one thanks to the support of the Bank of England. Now bulls are focused on the 1.1200 resistance, the breakthrough of which will open up prospects for further recovery in the area of 1.1260 and 1.1320. It will be possible to talk about the return of pressure on the trading instrument only after the bears take control of 1.1070, but this will not cause serious damage to the bull market observed since the middle of the week. Only a breakthrough of 1.1070 will push GBPUSD back to 1.1010 and 1.0950.   Relevance up to 08:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323100
The UK Assets Will Be Pressured| Japan And Its A Huge Foreign Debt

The UK Assets Will Be Pressured| Japan And Its A Huge Foreign Debt

Saxo Bank Saxo Bank 30.09.2022 09:54
Summary:  While the Bank of England’s emergency bond-buying has propped up the sterling recently, there are hardly any reasons to turn positive on UK assets in general unless the government changes course on its fiscal policy roadmap. In fact, Japanese authorities remain better placed to defend their currency than the UK, given their better reserves position. While UK’s pain is self-inflicted, the overarching theme of tighter global liquidity conditions continues to pose threats of wider market disruptions. The Fed’s aggressive monetary policy tightening and the unrelenting surge in the US dollar this year is now tightening global financial conditions, with effects reverberating through global financial markets. Still, the degree to which this can be blamed for what is happening in the UK remains under the scanner. Despite the Fed tightening remaining an overarching theme, UK’s pain is largely self-inflicted. While bond buying by the Bank of England (BOE) is somewhat on the lines of what the Bank of Japan (BOJ) has been, the motives are completely different and the impact is likely to vary as well from here. The motives BoJ’s wider bond-buying operations are a reflection of its desire to stoke inflation. Japan’s headline inflation has averaged under 1% in the last two decades with the core print being in negative territory. The latest print for August was 3%, above the BOJ’s 2% goal, but wage pressures still remain subdued. UK’s inflation, on the contrary, is running at nearly three times that, and the BOE’s plan to begin purchasing long-dated gilts was a forced emergency measure to support pension funds that may be on the verge of a default due to the jump in gilt yields stemming from fiscal concerns after the announcement of the new government’s mini-budget. The vulnerabilities Japan’s fiscal and current account are also not in great shape, and it has a huge foreign debt. But it has huge FX reserves of the order of over $1.2 trillion as of end-August. This equates to 20% of GDP and over 18 months of import cover. Of this, about $136bn is deposits with foreign central banks that can be used immediately to intervene. So, while the Japanese yen remains vulnerable due to its twin deficits and high debt levels, the huge FX war chest still gives Japanese authorities some ammunition to intervene against excessive pace of yen decline. Meanwhile, UK’s problem is not just in its high inflation but also its twin deficits and weak FX reserves position. Foreign currency debt levels in the UK are more contained, however, and that may be one of the reasons why FX reserves are low. As we noted in a previous piece, UK’s net forex reserves of $100bn are also enough to only cover two months of imports, or roughly equal to 3% of GDP as compared to Japan’s 20% and Switzerland’s 115%. This gives the UK policymakers less room to prop up the sterling. Threats to Sterling and UK assets Sterling has undoubtedly regained some strength since the massive selloff on the fiscal plan announcement. It has been ‘temporarily’ supported by the BOE’s bond purchase program, which has led to the global reprieve in yields. Also, the month-end/quarter-end rebalancing has possibly helped cap dollar gains after massive USD strength seen in the quarter. To be clear, BOE didn’t ‘pivot’, rather it acted as the lender of last resort for the domestic pension funds, and there is hardly anything to be bullish about, or turn positive on UK assets. The UK assets will likely continue to be pressured until the UK government remains in denial. Even an emergency rate hike, at this point, seems unlikely to be able to support the sterling or gilts, as it would signify panic and a divergence in fiscal and monetary policies, further weighing on general confidence in the economy and its policies. Meanwhile, markets are currently pricing in a close to 150bps rate hike from the BOE at the November 3 meeting. That’s massive, and will mean significant pain to the UK economy. Threat of global contagion The UK is becoming a major credit risk not only for GBP assets but also for the rest of the world, primarily the eurozone as my colleague Chris Dembik noted in his piece. We see some kind of contagion effect in the eurozone credit market. There’s also risk of more markets succumbing to evaporating liquidity, and it is inevitable to ponder over who could be next? The Chinese currency has also weakened dramatically lately, but the PBoC has numerous tools available and credit impulse in China is also turning positive. South Korea has already intervened to prop up its currency, and more economies are likely to follow that path if things continue like this. The G20 meetings on November 15-16 will be particularly important to watch not just for geopolitical updates, but also for possible collective concerns on the impact of global tightening and the strong dollar. Atleast until then, if not longer, there is not enough reason for the US Treasury to intervene to buoy the battered pound or yen or another faltering currency. Most US officials, including Treasury secretary Yellen, expressed no urgency to act. Wider market disruptions and increasing risks to global financial stability, beyond the financial turmoil emanating from Britain and Japan, therefore remain likely.   Source: https://www.home.saxo/content/articles/macro/macro-insights-bank-of-england-bank-of-japan-and-the-risks-of-wider-market-disruptions-30092022
British Pound: Oanda Expects That If Liz Truss Doesn't Change The Plan, The UK Inflation May Go Up!

British Pound: Oanda Expects That If Liz Truss Doesn't Change The Plan, The UK Inflation May Go Up!

Kenny Fisher Kenny Fisher 30.09.2022 15:54
British pound calm after tumultous week The British pound has posted slight gains, after a spectacular showing on Thursday. In the European session, GBP/USD is trading at 1.1145, up 0.26%. For anyone looking for lots of volatility, look no further. The pound has taken riders on a wild ride, with GBP/USD surging 2.1% on Thursday. On Monday, the pound traded in a stunning 500-point range, which saw GBP/USD touch a record low of 1.0359. Since then, the pound has padded on 800 points, in what has been a truly remarkable week. The driver behind the pound’s volatility was Chancellor Kwarteng’s mini-budget, which included tax cuts and increased borrowing. The package was roundly criticized, with even the IMF and US officials panning the plan. This led to a near-crash in the UK bond market, forcing the Bank of England to take emergency measures and pledge unlimited purchases of securities. The bailout will continue for over two weeks and could cost up to 60 billion pounds. The BoE’s intervention has reassured investors and stabilized the bond market. The pound continued to swing wildly, but it has recovered almost all of the losses triggered by the mini-budget. What happens now? The government clearly was not expecting a financial tsunami after a mini-budget, which are usually tame affairs that don’t affect the financial markets. Prime Minister Truss is under pressure to shelve or at least make changes to the mini-budget, but so far Truss is holding firm and insisting that she will stick with the plan. If she does, we can expect inflation, which is running at a 9.9% clip, to climb even higher. GBP/USD Technical GBP/USD has support at 1.1144 and 1.1052 There is resistance at 1.1265 and 1.1384 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Pound takes a breather after wild ride - MarketPulseMarketPulse
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

ING Economics ING Economics 01.10.2022 09:03
Despite a lot of tightening priced into the swaps market, we believe it is unlikely that the Bank of England will hike rates before the scheduled November meeting. In the US, unemployment remains stable at 3.7% and with wage growth staying elevated, we see few signs that the pace of tightening will slow In this article US: Inflation is sticky as unemployment remains low and wage growth remains elevated UK: Intermeeting Bank of England hike looks unlikely despite ongoing turmoil Canada: Hopeful for a stabilisation in the jobs market Eurozone: Expecting declining trend in retail sales Source: Shutterstock US: Inflation is sticky as unemployment remains low and wage growth remains elevated Financial markets are currently favouring the Federal Reserve implementing a fourth consecutive 75bp rate hike on 2 November and we agree. Inflation is sticky while the near-term growth story is looking OK and the economy continues to add jobs in significant numbers. That message should be reinforced by the upcoming labour report with unemployment staying at just 3.7%, payrolls increasing by around 200,000 and wage growth staying elevated. There are also plenty of Federal Reserve officials scheduled to speak and so far there is little sign of any inclination to slow the pace of policy tightening. The ISM business activity report should remain firmly in growth territory as well with the trade balance making further improvements. As such, we are expecting 3Q GDP to come in at close to 2%. UK: Intermeeting Bank of England hike looks unlikely despite ongoing turmoil UK markets remain volatile, and sensitive to further headlines over the coming week. We remain sceptical that the Bank of England will hike rates before its scheduled November meeting, despite a lot of tightening priced into swaps markets. Instead, we’ll be watching for any update on the Bank’s bond strategy. The BoE was forced to start buying long-dated gilts amid concerns about the stability of UK pension funds, but this is for a limited period and the Bank has said it plans to plough on with gilt sales from the end of the month. We think that’s likely to get pushed back, however, given the strains in the gilt market. Markets will also remain hyper-sensitive to any headlines related to the government’s controversial growth plan. In the first instance, press reports suggest the focus will be on spending cuts to offset some of the planned tax cuts, though this could be both practically and politically challenging. The Office for Budget Responsibility is due to provide a first draft of its post-Budget forecasts to the Chancellor privately on Friday. Canada: Hopeful for a stabilisation in the jobs market In Canada, the jobs market has wobbled of late with employment falling for three consecutive months after some very vigorous increases earlier in the year. We are hopeful of stabilisation in Friday’s September report given the economy is still performing relatively well, but if we are wrong and we get a fourth consecutive fall then expectations for Bank of Canada tightening could be scaled back somewhat – especially after some softer than anticipated CPI prints. We are currently forecasting a 50bp rate hike at the October BoC policy meeting with a final 25bp hike in December. Eurozone: Expecting declining trend in retail sales For the eurozone, it’s a pretty light week in terms of data. Retail sales on Thursday catch the eye as we’ll get more information on consumer spending in the eurozone, as purchasing power remains under severe pressure. We’ve seen a declining trend in spending since last November and have little indication that August data will have shown a big turnaround. Continued declines would fuel our view that the eurozone economy could have already tipped into contraction in the third quarter. Key events in developed markets next week Source:  Refinitiv, ING TagsUnited States Eurozone Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Securing Italy In Case Russia Cuts Off All Gas Supplies| Eyes On Elections In Brazil And More

Securing Italy In Case Russia Cuts Off All Gas Supplies| Eyes On Elections In Brazil And More

Saxo Bank Saxo Bank 03.10.2022 09:45
Summary:  Market sentiment continued to deteriorate late last week on geopolitical concerns and despite the Bank of England’s intervention helping to at least temporarily stabilize global sovereign bond markets after their aggravated slide of late. The week ahead features a busy economic calendar from the US, capped by Friday’s September jobs report as markets wonder whether the US labor market will allow the Fed any chance to change its hawkish tune.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures pushed below the 3,600 level this morning, which is obviously a major level to watch and indicates that the equity market is still facing headwinds. The latest risk sources adding to the negative sentiment are talks about Credit Suisse and their financial strength, and then macro indicators in Asia continuing to weaken against estimates. On a positive note, the US 10-year yield has stabilised around the 3.75% level which is critical for stabilisation in the equity market. Our medium-term outlook continues to be negative on equities driven by higher rates for longer and structurally higher inflation being priced in by the market over time. USD and risk sentiment The US dollar found support as US treasury yields bottomed out and recovered on Friday. An interesting test for the USD here if treasury yields continue to churn sideways or lower and yet risk sentiment remains on the defensive. Is the USD still a safe haven without the constant turning of the screws from treasury yields that have been a key factor in the huge upswing in the greenback this year? Key levels for the USD include the 145.00 area tested overnight in USDJPY (the Bank of Japan intervened above this level previously) for resistance and 0.9900 resistance/USD support in EURUSD. A busy data week for the US this week as well – a strong September jobs report on Friday could continue to support the dollar. GBPUSD and EURGBP after climactic week Sterling made a bid at a full reversal of its enormous slide last week, but the jury is still out on whether the currency has put in a major low A major sentiment shift to the upside might require the Truss government to go or at least to roll back some of the measures that helped to trigger the currency’s slide (although pension fund hedging was a significant factor in the lock-up in the UK’s gilt market that brought both the chaotic slide and the Bank of England’s emergency response.) EURGBP focus on the 0.8700-0.8750 area that was the former top of the longer term range, and GBPUSD focus on 1.1200-1.1250 if sterling continues to attempt a recovery. The Bank of England is priced to hike 122 bps at its November 3 meeting, down from over 150 bps at times last week. Gold (XAUUSD) Gold holds above Friday’s low at $1660, supported by geopolitical and financial risks and a cooling of the recent dollar and yield surge. At this stage the main buyer is likely to be money managers reducing short bets on COMEX gold. In the week to September 27, the net short held by these speculators jumped 25% to a near four-year high. Focus now being the critical resistance zone into 1,678-1,690 that is the departure point for this latest bear market move. Crude oil (CLX2 & LCOX2) Crude oil trades higher ahead of Wednesday’s OPEC+ meeting in Vienna as the alliance is considering a production cut of more than 1 million barrels to support prices following a 25% slump during Q3-22. Both WTI and Brent, however, trade up by less than 3% with the decision by no means final while the impact of such a move would be smaller than the headline number suggests as several producers, including Russia, produces below their target. Relative to the current quotas, only a handful of producers led by Saudi Arabia would be able to deliver the cuts without losing additional market share relative to the quota system in place. In addition, the group also need to consider the impact of a Russian embargo starting in December and the US pausing its sales from Strategic Reserves as well as the Biden administration asking gasoline producers to curb overseas sales. Weighing on prices are the potential for more fuel exports from China after it issued its biggest fuel-export quota for this and potentially the next quarter. US treasuries (TLT, IEF) US treasury yields rebounded from local lows for the week on Friday, suggesting that very weak risk sentiment elsewhere is not yet seeing significant interest in treasuries as a safe haven – although at least rising yields aren’t the primary driver of weak risk sentiment at the moment. The upside focus remains to on the 4.00% area highs for the US 10-year treasury yield benchmark from last week and to the downside on the 3.50% prior high from June. Important macro data points from the US include the ISM surveys today and Wednesday and the Friday US September jobs report. What is going on? Hot US PCE paves the way for another CPI surprise this month US PCE data came in stronger-than-expected, with the headline up 6.2% YoY from 6.3% YoY prior and 6.0% YoY expected. The core measure was at 4.9% YoY, coming in both higher than last month’s 4.6% YoY and the expected 4.7% YoY. This will likely push up the pricing of another 75bps rate hike from the Fed at the November meeting, as the CPI report out this month is generally likely to follow the same trend of remining close to its highs. Meanwhile, the final estimate of University of Michigan survey was revised lower to 58.6 from preliminary print of 59.5 due to the slide in expectations to 58 from 59.9, even as the current conditions fared better at 59.7 from 58.9 previously. The inflation metrics also diverged with 1yr consumer inflation expectations edging higher to 4.7% (prev. 4.6%), although the longer term 5yr slightly fell to 2.7% (prev. 2.8%). Credit Suisse credit in focus The FRA-OIS spread is rising rapidly indicating that the risk priced by the market in the overall banking sector is deteriorating and thus the banking sector is in focus by investors this week. Tesla Q3 deliveries miss estimates The EV-maker reports 343,830 cars delivered in Q3 against estimates of 358,000 which the EV-maker says is due to logistical obstacles, but other consumer companies have faced headwinds due to elevated energy costs so it would be natural to expect Tesla’s delivery figures being hit by the current cost-of-living and energy crisis. Eurozone inflation remains painfully high The September Eurozone consumer price index (CPI) reached double-digits at 10 % year-over-year versus prior 9.1 % and expected 9.7 %. The core CPI (excluding volatile components) is up to 4.8 % year-over-year versus expected 4.7 %. What is clearly worrying is the acceleration in price pressures beyond energy and food prices. This is a signal that inflation is now broad-based. In France, the EU-harmonized CPI was out at 6.2 % year-over-year in September. This is much lower than what the consensus expected (6.7 %). It stood at 6.8 % in July and 6.6 % in August. On the downside, the producer price index (PPI) for August reached a new high at 29.5 % year-over-year against expected 27.6 %. This matters. The PPI usually represents the pipeline in inflation which will be passed on to consumers, at least partially. This means that the peak in inflation is likely ahead of us in France and in all the other Eurozone countries. Expect to reach it in the first quarter of next year, at best. Norway set to purchase record amounts of foreign currency On Friday, the Norges Bank said it would raise the level of daily foreign FX purchases to $400 million in October as it transfers revenues from its energy exports into the enormous sovereign wealth fund. NOK sold off sharply on the news on Friday, with EURNOK rising to a new high for 2022 above 10.60. Election in Brazil headed to October 30 run-off The former left-populist president Lula polled strongly at 48%, but not over the 50% margin required to avoid a run-off. Incumbent president Jair Bolsonaro received 43% of the vote. Observers are watching the election with some level of unease on fears of election interference or lack of acceptance of the results from Bolsonaro. USDBRL trades near the highs since January, just below 5.50. Wheat jumps after US production disappoints On Friday, the USDA published its Quarterly Stocks and wheat production reports, and the result drove Corn (ZCZ2) higher after the stocks came in lower than analysts had forecast while soybean slumped in response to higher-than-expected stocks. December wheat (ZWZ2) jumped 2.8% with stocks in line but production in all categories falling short of expectations, reducing all wheat production levels to 1650 million bushels, some 8% below expectations. Meanwhile, geopolitical concerns are on the rise with Russia threatening use of low-yield nuclear weapons as its military advantage starts to diminish. This has again raised concerns over the fate of the Black Sea export corridor and the supply situation in agriculture commodities may continue to be challenged. Gazprom cuts gas supplies to Italy Just days after the NordStream pipelines blew up, Gazprom announced it was halting supplies to Italy via Austria due to a contractual dispute. Last week the newly elected Italian PM said she stood with Ukraine. While flows through Ukraine, the only remaining major pipeline bringing gas straight to Europe is operating as normal, it highlights an increased risk that Russia eventually may cut all of its supply. A situation the European market should be able to cope with given the current level of stocks and increased flows from Norway and LNG. Italy meanwhile has already sourced sufficient alternative supplies of gas from North Africa to make up for any shortfalls this winter if Russia were to cut off supplies. China relaxes mortgage rates’ lower bound for first-time homebuyers The People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) announced last Friday to lower or even remove the lower bounds imposed on first-time homebuyers in cities that experienced three consecutive months (from June to August 2022) declines in new home prices both sequentially and y/y. The currently lower bound is the 5-year Loan Prime Rate minus 20bps.  The new policy will benefit first-time homebuyers in lower-tier cities while tier-1 cities do not meet the above price decline criterion. Among the top-70 cities, eight Tier-2 cities and 15 Tier-3 cities are eligible. The PBoC and the CBIRC also reportedly told the largest banks in the country to extend at least RMB600 billion in net new financing to the housing sector for the rest of the year. What are we watching next? US ISM manufacturing on tap today Due later today, 7ISM manufacturing is unlikely to dent the optimism around the US economy that has been building up further with positive economic indicators released over the last few weeks. While the Bloomberg consensus estimates show some signs of a slowdown to 52.1 in September from 52.8 in August – that should likely be underpinned by improving supply chains, while new orders should remain upbeat. Australia’s RBA to announce latest hike tonight The market is leaning for a 50 basis point move that would take the rate to 2.85%, though a strong minority are looking for a smaller move as Governor Lowe had previously signalled that the pace of rate hikes is likely to slow from here after four consecutive rate hikes of the magnitude of 50bps. The RBA is seen as not wanting to clamp down on financial conditions. A significant risk for the Australia economy is that 60% of mortgages in the country are based on floating rates, with the short yield in Australia now at the highest level in over a decade, when they were close to record lows just over a year ago. On Tuesday, Japan’s Tokyo CPI will see impact of reopening Japan’s inflationary pressures are likely to continue to surge amid higher global prices of food and electricity, as well as on the weak yen propping up import prices. Bloomberg consensus estimates point to a slightly softer headline print of 2.7% YoY from 2.9% YoY previously, but the core is pinned higher at 2.8% YoY from 2.6% YoY previously. Further, the reopening of the economic from the pandemic curbs likely means demand side pressures are also broadening, and services inflation will potentially pick up as well. UK government on the rocks? After recent polls suggest that the Conservative party has its weakest popular support since the 1990’s, the Truss government is in a fight for its very survival. A Conservative Party conference is ongoing and will end on Wednesday with a closing speech from PM Truss. Chancellor Kwarteng, meanwhile, has been out battling to defend his policy moves, but breaking news this morning suggests that the government may be set to reverse its move to cut taxes for the highest earners. We should get some clarity on that today with a speech from Kwarteng. The only glue holding the fractious Conservative party together is the knowledge that early elections (not required until early 2025) would see the party losing power for the first time since 2010. Earnings to watch The earnings season officially starts next week with the first group of US financials reporting but in the meantime a few earnings are worth watching this week. Biogen reports Q3 earnings (ending 30 September) tomorrow with analysts expecting revenue growth of -11% y/y and EBITDA at $847mn down from $959mn a year ago. While the current financial performance of Biogen is volatile and weak the recent news about its breakthrough in Alzheimer’s with a drug that can slow down the disease is what analysts will focus on in terms of gauging the outlook. On Wednesday, Tesco is in focus as the UK largest grocery retailer is at the center of the current food inflation and insights from Tesco will be valuable from a macro point of view. Tuesday: Biogen Wednesday: Keurig Dr Pepper, Aeon, Lamb Weston, Tesco, RPM International Thursday: Seven & I, Conagra Brands, Constellation Brands, McCormick & Co Economic calendar highlights for today (times GMT) 0630 – Switzerland Sep. CPI 0715-0800 – Eurozone Sep. Manufacturing PMI 1330 – Canada Sep. Manufacturing PMI 1345 – US Sep. Final S&P Global Manufacturing PMI 1400 – US Sep. ISM Manufacturing 1910 – US Fed’s Williams (Voter) to speak 2330 – Japan Sep. Tokyo CPI 0330 – Australia RBA Rate Announcement  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-3-2022-03102022
The Bank Of England's (BoE) Intention To Spend £65bn To Stabilize Financial Markets

The Bank Of England's (BoE) Intention To Spend £65bn To Stabilize Financial Markets

InstaForex Analysis InstaForex Analysis 03.10.2022 12:19
Markets need to be prepared. Otherwise, hysteria will happen to them. The Fed knows this very well, which, looking at the "taper tantrum" of 2013, began to gradually introduced investors the QE curtailment in 2021. But governments communicate with the markets less often. Unless they have to. UK Prime Minister Liz Truss, amid a sharp decline in the ratings of her Conservative Party, was forced to admit a mistake. More attention should have been paid to preparing investors for tax cuts. However, the help of the Bank of England smoothed out this oversight: the GBPUSD pair, after sinking to a new anti-record, completely regained the lost ground. The worst month for sterling since 2008 and the best week since 2020. It is rare to find such a breathtaking roller coaster in Forex. The presentation of the fiscal stimulus package to the general public turned into a large-scale sale of British bonds and the fall of the GBPUSD to a new historical bottom. Only the suspension of the quantitative tightening (QT) program and the resuscitation of quantitative easing (QE) allowed the bulls to recover. The reaction of the debt market to the actions of the government and the Central Bank With the BoE's intention to spend £65bn to stabilize financial markets, many thought the worst was over. The panic is over. But what will happen after October 14, when the program ends? The Bank of England will return to QT again and continue the cycle of raising the repo rate. Its policy will be contrary to the actions of the government. In addition, the reputation of the regulator was dealt a blow. Rumors began to circulate in Forex that Andrew Bailey and his colleagues are on the sidelines of the Cabinet of Ministers and are ready to finance the embarrassed government of Liz Truss by printing money. Indeed, due to the fiscal stimulus package and the associated S&P downgrade of the UK's credit rating outlook to "negative" and panic in the financial markets, the gap in the popularity of Labor and the Conservatives has widened to 33 points. Elections will be held in 2024. Contradictions in monetary and fiscal policy and shaken confidence in the Bank of England and the Cabinet of Ministers are far from the only problems of the pound. Britain remains the only G7 economy still smaller than it was before the pandemic. Due to the energy crisis, the country is on the verge of recession. Dynamics of the G7 economies Thus, the markets managed to calm down. And this is good news for sterling. But is it enough to continue the GBPUSD rally? Personally, I doubt it. The pound has many unresolved issues, including the echoes of Brexit. It is unlikely that this currency is capable of a long rally. On the contrary, the US dollar continues to be in high demand as a safe-haven asset, and the Fed is able to bring the federal funds rate up to 5%. Technically, there is a consolidation in the 1.105–1.1265 range on the 4-hour GBPUSD chart. An unsuccessful test of its upper border with a subsequent return to 1.115 is a reason for selling within the false breakout pattern.   Relevance up to 09:00 2022-10-06 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323226