eur to gbp

The dollar continues to power ahead. Over the last 24 hours, the focus has switched from the pound to the Chinese renminbi. Here, there are signs that authorities are acquiescing to a weaker currency. With no sign that the Fed is going to ease its hawkishness nor the US Administration showing any concern with the strong dollar, current trends should extend USD: All systems are go Whether it be US data surprising on the upside, the US Administration showing no concern at all with the strong dollar, or new chapters in the energy war in Europe, it looks like all systems are go for the dollar rally. Trying to pick a dollar top in the current climate is an exercise in futility. The dollar is clearly in the midst of a very powerful rally and one akin to the macro settings in the early 1980s when US authorities were also trying to tame inflation.  What has caught our eye overnight is USD/CNH trading to a new all-time high above 7.20. The renminbi was seen a

Considering Portfolios In Times Of, Among Others, Inflation...

EUR To GBP and EURUSD Will Go Down If Dollar Strengthens?

Alex Kuptsikevich Alex Kuptsikevich 26.01.2022 09:39
The US dollar has been gaining steadily against the developed countries' currencies since the beginning of the year. By the way, the yen was an exception: it has been adding 1.8% over the past 11 days after the stock market entered the turbulence zone due to a reassessment of the monetary policy outlook. According to historical data, the Fed often finds itself at the forefront of the monetary policy cycle. That is used to be translating into a stronger USD in the months before and after the first tightening. So the question is in what currency pairs it is most profitable to buy the dollar now. Among the developed and liquid currencies, three scenarios can be considered. The first way is to sell EURUSD. The euro is weaker than the dollar due to the ECB being on several steps behind the Fed. That means that the EU rates will remain lower for a longer period of time, and the balance of bond yields will be shifted towards the dollar. Given the pace the Fed intends to take in tightening monetary policy, this yield gap promises to widen further. Another way is to bet that monetary tightening is stressing the declining markets drag the pound down. We should keep in mind that the Bank of England has already approved its first tightening policy step, and in this case it's not far behind the Fed. At the same time, it's closely correlated with falling market indices. Need to mention that GBPUSD is still far from being oversold with a wide room for further decline. The third way is often more obvious. Traders may consider selling the currencies of developing countries, which are much more sensitive to the Fed monetary policy changes. However, EMs have been raising rates for almost a year, so selling them now is a bet on market volatility in the near term. For the longer perspective, higher interest rates promise to level out short-term gains. In this case, the dollar's down turn may be faster than in the euro.
Volatile GBP/AUD - Good Morning Forex By FXMAG.COM

Volatile GBP/AUD - Good Morning Forex By FXMAG.COM

Rebecca Duthie Rebecca Duthie 11.04.2022 11:30
To give some perspective on how the Forex market is currently performing, this article will report on 4 different currency pairs, a major currency pair, a minor currency pair, a volatile currency pair and another major pair. The major currency pair is the EUR/USD: Since the market opened this morning the Euro hit a high of 1.09471, this means it costs traders 1.09471 USD to buy 1 Euro. This figure beats Fridays's market closing. The Euro held its position in spite of the fact that the far right did not win the first round of the elections in French votes, this position was helped by the rising U.S. Yields. EUR/USD Chart Stronger Euro - EUR/GBP: Since market opening, the GBP is at 0.8377. This means it costs traders 0.8377 GBP to buy 1 Euro. The EUR/GBP relationship is bearish. Despite this bearish relationship, the Euro has slightly strengthened over the weekend. EUR To GBP Chart Volatile GBP/AUD: Since market opening, the AUD reached a high of 1.75442, this means that it costs 1,75443 AUD to buy 1 GBP. The relationship between these 2 currencies is considered volatile due to the fact that the AUD is a commodity currency (the price of AUD is linked to the value of Australian exports). Therefore, since the start of the trade war between the US and China, currency pairs that contain AUD have increased in Volatility. GBP To AUD Chart Rushing 10-year treasury yield - USD/JPY: The relationship between these 2 currencies is currently bullish. Since market opening, the JPY reached a high of 125.444, which means that it costs 125.444 JPY to buy 1 USD, the weakening Yen is as a result of the 10 year treasury yield rushing 77bps reaching 2.77%. USD/JPY Chart Charts: finance.yahoo.com
Intraday Market Analysis – CHF Bounces Back

Intraday Market Analysis – CHF Bounces Back

Jing Ren Jing Ren 12.04.2022 07:57
USDCHF hits resistance The Swiss franc rallies across the board as traders dump risk assets for safe haven ones amid uncertainty. The latest rebound came to a halt at 0.9370 from the late March sell-off. The RSI’s double top in the overbought zone prompted intraday buyers to take profit, weakening the upward momentum. A bullish close would lift offers to the recent peak at 0.9460, where strong selling pressure could be expected. A breakout may extend the rally to 0.9600. Otherwise, 0.9240 is the closest support to test the bulls’ resolve. EURGBP attempts rebound The sterling softened after Britain’s GDP fell short of expectations in February. The euro found support in the demand zone between 0.8300 and 0.8310, an important level from the daily chart. The ensuing break above 0.8360 flushed out some selling interests and could pave the way for a sustained bounce. 0.8400 is the next hurdle and its breach may propel the single currency to the previous high (0.8510). An overbought RSI may cause a temporary pullback and the bulls may see it as an opportunity to join in. US 30 struggles for support The Dow Jones 30 turns south as US Treasury yields continue to climb. The index briefly found support over the 30-day moving average (34200). A bullish RSI divergence indicates a deceleration in the current sell-off. Nonetheless, the bulls’ struggle to push past 35000 suggests that short-term sentiment remains cautious. On the downside, a fall below 34200 could trigger a broader liquidation, causing an extended consolidation in the days to come. 33500 at the origin of the previous breakout would be the next support.
Follow EUR/USD, EUR To GBP And The Rest Of EUR Pairs - Inflation In Euro Area Continues To Worry Investors After Reaching New High

Follow EUR/USD, EUR To GBP And The Rest Of EUR Pairs - Inflation In Euro Area Continues To Worry Investors After Reaching New High

Walid Koudmani Walid Koudmani 21.04.2022 12:02
Today's Euro area inflation report continued to show the alarming rate of increase in prices mainly driven from energy prices and services. The euro area annual inflation rate was 7.4% in March 2022, up from 5.9% in February and noticeably higher than when compared to a year earlier (1.3%). Stagflation scenario? While we have already seen a slight change in tone from some members of the ECB, hinting at rate hikes sooner than previously expected, today's report could further incentivize the bank to act in an attempt to avoid the increasingly likely stagflation scenario. It will be important to keep an eye on today’s speech from the ECB head Lagarde after another member of the ECB , Kazaks, stated they believe asset purchases may be terminated before Q3 2022 - much earlier than it was expected. Gold price returns to key support area ahead of central banker speeches The price of gold has seen a noticeable pullback after reaching a high of $1958 yesterday while stock markets started the day trading higher following better than expected earnings from Tesla. The precious metal has once again returned to a previous support area of and could continue to see an increase in volatility as investors await today's comments from the heads of BoE and ECB. While the ECB appears to be changing its opinion slightly on the possibility of adjusting its fiscal and monetary policy to contend with record inflation, it remains to be seen how and if Lagarde will downplay the situation in order to calm the markets. In any case, gold might see a reaction to the $1945 area once again after the price managed to rebound several times in the past.  
Pound (GBP) takes a tumble after BoE hike

Pound (GBP) takes a tumble after BoE hike

Kenny Fisher Kenny Fisher 06.05.2022 09:56
The British pound is fading badly on Thursday. GBP/USD has dropped a staggering 2.15% today and has fallen below the 1.24 line for the first time since July 2020. After the BoE decision, market focus has shifted to the elections in Northern Ireland later today. A Sinn Fein victory could weigh on the wobbly pound.   BoE hike fails to impress markets The BoE raised interest rates for a fourth straight time since December, bringing the Official Bank Rate to 1.00%, its highest since 2009. Yet the market reception to the BoE move was decidedly chilly, as the pound has plunged almost 2% today. Why the sour reaction from the markets? The 0.25% was a modest move and it’s questionable if it will have much impact on soaring inflation. In March, CPI rose to 7.0%, up from 6.2%, and the BoE has warned that inflation could surpass 10%. The modest rate hike passed by a vote of 6-3, surprising the markets which had expected an 8-1 vote. Two MPC members called for a 0.50% hike, which reveals a sharp split within the MPC. Governor Bailey admitted after the meeting that an uncertain economic outlook had led to a range of views in the MPC, and such a statement can hardly be expected to instill confidence amongst investors. The BoE cannot be blamed for not being aggressive – it is well into its rate-hike cycle and the policy summary noted that “some degree of further tightening in monetary policy may still be appropriate in the coming months”. In addition, the BoE dropped the word “modest” to describe upcoming rate hikes. Yet the markets appeared to focus on the split vote and the warning from the BoE that the country could face a sharp economic downturn, and the thumbs-down response has sent the pound sharply lower. As expected, the Federal Reserve raised rates at its meeting by a half-point, the largest increase in 20 years. The Fed signalled that it will deliver additional half-point hikes in June and July, with Fed Chair Powell stating that the FOMC was not “actively considering” a 0.75% increase. The Fed is also implementing quantitative tightening with a reduction in the balance sheet. Starting in June, the Fed will sell USD 45 billion/mth in assets, which will rise to USD 95 billion/mth in September. In sharp contrast to the BoE’s hike, the financial markets reacted positively, as investors believe that the Fed’s rate hikes can curb inflation while ensuring a soft landing for the economy and avoiding a recession.     GBP/USD Technical GBP/USD faces resistance at 1.2612 and 1.2719 There is support at 1.2272 and 1.2179           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.
EUR/JPY Pair: The Continuation Of The Rebound From Last Week’s Lows Remains Well

(EUR/USD) Wall Street Tanks, Allowing the Euro To Slightly Recover, (EUR/GBP) Goldman Sachs Betting Against GBP, JPY Gets The Better Of The US Dollar And EUR - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 10.05.2022 11:58
Summary: Euro gained slightly against the USD after the poor performance of the US markets on Monday. Goldman Sachs placing their confidence in the value of the EURO. JPY gains slightly against the EUR and USD on Tuesday. Read next: (EUR/USD) US Dollar Continues To Trump the EUR, (EUR/GBP)(GBP/JPY) Pound Sterling Unlikely To Recover Anytime Soon.  EUR gains some ground against the USD. Markets turned around on Monday with the EUR/USD currency pair with market sentiment showing bullish signals. The Euro is gaining value despite the surging US Dollar, at the end of the trading day on Monday Wall Street has tanked with the Nasdaq down 4.29%. As investors turn away from risky assets such as forex, and move to safer investments such as treasuries, the value of the US Dollar is facing potential pressure. Investors are concerned around the Feds shrinking balance sheet as liquidity dries up. EUR/USD Price Chart Pound Sterling losing value against the Euro. On Tuesday, Goldman Sachs bet the EUR will continue to gain against the GBP, as the market for the EUR/GBP currency pair continues to reflect a bullish sentiment. The European Central Bank (ECB) seems intent on raising interest rates by the summer, showing a more hawkish attitude than the Bank of England (BoE) who believe that inflation will return to normal levels on its own. This BoE attitude is causing investors to lose confidence in the Pound Sterling and causing its value to decrease. EUR/GBP Price Chart JPY receives momentary relief from the USD Although the JPY has gained on the US Dollar on Tuesday, the USD/JPY currency pair is reflecting a bullish market sentiment. The strengthening against the USD comes after the carnage the US markets saw on Monday. Whether or not this strengthening will continue is unlikely as the Bank of Japan (BoJ) continues their monetary easing in their attempt to boost the economy. USD/JPY Price Chart JPY markets best performer on Monday The EUR is losing ground to the JPY during the trading day on Tuesday, the EUR/JPY currency pair is reflecting a mixed market sentiment. As risk averse investors fled to safety assets given the US markets performance, the Japanese Yen was the forex markets top performer on Monday, which gave it the chance to strengthen against the EUR and the USD. EUR/JPY Price Chart Read next: (EUR/USD) All Eyes On The US Bureau Of Labour Statistics’ Results Due On Friday, (EUR/GBP) Bleak Economic Outlook For the UK Sends GBP Spiralling - Good Morning Forex!  Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
(EUR/USD, EUR/GBP, EUR/CHF) ECBs Hint To Raise Interest Rates Offers Some Relief For The Euro - Good Morning Forex!

(EUR/USD, EUR/GBP, EUR/CHF) ECBs Hint To Raise Interest Rates Offers Some Relief For The Euro - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 16.05.2022 15:13
Summary: Rising of European government bond yields. Despite the Euro’s likelihood to strengthen, market sentiment is still bearish for the EUR/GBP USD continues to show bullish sentiment against the JPY Raised government bond yields allow the EUR some relief The price of the EUR/USD currency pair increased by more than 0.15% on Monday. Market sentiment for the EUR/USD currency pair has turned bullish on Monday. The European Central Banks (ECB) representative, Villeroy, hinted at the possibility of an active summer for the European bond yields, this comes amidst concerns that a weak Euro threatened price stability in the currency bloc. A weak Euro can steer the ECB away from its inflation target. The possibility of raising interest rates from the ECB is likely to instill investors with confidence in the Euro going forward and in the ECBs determination to fight against rising prices and inflation. EUR/USD Price Chart 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 EUR/GBP showing bearish signals Market sentiment for this currency pair is showing bearish signals. In general the market risk sentiment has soured over the past weeks, investors are still concerned over the lockdowns in China, the war in the Ukraine and rising interest rates at the Federal Reserve Bank. With the UK economy bordering on a recession, and Villeroy’s comments, the Euro is strengthening against the Pound Sterling, after the drop in value mid last week, the recovery is welcome. EUR/GBP Price Chart CHF not keeping up with the EUR The Euro strengthens against the CHF amidst the bullish market sentiment for this currency pair. The volatility in the forex market is felt daily by investors, as investors risk sentiment sours, the value of safe-haven currencies, like the Swiss Franc, usually strengthens. However, investor confidence in the EURO has improved as expectations for the ECB to raise interest rates increase. EUR/CHF Price Chart Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM USD/JPY bullish The market sentiment for this currency pair is showing bullish signals. Despite the bullish signals, the JPY has gained on the USD on Monday. As the hawkish Fed continues, it is likely that the sentiment will remain bullish for this currency pair. If there are to be bearish signals for the pair, they are likely to be short lived if the Bank of Japan (BoJ) continue with their dovish monetary policy. USD/JPY Price Chart Sources: Finance.yahoo.com, poundsterlinglive.com, dailyfx.com
British Pound (GBP) Amid Fiscal Stimulus. Which Way Did USDCAD Go After Retail Data?

British Pound (GBP) Amid Fiscal Stimulus. Which Way Did USDCAD Go After Retail Data?

Jing Ren Jing Ren 26.09.2022 08:13
In this article: USDCAD EURGBP GER 40 USDCAD breaks major resistance The Canadian dollar slipped after July’s retail data fell short of expectations. The current rally continues to accelerate after the US dollar rose to a fresh two-year high above 1.3420. A lack of selling pressure enables the bulls to push towards July 2020’s high at 1.3640. Though short-term price action could use a little breathing room after the RSI ventured into overbought territory multiple times. 1.3390 would be the first support in case of pullback, and strong interest could be expected from bullish trend followers. EURGBP breaks higher The pound tumbles as Britain’s new fiscal stimulus raises doubts about its debt burden. A previous break above June’s high at 0.8720 had flushed out the remaining selling interest. Following a brief consolidation, the euro’s surge above 0.8780 triggered a runaway rally to a two-year high at 0.9290. The RSI’s extreme overbought condition may cause profit-taking with 0.8930 near the base of the momentum and the 20-hour moving average as a fresh support. Further extension may carry the pair to March 2020’s high at 0.9500. GER 40 falls through critical floor The Dax 40 plunged over wide-spread unease about the direction of inflation and rate hikes. A fall below the double bottom at 12420 invalidated the bounce over the past few months and signalled a return to the bear market. Strong momentum is a sign of liquidation as the last bulls rush to the exit. As the RSI sank into the oversold area, the psychological level of 12000 may see some buying. However, bounces may be capped below 12500 where the bears could double down and push towards October 2020’s low around 11400. Read next: Leaders Must Take Action To Protect The Environment. The Statement By E. Muska Will Cause Confusion| FXMAG.COM
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
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)
Forex: Friday's NFP Release May Support US Dollar (USD). EUR/USD May Reach 0.95

Forex: US Dollar (USD) May Have Quite Road To 120.00. GBP/USD - Does Market Consider A Huge Rate Hike In November?

ING Economics ING Economics 28.09.2022 10:43
The dollar continues to power ahead. Over the last 24 hours, the focus has switched from the pound to the Chinese renminbi. Here, there are signs that authorities are acquiescing to a weaker currency. With no sign that the Fed is going to ease its hawkishness nor the US Administration showing any concern with the strong dollar, current trends should extend USD: All systems are go Whether it be US data surprising on the upside, the US Administration showing no concern at all with the strong dollar, or new chapters in the energy war in Europe, it looks like all systems are go for the dollar rally. Trying to pick a dollar top in the current climate is an exercise in futility. The dollar is clearly in the midst of a very powerful rally and one akin to the macro settings in the early 1980s when US authorities were also trying to tame inflation.  What has caught our eye overnight is USD/CNH trading to a new all-time high above 7.20. The renminbi was seen as one of the more controlled currencies in the global economy, but after tweaks to FX required reserve ratios and stronger renminbi fixings failed to slow the move, it seems the Chinese authorities are as close to letting the renminbi float as they have been. The final roll of the dice might be to re-introduce the counter-cyclical factor in their daily fixings (allowing even stronger renminbi fixings) - but given that strong fixings have not worked so far, why bother? The renminbi move could add another round of weakness to closely correlated emerging market and commodity currencies. We are thinking here of the big beasts in the EM space such as the South African rand and Brazilian real - and of course local Asian currencies, where the Singaporean dollar formally tracks the renminbi via its basket. And the pressure will continue to build on some of the more managed EM currencies such as the Egyptian pound and Nigerian naira, where implied yields through the 3m non-deliverable forwards are trading over 50% and 25%, respectively. As far as Washington is concerned the strong dollar is someone else's problem - an advisor to President Biden said overnight that we were not headed towards another Plaza accord - the 1985 agreement to reverse dollar strength. This all leaves the dollar in the ascendancy. DXY is close to 115 and in reality, there is not much resistance until 120. Favour shallow consolidations and further gains in this powerful stage of the rally. We doubt second-tier US data today, nor Fed speakers do much damage to the dollar. Chris Turner  EUR: Deep-sea subterfuge It is hard to know what to make of the presumed sabotage attack on Russian gas pipelines in the sea off Denmark. As Warren Patterson outlines in his Commodities Feed, those pipelines were not carrying any gas to Europe. Instead, the attack presents a pure geopolitical event - with investors awaiting how both the West and particularly the Russians respond. The strong dollar environment and the deteriorating geopolitical situation in Europe have sent EUR/USD close to 0.9500. Traditional drivers of the EUR/USD such as two-year swap differentials and terms of trade are having no say in EUR/USD pricing right now. However, EUR/USD, at 0.9500, would be near the lower of a bearish channel that has contained this year's orderly descent in the dollar - so perhaps some consolidation may be due above 0.9500. But one-week EUR/USD implied volatility is still changing hands at the highs of the year 15% - warning of fast markets if 0.9500 breaks. Chris Turner GBP: No emergency BoE rate hike after all Comments yesterday from Bank of England (BoE) Chief Economist Huw Pill were consistent with Monday's statement that the BoE would respond to the mayhem in UK asset markets at their regular monetary policy meeting on 3 November. This will have further disappointed the community looking for emergency rate hikes - we were not part of that community. Instead, the market seems to be settling on a view of a 'significant' BoE rate hike in the order of 150bp on 3 November. We doubt BoE speakers today (Jon Cunliffe and Swati Dhingra) will have too much more to add. That leaves GBP/USD at the mercy of the strong dollar and a bias back towards 1.05 this week. Events on the continent may keep EUR/GBP constrained to an 0.8900-0.9000 range. Chris Turner CEE: Gas prices strike again Yesterday's news about the sabotage of the Nord Stream pipelines and headlines that Gazprom sees the risk of sanctions on gas supplies via Ukraine have put gas prices back in the FX game. This triggered the first visible rise in gas prices in a week and tested the muted relationship with CEE FX. Unsurprisingly, this led to FX weakness across the region and this theme can be expected to drive the market for the rest of the week. The main news for us though is that the last pillar of strong FX in the region is gone for now and higher gas prices are adding to the side of falling interest rate differentials and a strong dollar. This is a net negative for CEE and we will see more weakness in the days ahead. Meanwhile, in Hungary, the central bank surprisingly ended the hiking cycle with a higher-than-expected 125bp rate hike to 13.0% and plans to do the rest of the monetary tightening through liquidity measures. Earlier, the NBH introduced new measures to withdraw excess liquidity from the market in the form of higher reserve requirements for banks or the issuance of discount bills. The question is how successful the NBH will be with the new approach. However, the EU money issue remains on the table, and in conjunction with the gas story, we can expect further volatile weeks for the forint around the 405 EUR/HUF level depending on incoming news. Frantisek Taborsky 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