• German double-dip recession likely after 0.1% contraction in Q3
  • UK consumer confidence improves but remains weak
  • EURGBP appears to fail again near range high

German uncertainty weighing on the single currency

The euro is slipping against the pound at the end of the week with economic data highlighting the challenges facing the bloc.

Nowhere is that more evident than in Germany which appears to be on the brink of a double-dip recession and facing immense uncertainty over its budget for next year as it scrambles to patch up finances for this one.

A supplementary budget next week alongside a proposal to suspend the debt brake now looks likely but even this is just a temporary solution that won’t give investors much confidence in the outlook for an economy already under significant strain.

The economy was confirmed to have contracted by 0.1% in Q3 this morning and as we move into the final month of Q4, it’s looking likely data early next year will confirm the country is back

Intraday Market Analysis – Gold Attempts To Rebound

Intraday Market Analysis – Gold Attempts To Rebound

Jing Ren Jing Ren 20.10.2021 09:08
Gold inched higher as the dollar index hit a two-week low. The latest rebound has been checked by the psychological level of 1800. With the RSI showing an overbought situation, short-term buyers were swift in taking profit from this resistance on the daily chart. The pullback has met buying interest over 1760. There is an expectation for sideways action in the next few hours as traders wait for a breakout. A deeper correction would test the floor at 1730, while a higher high may send the precious metal to the triple top at 1830. EURGBP breaks below support The sterling soared after BOE Governor Bailey said that the central bank may act to contain inflation. Sentiment has become increasingly bearish over the euro after its break below August’s low at 0.8450. A bearish MA cross on the daily chart indicates an acceleration to the downside. An oversold RSI has led to a limited rebound towards 0.8485, which may turn out to be an opportunity to sell into strength. 0.8350 near February 2020’s lows would be the next target when momentum traders jump in to bid up the pound. US 30 recovers to previous peak The Dow Jones rallies as investors look past macro concerns and focus on earnings instead. The break above the supply zone around 35000 has prompted the bears to cover. The index then went on to recoup most losses from the September sell-off. With the short-side out of the picture, sentiment might have turned around. 35500 is a major resistance and a bullish breakout would resume the uptrend for new all-time highs. As the RSI suggests an overextension, 35050 is fresh support in case of retracement.
Sideways drifts and targets hit

Sideways drifts and targets hit

Jason Sen Jason Sen 28.10.2021 12:21
AUDUSD trades sideways after we warned last week that the rally has ended with Thursday's bearish engulfing candle. We keep holding good support at 7465/55 & held just below strong resistance at 7555/65. We can trade the range while we wait for a breakout. NZDUSD longs at 7140/30 work perfectly again yesterday hitting the target of 7180/90 for profit taking as we remain in the sideways trend. This could be the case for an extended period after Thursday's bearish engulfing candle. AUDJPY also likely to trade sideways for a while after Thursday's bearish engulfing candle for a sell signal. Today's Analysis. AUDUSD longs at good support at 7465/55 work again on the bounce to 7500/05 for profit taking before a high for the day yesterday exactly at the next target of 7530/35. Strong resistance at 7555/65 should be a big challenge. Try shorts with stops above 7580, looking for a double top sell signal. Longs at 7465/55 again today stop below 7445 (so the risk is very small). A break lower is a sell signal targeting 7410/7390, perhaps as far as 7360/50. NZDUSD longs at first support at 7140/30 could work again re-targeting 7180/90 for profit taking & as expected this was a high for the day. If we retest 7200/7220, try shorts with stops above 7240, looking for a double top sell signal. BUT be ready to sell again at very strong resistance at 7255/75. Stop above 7300. Longs at first support at 7140/30 must stop below 7120 so the risk is very small. A break lower is a sell signal targeting 7090/80 probably as far as 7040/30. AUDJPY I would sell at 8620/40 (unfortunately yesterday's high was 8605) with stops above 8660 looking for a double top sell signal. A break higher kills the bearish engulfing candle for a buy signal. First support at 8460/40 in the sideways trend. A bounce targets 8500 perhaps as far as 8540/50. A break below 8420 however is the next sell signal targeting 8370 & 8345/35. To subscribe to this daily report please visit or email USDJPY longs at support at 113.40/30 were offered 50 pips yesterday. as we topped exactly at first resistance at 113.80/95. EURJPY buying opportunity at at 131.60/40, stop below 131.30. CADJPY shorts at first resistance at 9240/60 keep working this week. Update daily at 06:30 GMT Today's Analysis. USDJPY meets minor resistance at 113.85/95. Strong resistance at last week's high at 114.50/70. Shorts need stops above 114.80. A break higher is a medium term buy signal. Good support again at 113.40/30. Longs need stops below 113.20 so the risk is very small. A break lower target 113.00/112.90 & 112.60/50. EURJPY buy at 131.60/40, stop below 131.30. A break lower is a sell signal targeting 130.90 then an important buying opportunity at 130.40/20 with stops below 130.00 Longs at 131.60/40 target 131.90 & 132.10 for profit taking. Strong resistance at 132.20/40. Shorts need stops above 132.60. CADJPY shorts at first resistance at 9240/60 work again as we target 9200 & 9175, hit as I write this morning. A buying opportunity at 9120/00 with stops below 9090. Gains are likely to be limited with first resistance at 9240/60. However on a break higher sell at 9280/9300 with stops above 9320. To subscribe to this daily report please visit or email EURUSD breaks support at 1.1620/00 so this is now working as resistance. It is difficult to trade the pair as the daily ranges are small & we are mostly trading sideways. USDCAD shorts at first resistance at 1.2420/40 this trade worked perfectly on the collapse to 1.2370  & as far as first support at 1.2300/1.2280. Longs here also this trade worked perfectly on the bounce to 1.2370 for an easy 120 pip profit on the day. GBPCAD shorts at first resistance at 1.7050/70 handed a quick & easy 150 pip profit yesterday. Update daily at 06:30  GMT Today's Analysis. EURUSD holding below first resistance at 1.1610/20 targets 1.1580 & 1.1540/30. A break below 1.1520 is an important medium term sell signal. A break above 1.1620 however can target resistance at 1.1665/75.  Next we look for a test of minor resistance at 1.1690/99. Exit longs & try shorts with stops above 1.1720. USDCAD same levels apply for today with first resistance at 1.2420/40. Shorts here stop above 1.2450. Be ready to buy a break above 1.2450 targeting 1.2510/30. Shorts at 1.2420/40 target 1.2370 then support at 1.2300/1.2280. Longs here need stops below 1.2270 for a sell signal. GBPCAD shorts at first resistance at 1.7050/70 worked perfectly on the collapsed to our targets of 1.6950/40 & 1.6910/1.6890 for an easy 150 pip profit yesterday. Ultimately we are looking for the target of 1.6870/60, perhaps as far as support at 1.6800/1.6780. We can try shorts again at first resistance at 1.7050/70 but must stop above 1.7090. A break higher is a buy signal targeting a selling opportunity at 1.7155/75 with stops above 1.7195. To subscribe to this daily report please visit or email GBPUSD high for the day exactly at resistance at 1.3835/55 so far this week followed by a test of support at 1.3740/30, but we over ran to 1.3707. EURGBP longs at important 200 week moving average support at 8405/8395 worked perfectly on the bounce to first resistance at 8455/65 for profit taking. Shorts here are also working as I write. GBPNZD breaks important support at 1.9180/70 for a sell signal. Update daily at 07:00 GMT Today's Analysis. GBPUSD first support at 1.3740/20 but be ready to sell a break below 1.3700 targeting 1.3670/60, perhaps as far as strong support at 1.3600/1.3580. Any longs at support at 1.3740/20 target 1.3770/80, perhaps as far as strong resistance at 1.3835/55. This remains key to direction in severely overbought conditions. Try shorts again with stops above 1.3875. A break above here is a medium term buy signal. EURGBP longs at important 200 week moving average support at 8405/8395 work on the bounce to first resistance at 8455/65 for profit taking. Shorts need stops above 8475. A break higher targets 8500. Shorts at first resistance at 8455/65 are working as we target 8440 before a retest of important 200 week moving average support at 8405/8395. Longs need stops below 8380. A break lower is a medium term sell signal. GBPNZD break below support at 1.9180/70 is a sell signal targeting 1.9110/00. First resistance at 1.9170/90. Shorts need stops above 1.9210.
USDCAD Chart Like A Ski Slope. Will EURGBP Go Back To The Previous Value? USOIL - How Long The Price Will Be Increasing?

USDCAD Chart Like A Ski Slope. Will EURGBP Go Back To The Previous Value? USOIL - How Long The Price Will Be Increasing?

John Benjamin John Benjamin 20.01.2022 09:19
USDCAD grinds lower The Canadian dollar finds support from hotter-than-expected inflation. The US counterpart remained under pressure after it failed to hold onto 1.2500. The RSI’s repeatedly oversold situation has attracted some buying interest. But timid rebounds have rather been opportunities for trend-followers to sell into strength. 1.2570 is a key resistance to lift if the bulls look for another chance. On the downside, a drop below 1.2450 would trigger a new round of sell-off towards the daily support at 1.2390. EURGBP slips to 12-month lows The sterling edged higher after Britain’s December CPI exceeded expectations. The euro has struggled to lift offers around 0.8375 after a two-week-long consolidation. The subsequent break below 0.8340 has forced buyers to bail out, exacerbating the bearish mood. This former support has turned into a fresh resistance. A bearish MA cross indicates an acceleration to the downside. The pair is now heading towards February 2020’s lows near 0.8290. An oversold RSI may cause a limited rebound. USOIL seeks support WTI crude continued upward after the IEA warned inventories in OECD countries were at their lowest levels. The rally may accelerate in the medium-term after the bulls clear last October’s high at 85.00. However, the RSI has shot into the overbought area on the daily chart. Bearish divergence on the hourly time frame suggests a slowdown in the short-term momentum. Price action could be due for a pullback. 84.70 is the first support and 88.00 is the resistance when the price bounces back.
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.
Tension Beetween Ukraine And Russia Definetely Shaped News In Recent Days

EURGBP - Does The Single Currency Strengthen? Bearish GER 40 Ahead?

John Benjamin John Benjamin 23.02.2022 08:52
EURUSD bounces off support The euro surged over signs that Moscow may remain open to diplomacy. The pair found support at the base of the previous rally (1.1290), indicating the bulls’ commitment to keeping the rebound intact. The RSI’s oversold situation attracted a slew of bargain hunters betting on a lengthy rebound. A break above 1.1390 would prompt sellers to cover and pave the way for a sustained recovery. The recent peak and daily resistance at 1.1490 is a major hurdle. Its breach could extend the rally to 1.1600. EURGBP attempts reversal The sterling whipsawed after BOE officials’ comment about a “modest” rate hike over the coming months. The euro saw strong bids at the base of the February breakout rally (0.8310). A break above 0.8370 wiped out some selling interest, a prerequisite for a meaningful recovery. 0.8400 is the next resistance and its breach would further boost buyers’ confidence and propel the single currency to the recent high at 0.8475. On the downside, a bearish breakout would invalidate the rebound pattern and cause a sell-off below 0.8280. GER 40 breaks floor Trepid sentiment continues to weigh on the Dax. The plunge below the 9-month long consolidation area (14850) may foreshadow a bear market. As traders grew wary, trapped bulls would look to get out of their positions while the bears saw any rebound as an opportunity to sell into strength. An oversold RSI brought in some bids and 14850 is the immediate resistance. However, the index would remain under unless it lifts offers around 15200. Otherwise, the psychological level of 14000 would be the next stop.
USDCHF Trades Lower, EURGBP - EUR Weakened A Bit, US 100 Looks To Hold Its Normal Level

USDCHF Trades Lower, EURGBP - EUR Weakened A Bit, US 100 Looks To Hold Its Normal Level

Jing Ren Jing Ren 01.03.2022 10:07
USDCHF struggles for support The Swiss franc rallies as new sanctions against Russia trigger a flight to safety. The pair has met stiff resistance in the supply area (0.9290). Then a drop below 0.9220 and 0.9170 suggests that sentiment remains cautious and buyers are hesitant. 0.9150 is a key level to safeguard the greenback’s latest bounce. A bearish breakout could send the pair to the daily support at 0.9110. An oversold RSI may attract some buying interest. The bulls need to reclaim 0.9230 before they could hope for a turnaround. EURGBP attempts to rebound The euro struggles amid escalation in Western sanctions. A bullish attempt above 0.8400 indicates an upward bias as sellers cover their positions. 0.8310 has been solid support. And the market mood may become increasingly upbeat if buyers succeed in holding above this level. An extended rally may send the single currency to the daily resistance at 0.8475, where a breakout may cause a bullish reversal in the weeks to come. On the downside, a fall below the said demand zone may send the euro to 0.8260. US 100 to test key resistance The Nasdaq 100 bounces as Russia and Ukraine meet for peace talks. The index saw bids near last May’s lows (13050), an important floor to prevent further bleeding. A rebound above 14050 has prompted some sellers to take profit, easing the downward pressure for the moment. Price action is heading to the next resistance at 14500 which sits on the 30-day moving average, and high volume could be expected in this area of interest. A bullish breakout could boost sentiment in the short term and extend gains to 15280.
EUR: Range-bound Outlook Amid Tightened Swap Rate Gap

GBP Loses! EUR Gains! NFP (Non Farm Payrolls) Is Released And We Know How Have Forex Pairs Reacted To This Week's Events!

Mikołaj Marcinowski Mikołaj Marcinowski 01.04.2022 23:37
It was another week full of events, geopolitical news and economic indicators releases. As the Forex pairs charts show the fluctuation weren’t always slight and developed an interesting outlook ahead of April which has just begun. EUR/USD gained over 0.5% Let’s begin with EUR/USD. Of course this pair is significantly affected by the slowly ceasing (?) conflict between Russia and Ukraine. As we can see on the chart there was a huge rise on Tuesday as the tensions were reported to loose its momentum. Cease fire has been said to come shortly and this optimism seems to had remained till the end of the week. There’s no doubt today’s fluctuations were caused by the release of NFP. The following week’s FOMC Meeting Minutes will surely let us have a closer look of dollar’s rate future. EUR/GBP gained ca. 1.1% EUR has been fighting all the week to finally beat British pound. It seems that the single currency needs to be triggered, but only a little, to rise significantly. Naturally these supporters were positive news about cease fire in the eastern Europe. In the following week BoE’s Bailey speaks and we can expect that it will be an introduction to next monetary policy decisions. USD/CHF – Swiss franc strengthened… The beginning of the week wasn’t so optimistic for CHF. Before the news coming from Ukraine it was losing the fight with dollar. The situation got better after positive news about possible cease fire. USD/PLN – Zloty feels good Poland lies close to the area where the conflict takes place. Because of corelations and other factors Polish zloty was hit several times. After tightening of monetary policy (next decisions to come shortly) and optimistic signals from Ukraine zloty strenghthened again gaining 1.6% over the week. Source/Data: Charts: Courtesy of
USDJPY Flattened, EURGBP Is Sliding, DAX (GER 40) Is Back

USDJPY Flattened, EURGBP Is Sliding, DAX (GER 40) Is Back

Jing Ren Jing Ren 05.04.2022 07:46
USDJPY consolidates gains The US dollar gains on the prospect of more sanctions on Russia. On the daily chart, the RSI’s overbought condition led to profit-takings as the bulls became reluctant to outbid each other. Nonetheless, the direction remains upward, and a pause is necessary for the market to take a breather. The current pullback has found support over 121.30. A bounce above 123.20 may signal a bullish continuation and extend the price back to 125.00. On the downside, a breakout could cause a correction to 119.40 near the 30-day moving average. EURGBP struggles for support The euro fell as worries over Europe’s energy supply grew. The current pullback could be an opportunity for the bulls to stake in but they will need to push past 0.8400 to regain control. The 61.8% (0.8380) Fibonacci retracement level has failed to foster buyers’ interest. The RSI’s double dip into the oversold area may attract some bids. The demand zone between the daily support (0.8300) and 0.8320 is a critical floor to keep the rebound valid. That said, its breach could trigger a sell-off towards 0.8200. GER 40 takes a breather The Dax 40 goes sideways as the EU considers a new set of sanctions. A bullish MA cross on the daily chart suggests an acceleration in the rebound as a sign of improved sentiment. The index is hovering above the lower end (14200) of the previous consolidation. This level coincides with the 20 and 30-day moving averages, making it an area of interest. A close above 14730 could extend the rally to the origin of the February liquidation at 15200. This is an important resistance before the uptrend could resume in the medium-term.
Crucial Upcoming PMI Data and High-Stake Meetings Shape China's Economic Landscape

Euro Enters The Week Strong As The Market Awaits ECB Announcements Due Later This Week (EUR/USD, EUR/GBP, EUR/CHF), Focus On The RBA Announcement On Tuesday (GBP/AUD)

Rebecca Duthie Rebecca Duthie 06.06.2022 15:22
Summary: ECB interest rate decision due to occur later this week. Confidence vote being held for Boris Johnsson later on Monday. Investor confidence could be returning to the markets. On Tuesday the Reserve Bank of Australian (RBA) is due to announce its decision regarding tightening of monetary policy. Read next: Altcoins: Decentraland (MANA), What Is It? A Deeper Look Into The Decentraland Platform  EUR strong entering the week On Monday market sentiment for this currency pair turned bearish. The Euro opened stronger on Monday as the market awaits the European Central Banks (ECB) interest rate decision, which is due to occur later this week. If the European Central Bank shows any signs of dovish intentions, the effects could be heavy on the Euro's downside, however, if a hawkish attitude is shown (which seems to be more likely), the upside effect on the euro may be minimal as the expected hike is already priced into the market. U.S CPI data is expected to close off this week, if there is another undershoot regarding the CPI data, it will just confirm that inflation has reached its peak and add to dovish pressure. EUR/USD Price Chart Both Euro and Pound sterling entered the week strong The market is reflecting mixed signals for this currency pair. As the market awaits the European Central Bank's (ECB) announcement regarding the decision for interest rates in July and September, the Euro entered the week strong. In addition, the pound sterling also entered the week strong despite a confidence vote being held this evening to determine Prime Minister Boris Johnssons future as leader. The pound sterling holding strength, shows its resilience to political tensions. EUR/GBP Price Chart EUR/CHF bullish The market is reflecting bullish signals for this currency pair. Amidst the expected announcements from the European Central Bank this week, the Euro has entered the week strong, even against the safe-haven Swiss Franc. During times of economic stress, investors normally turn to safe-haven assets, however investor confidence seems to be returning to the markets. EUR/CHF Price Chart RBA due to make an announcement The Australian Dollar entered its third week of gains this week in the wake of China’s easing of Covid-19 lockdowns and stronger than expected GDP data. However, on Tuesday the Reserve Bank of Australian (RBA) is due to announce its decision regarding tightening of monetary policy. The price of the GBP/AUD currency pair is sensitive to the price changes of the GBP/USD currency pair. GBP/AUD Price Chart Sources:,,
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/GBP Cross-Currency Pair Justifies The Escalating Fears Of The Eurozone’s Recession

TeleTrade Comments TeleTrade Comments 10.10.2022 10:34
EUR/GBP prints the first daily negative in five, grinds lower of late. Escalating fears of Eurozone recession, mixed political headlines from BOE keep sellers hopeful. BOE’s Bailey will face a tough task during his trip to Washington. Russia responds to Crimean bridge explosion by blowing Ukrainian President’s office. EUR/GBP fails to extend the four-day uptrend as it stays depressed near 0.8785 heading into Monday’s European session. In doing so, the cross-currency pair justifies the escalating fears of the Eurozone’s recession while trying to take positives from the mixed headlines from Britain. As per the latest update, the Bank of England (BOE) launches multiple intermediate measures to unleash liquidity into the UK market. Among the key measures discussed, the alterations in the repo facility will be important and can help the “Old Lady”, as the BOE is often called. Elsewhere, the fears of EU recession amplified after Russia’s reaction to the Crimean bridge explosion. Recently, the BBC came out with the news suggesting multiple large explosions hit Kyiv, marking it the first tragic event in months. It’s worth noting that the missiles also destroyed Ukrainian President Volodymyr Zelensky's office. While the UK is likely benefiting from the bloc’s fears of a pause in the European Central Bank’s (ECB) hawkish move, doubts over the BOE’s ability to tame the financial crisis triggered by chancellor Kwasi Kwarteng’s September 23 fiscal announcements can keep the EUR/GBP buyers hopeful. Furthermore, political pessimism in Britain also propels the cross-currency pair. Moving on, the aforementioned risk catalysts and the UK’s employment data can entertain the EUR/GBP traders ahead of Friday’s speech of BOE Governor Andrew Bailey. If Bailey fails to defend his latest surprises, the EUR/GBP may have further upside to track. Technical analysis EUR/GBP retreats from the one-month-old support-turned-resistance line, around 0.8815 by the press time, as it directs bears towards June’s peak surrounding 0.8720.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Pair: A Slump Towards The Monthly Low Can’t Be Ruled Out

TeleTrade Comments TeleTrade Comments 12.10.2022 09:37
EUR/GBP consolidates biggest daily gains in two weeks inside bullish chart formation. Reports that BOE could extend bond-buying triggered GBP’s immediate strength. 200-SMA adds strength to 0.8735 support confluence, oscillators also favor buyers. EUR/GBP portrays the British Pound’s (GBP) immediate run-up on the Financial Times (FT) report that the Bank of England (BOE) is likely to extend the bond-buying program. In doing so, the cross-currency pair reverses from the upper line of a weekly bullish channel while flashing 0.8796 as the daily low, around 0.8825 by the press time of early Wednesday morning in Europe. “The Bank of England has signaled privately to bankers that it could extend its emergency bond-buying program past this Friday’s deadline, according to people briefed on the discussions, even as Governor Andrew Bailey warned pension funds that they “have three days left” before the support ends,” mentioned FT. Although the recent news suggests further downside of the EUR/GBP pair, a convergence of the 200-SMA and the stated bullish channel’s bottom, around 0.8735, appears a tough nut to crack for the bears. Following that, a slump towards refreshing the monthly low, currently around 0.8650, can’t be ruled out. It should be noted that the MACD and the RSI (14) are both in favor of the quote’s further upside. That said, the aforementioned channel’s top, close to 0.8870, guards the EUR/GBP pair’s immediate rebound. Also acting as an upside filter is the 50% Fibonacci retracement level of September month upside, near 0.8910, a break of which will direct the EUR/GBP bears towards the 0.9000 psychological magnet. EUR/GBP: Four-hour chart Trend: Limited downside expected
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Euro To British Pound (EUR/GBP) Cross Gets Support From Another Factor

TeleTrade Comments TeleTrade Comments 18.10.2022 08:34
EUR/GBP seesaws between tepid gains/minor losses through the Asian session on Tuesday. The UK political uncertainty undermines the British pound and offers support to the cross. A weaker USD benefits the shared currency and also contributes to limiting the downside. The EUR/GBP cross struggles to capitalize on the overnight bounce from its lowest level since early September and oscillates in a narrow trading band on Tuesday. The cross is currently placed in neutral territory, around mid-0.8600s, as traders await a fresh catalyst before positioning for the next leg of a directional move. The downside, however, remains cushioned, at least for now, amid the UK political uncertainty, which continues to act as a headwind for the British pound. In fact, rebels within the ruling Tory Party are coming together to replace the newly-elected UK Prime Minister Liz Truss in the wake of the recent tax cut fiasco. It is worth recalling that the new UK Finance Minister Jeremy Hunt reversed almost all tax measures set out in the mini-budget led to chaos in the financial markets. The shared currency, on the other hand, draws some support from the prevalent selling bias around the US dollar. This is seen as another factor offering some support to the EUR/GBP cross. That said, soaring bets for a bigger 100 bps rate hike by the Bank of England (BoE) in November offer some support to sterling and keep a lid on any meaningful upside for the cross. This, in turn, warrants some caution for aggressive traders and positioning for a firm intraday direction. The market focus now shifts to the latest UK consumer inflation figures, due for release on Wednesday. The data will influence BoE rate hike expectations and drive the British pound. Traders will further take cues from the final Eurozone CPI prints, which might further contribute to providing some meaningful impetus to the EUR/GBP cross.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Euro To British Pound (EUR/GBP) Pair Consistently Hit Lower Lows

TeleTrade Comments TeleTrade Comments 21.10.2022 09:13
EUR/GBP has advanced to 0.8740 amid downbeat UK Retail Sales data. A negative divergence formation has bolstered signs of a bullish reversal. The cross is overlapping with the 200-EMA at around 0.8715. The EUR/GBP pair has picked significant bids and has accelerated to near 0.8740 as the UK Office for National Statistics has reported downbeat Retail Sales data. The annual Retail Sales have declined by 6.9%, against the expectations of a 5.0% decline and the prior release of -5.4%. While the monthly retail sales figure remained negative by 1.4% vs. the projections of a 0.5% decline. Meanwhile, public Sector Net Borrowings have remained marginally lower at GBP 19.248B vs. the estimate of GBP 19.325B. On an hourly scale, the asset has displayed a rebound after a bullish negative divergence formation. It is worth noting that the asset was continuously making lower lows while the momentum oscillator, Relative Strength Index (RSI) (14) made a higher low. This indicates a loss in the downside momentum. Also, the momentum oscillator has shifted into the 40.00-60.00 range. The cross is overlapping with the 200-Exponential Moving Average (EMA) at around 0.8715, which signals a consolidation ahead. Going forward, a break above the upward-sloping trendline from October 4 low at 0.8649 will drive the asset towards the round-level hurdle of 0.8900, followed by September 29 high at 0.8980. On the contrary, a drop below Monday’s low at 0.8578 will drag the asset toward August 19 high at 0.8511. A slippage below the latter will expose the cross to August 19 low at 0.8449. EUR/GBP hourly chart  
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Pair: The Shared Currency Bulls Have Picked Demand

TeleTrade Comments TeleTrade Comments 24.10.2022 09:04
EUR/GBP is playing around the immediate hurdle of 0.8700 after a firmer rebound. The chances of a 75 bps rate hike announcement by the ECB look solid. Former UK PM Boris Johnson has asked Rishi Sunak to step back from the UK PM race. The EUR/GBP pair is hovering near the round-level resistance of 0.8700 in the late Tokyo session. The asset has accelerated after a gap-down opening near 0.8660 and is aiming to overstep the immediate hurdle of 0.8700. The shared currency bulls have picked demand as investors are betting over a bigger rate hike announcement by the European Central Bank (ECB). Price pressures in the trading bloc are mounting and have not displayed any sign of exhaustion yet. Therefore, ECB President Christine Lagarde is required to tighten its policy further. According to analysts from Rabobank, a 75 basis point (bps) interest rate hike is a done deal. They see the deposit rate reaching 3% by March next year. Currently, the ECB rates stand at 1.25% as the central bank announced a 75 bps rate hike in September. Apart from that, soaring energy bills are hurting the sentiment of households in Germany. On Friday, Reuters reported that German Parliament is preparing to vote for the approval of a €200 billion emergency rescue package to tackle the energy crisis. On the UK front, escalating political tensions have turned the pound bulls extremely volatile. The Shortest UK Prime Ministerial term by Liz Truss has dampened the confidence of stakeholders. Meanwhile, the debt crisis in the UK economy has reached the sky and the novel UK prime Minister will face the highest-ever debt burden. It would be worth watching the efforts from would-be UK Prime Minister and newly appointed Finance Minister Jeremy Hunt in fixing the pile debt mess. British Conservative Party needs a suitable candidate to maintain decorum and avoid their defeat in General Elections, scheduled for 2024. However, Boris Johnson has asked Rishi Sunak to step down from the UK PM race, which will be decided latest by Friday.
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The Euro To British Pound (EUR/GBP) Cross Pair Prices Back Above

TeleTrade Comments TeleTrade Comments 31.10.2022 13:11
EUR/GBP gains some positive traction on Monday and snaps a four-day losing streak. Stronger Eurozone inflation data provide a modest lift to the euro and offer support. A combination of factors seems to underpin sterling and might cap gains for the cross. The EUR/GBP cross attracts some buying near the 0.8575-0.8570 region on Monday and snaps a four-day losing streak to its lowest level since early September. The intraday uptick picks up pace following the release of stronger Eurozone consumer inflation figures and lifts spot prices back above the 0.8600 mark during the first half of the European session. The latest data published by Eurostat showed that the annualized Eurozone Harmonised Index of Consumer Prices (HICP) accelerate to 10.7% in October from 9.9% in the previous month. Adding to this, the core figures climbed to 5.0% YoY during the reported month as compared to the 4.9% expected and 4.8% recorded in September. Separately, the first reading of the Eurozone GDP print showed that the economy expanded by 0.2% during the third quarter, matching consensus estimates. This, in turn, is seen as a key factor behind the shared currency's relative outperformance against its British counterpart and offering some support to the EUR/GBP cross. That said, a more dovish tone adopted by the European Central Bank last week - in the wake of the worsening economic outlook - continues to act as a headwind for the euro. The British pound, on the other hand, draws support from the latest optimism over the appointment of Rishi Sunak as the new UK Prime Minister. Market players see Sunak as someone who can bring stability back after the recent volatility in the markets. Adding to this, International Monetary Fund (IMF) Managing Director Kristalina Georgieva told Reuters that she expects the new UK PM Sunak to steer Britain towards a path of medium-term fiscal sustainability. Apart from this, expectations for a 75 bps hike by the Bank of England warrant some caution for aggressive bullish traders and positioning for a further appreciating move for the EUR/GBP cross. Hence, any subsequent strength is more likely to confront stiff resistance and remain capped near the mid-0.8600s, which should act as a pivotal point for intraday traders. Some follow-through buying should push spot prices back above the 0.8700 mark and allow bulls to aim back to retest the 0.8750-0.8760 supply zone.
Unraveling UK Inflation: The Bank of England's Next Move

The Dovish Decision Of The Bank Of England (BoE) Puts A Heavy Burden On The GBP

Saxo Bank Saxo Bank 04.11.2022 13:39
Summary:  The FOMC meeting this week forced the market to adjust to the idea that the Fed could continue to take rates higher than had previously been priced. But clearly, to drive tightening expectations higher still, we’ll need to continue to see hotter than expected US data, with today’s US jobs report the next test on that. Elsewhere, sterling is in a world of hurt after BoE’s very dovish guidance. FX Trading focus: US incoming data focus after hawkish FOMC. BoE in dovish pushback against market hike expectations. The US dollar followed through stronger yesterday on the momentum off the back of the hawkish Powell presser Wednesday, but has come in for a chunky reversal overnight and today since a somewhat softer than expected ISM services survey yesterday (nudged lower to 54.4 vs. 55.3 expected and 56.7 in September, with the employment sub-index dipping back below 50 at 49.1 vs. 53.0 in September). Wouldn’t it be ironic if we also were to get a soft US jobs report today that takes US yields back to their starting point of the week, making Powell’s hawkish message so much noise, at least until the next incoming data point jerks the market the other way? Interestingly, the USD is selling off ahead of today’s US data releases even as short US yields are posting new highs for the cycle Specifically in today’s jobs report, in addition to any strong directional surprise in payrolls (multi-month grain of salt needed with this data series, as single releases require further corroborating evidence), we should keep both eyes on the average hourly earnings survey. Arguably, if we get the expected 0.3% month-to-month average hourly earnings print today after a couple of prior prints of a similar size, observers may begin to judge that the annualized rise in earnings is beginning to look far less threatening at sub-4.0%. The year-on-year is expected to drop to a 15-month low of 4.7% today. A significant upside surprise in earnings is perhaps could generate significant volatility. Chart: EURGBPWorth considering how the dovish Bank of England meeting yesterday (see more below) is weighing heavily on sterling, as it should, with the Bank of England reluctant to signal much tightening energy when it sees an incoming recession. Sterling is down sharply across the board, with EURGBP suddenly well backed up within the old range and now far away from the sub-0.8600 range support. The next area between the 0.8800 and pivot high of 0.8870 area looks key for whether sterling weakness is set to become a bit more unhinged, and the next key event-risk test is likely how the market greets an austere Autumn budget statement on November 17. Bank of England wrap. The BoE hiked by 75 bps to 3%, as most expected and as was mostly priced in, but Bailey and company strongly pushed back against expectations for the scale of future moves, saying that the terminal rate priced in currently by the markets would induce a two-year recession. There were also two dovish dissenters at the meeting, one calling for 50 bps rate hike and another for a mere 25 bps. New forecasts were also released, which gave a particularly grim outlook for the economy, looking for a GDP print of -0.5% QoQ in Q3 2022 vs -0.1% expected in September. The inflation forecast now shows a peak around 11% in Q4, which is marginally hotter than the prior meeting’s projection. Sterling was crushed lower, having already fallen heading into the meeting, and it speaks volumes that even though the BoE pushed back against the forward implied expectations for further tightening, which it said would trigger a 2-year UK recession, the market did not budge those expectations. In short: the market refuses to acknowledge what the BoE thinks it might do, probably figuring that the BoE will have no choice due to sterling weakness but to pursue the path to 4.50% or higher rates before mid-next year. I was surprised by the lack of discussion or journalist questioning in the press conference around the risk that currency weakness drives worse inflationary outcomes if the BoE fails to do as much as the market is pricing. Sterling remains in a heap of trouble. Table: FX Board of G10 and CNH trend evolution and strength.The USD needs to stick the move off the back of the FOMC meeting after the US jobs data today, otherwise we’ll suddenly be back to square one. The hottest movement in FX was clearly the sterling sell-off yesterday on a very clearly dovish Bank of England meeting. CNH is making waves on a lot of movement overnight and noise (unconfirmed) of an eventual opening up. Table: FX Board Trend Scoreboard for individual pairs.While the US dollar flipped to a positive trend in many places, we must still consider the risk that incoming data complicates the plot. GBP is already registering a negative trend in many new GBP pairs after yesterday’s BoE meeting. Interesting that the NOK failed to roll over to the downside in a couple of key pairs after the small hike from the Norges Bank yesterday. Upcoming Economic Calendar Highlights 1215 – UK Bank of England Chief Economist Huw Pill to speak 1230 – US Oct. Nonfarm Payrolls Change 1230 – US Oct. Unemployment Rate 1230 – US Oct. Average Hourly Earnings 1230 - Canada Oct. Unemployment Change/Rate 1400 – Canada Oct. Ivey PMI 1400 – US Fed’s Collins (Voter 2022) to speak Source:
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The Bank Of England's Gloomy Outlook Should Undermine The Pound (GBP)

TeleTrade Comments TeleTrade Comments 09.11.2022 09:13
EURGBP lacks any firm intraday direction and remains confined in a narrow trading band. Talks for aggressive policy tightening by the ECB underpin the Euro and offers support. The BoE’s gloomy outlook could weigh on the British Pound and favour bullish traders. The EURGBP cross struggles to capitalize on the previous day's modest gains and oscillates in a narrow trading band, just above the 0.8700 mark through the early European session on Wednesday. Talks of a more aggressive policy tightening by the European Central Bank (ECB) continue to benefit the shared currency and offer support to the EURGBP cross. In fact, several ECB policymakers said that higher rates are needed for longer to bring down double-digit inflation in the Eurozone back to its 2% target. This, in turn, pushes the rate-sensitive two-year German bond yield to its highest since December 2008 and is seen acting as a tailwind for the Euro. The British Pound, on the other hand, draws support from the recent slump in the US Dollar and keeps a lid on the EURGBP cross. That said, the Bank of England's gloomy outlook for the UK economy should undermine the Sterling and supports prospects for some upside for the cross. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024 while indicating a lower terminal peak than is priced into markets. The fundamental backdrop suggests that the path of least resistance for the EURGBP cross is to the upside and any slide below the 0.8700 round figure could be seen as a buying opportunity. Bulls, however, might wait for a sustained strength beyond the 0.8775-0.8780 resistance zone before placing fresh bets amid absent relevant market-moving economic releases. The market focus now shifts to the release of the Preliminary UK Q3 GDP report on Friday.
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The USD Could Yet Reject This Breakdown Attempt | Weak Risk Sentiment Could Provide The Strongest Support For The JPY

Saxo Bank Saxo Bank 09.11.2022 13:25
Summary:  Market sentiment improved further yesterday before dipping slightly overnight, as China Covid cases are on the rise, pushing back against hopes for a lifting of Covid restrictions. In the US mid-term elections, Democrats are slightly outperforming expectations, possibly set to retain control of the Senate even if Republicans look set to take narrow control of the House of Representatives. FX Trading focus: Next test for struggling USD over tomorrow’s US CPI data. The US mid-term election results are still rolling in this morning in Europe, with the Republicans set to take a small majority in the House and the Senate outcome looking at risk of riding on the outcome of a Georgia run-off election on December 6th as neither candidate looks set to achieve the 50% required for elections there. Remember that we had a similar setup after the 2020 election when two Senate races in Georgia were only decided in a January 5 run-off. There are no real market conclusions from the outcome, even if the Georgia race gives the Republicans a majority in the Senate, as the only scenario that would have guaranteed dramatic potential for fiscal policy would have been the Democrats surprisingly retaining both houses. Other conclusions: Trump is a liability for the Republican party, which likely would have done far better without his involvement, and forensic studies of split-ticket voting will likely confirm this, and it will be interesting to see if this deters his possible renewed ambitions for the presidency. Finally: razor thin Georgia results keep alive the narratives around election fraud, etc. Can the US move beyond its dysfunctional elections by 2024 or will the republic face an existential test in that election cycle? Back to incoming data, with tomorrow’s US October CPI in focus. Let’s recall that the September CPI data point was a real shocker as many qualified slicers and dicers of the data were looking for a deceleration in the core data rather than the acceleration we got. That has me leaning for a slightly softer release tomorrow. But I am far more interested in the nature of the market reaction. As I have discussed the last couple of days on the Saxo Market Call podcast, I find the most interesting test for the US dollar one in which we see inflation decelerating and US treasury yields perhaps easing a bit lower, but in which we also see risk sentiment weak as equity and bond markets are starting to decouple, as equities begin to fret recession rather than being merely led around by the nose by the treasury market. If that is the scenario we get and the USD weakens, then I think USD weakness can extend a bit more forcefully for a time, if not, then the USD could yet reject this breakdown attempt. I withhold judgement for now, as the USD has not yet broken down. But the easiest thing to do is to simply judge what happens on the charts in the wake of the data release (not knee-jerk, but how the day closes), as we have a number of clear-cut levels in play for the major USD pairs. Chart: USDJPY USDJPY has traditionally been a strong focus over US data surprises over the years and will be in focus with the macro event risk of the week, if not the month, coming up tomorrow in the form of the US October CPI release. Reaction in yields and risk sentiment are both worth watching as I have cooked up some thoughts of late (see above) on whether US treasury markets and equity markets could move out of correlation, i.e., that risk sentiment may have a hard time celebrating a drop in treasury yields. So, a weaker than expected US CPI report together with falling treasury yields, but also together with weak risk sentiment could provide the strongest support for the JPY here in a broad sense, though it might be felt more forcefully in JPY crosses. Regardless, if the JPY finds bids tomorrow, the 145.00 level will be a huge focus in USDJPY. Table: FX Board of G10 and CNH trend evolution and strength.The USD is clearly down, but will only be out on sticking further weakness in the wake of the US CPI release tomorrow. Elsewhere, note the sterling momentum turning badly south and SEK trying to look higher, not a surprise given European equities having rallied vertically for weeks – looking a bit much. Table: FX Board Trend Scoreboard for individual pairs.EURGBP is one to focus on around the 0.8800 level. JPY crosses are interesting in places as well as yields have consolidated a bit lower – look at the 165 area in GBPJPY, for example. But it is all about key USD levels after the US data tomorrow, including 1.0100 in EURUSD, 0.6522 in AUDUSD, etc… Upcoming Economic Calendar Highlights 1200 – Mexico Oct. CPI 1300 – UK Bank of England’s Haskel to speak 1530 – EIA's Weekly Crude and Fuel Stock Report 1630 – UK Bank of England’s Cunliffe to speak 1700 – World Agriculture Supply and Demand Estimates (WASDE) 0001 – UK Oct. RICS House Price Balance 0100 – US Fed’s Kashkari (Voter 2023) to speak   Source:
Bank of England survey highlights easing price pressures

The UK Central Bank (BoE) Expects A Recession To Last For All Of 2023

TeleTrade Comments TeleTrade Comments 10.11.2022 09:51
EURGBP lacks any firm intraday direction and oscillates in a range on Thursday. A combination of factors, however, continues to act as a tailwind for the cross. Talks for aggressive tightening by the ECB underpin the Euro and offers support. The BoE’s bleak outlook for the UK economy supports prospects for further gains. The EURGBP cross is seen oscillating in a range, around the 0.8800 round-figure mark through the early European session and consolidating the overnight strong gains to a nearly one-month high. The Bank of England's gloomy outlook for the UK economy turns out to be a key factor behind the British Pound's relative underperformance and acts as a tailwind for the EURGBP cross. In fact, the UK central bank expects a recession to last for all of 2023 and the first half of 2024. Moreover, the BoE last week indicated a lower terminal peak than was priced into the markets. The shared currency, on the other hand, continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). Several ECB policymakers, including President Christine Lagarde, indicated that the central bank will keep raising rates aggressively to tackle red-hot consumer inflation, which accelerated to a record high of 10.7% in October. This, in turn, pushed Germany’s short-dated yields to fresh multi-year highs earlier this week and adds credence to the near-term positive bias for the EURGBP cross. Even from a technical perspective, the previous day's sustained move and acceptance above the 0.8775-0.8780 supply zone support prospects for an extension of a nearly three-week-old uptrend. There isn't any major market-moving economic data due for release on Thursday, either from the Eurozone or the UK. Hence, the focus remains on the Preliminary UK Q3 GDP print on Friday. Investors will also look forward to British Finance Minister Jeremy Hunt's fiscal statement on November 17. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders.
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair's Bulls Are All Set To Challenge

TeleTrade Comments TeleTrade Comments 11.11.2022 09:15
EURGBP remains mildly bid while showing no major reaction to the UK, German data. UK’s Q3 GDP eased to -0.2% QoQ versus -0.5% expected and 0.2% prior. Germany’s HICP inflation gauge confirmed 11.6% YoY figures for October. The market’s cautious optimism underpins bullish bias, off in the US, and Canada restricts immediate advances. EURGBP holds onto smaller gains around 0.8730, picking up bids of late, even as the UK’s third quarter (Q3) Gross Domestic Product (GDP) printed mixed data heading into Friday’s London open. That said, the preliminary prints of the UK’s Q3 GDP signaled that the British economy contracted by 0.20% QoQ versus -0.50% market consensus and the previous expansion of the 0.20% QoQ figure. On the other hand, the final prints of Germany’s inflation data for October, as per theHarmonized Index of Consumer Prices (HICP) measure confirmed the 11.6% initial readings. With this, the market’s cautious optimism and the Euro’s (EUR) benefit from the US Dollar’s (USD) south-run, mainly after the previous day’s US inflation data, keeps the EURGBP buyers hopeful. It’s worth noting that the US Consumer Price Index (CPI) dropped to the lowest levels in the eight months the previous day and bolstered the hopes of an easy Fed rate hike. The same contrast with the hawkish comments from the European Central Bank (ECB) representatives and enable the EUR to remain firmer. However, a bank holiday in the US and Canada restricts the market’s latest moves. On the same line are mixed concerns surrounding the US-China tussle over Taiwan and the Covid conditions in China. Amid these plays, the US S&P 500 futures stay on their way to refreshing the two-month high while the US Treasury yields remain pressured, mostly inactive. Moving on, EURGBP traders should pay attention to the updates from the UK government and the Bank of England (BOE) concerning the reaction to the UK Q3 GDP, for fresh impulse. Technical analysis A daily closing below the 21-DMA immediate support, around 0.8690 by the press time, appears necessary for the EURGBP bears to retake control. Until then, the bulls are all set to challenge the monthly resistance line, around 0.8825 by the press time.
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

US Dollar (USD) Recovery Keeps A Lid On Any Meaningful Upside For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.11.2022 10:58
EURGBP gains some positive traction for the second straight day, though lacks any follow-through. A modest USD rebound is weighing on the common currency and acting as a headwind for the cross. Traders also seem reluctant ahead of this week’s UK macro data and Chancellor Hunt’s statement. The EURGBP cross edges higher for the second successive day on Monday and sticks to its modest intraday gains through the early European session. The cross is currently placed above the mid-0.8700s, though lacks any follow-through buying or bullish conviction. The shared currency continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). The British Pound, on the other hand, is undermined by the gloomy outlook for the UK economy. In fact, the National Institute of Economic and Social Research (NIESR) expects the UK GDP growth to be flat in Q4 and noted that the risk of a contraction remains elevated. This, in turn, is seen lending some support to the EURGBP cross. That said, the prospects for further interest rate hikes by the Bank of England act as a tailwind for the Sterling. Apart from this, a modest US Dollar recovery from a nearly three-month low exerts some pressure on the Euro and keeps a lid on any meaningful upside for the EURGBP cross, at least for now. Traders also seem reluctant to place aggressive bets ahead of this week's important UK macro data - the monthly jobs report on Tuesday and the CPI report on Wednesday. Investors will further take cues from the BoE's Monetary Policy Report Hearings on Wednesday and Chancellor Jeremy Hunt’s Autumn Statement on Thursday. This will play a key role in influencing the near-term sentiment surrounding the GBP and determine the next leg of a directional move for the EURGBP cross. In the meantime, spot prices seem more likely to consolidate in a range amid absent relevant market-moving economic releases, either from the Eurozone or the UK.
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

Aggressive Bearish Bets Has Arrived Around The EUR/GBP Pair

TeleTrade Comments TeleTrade Comments 15.11.2022 10:04
EURGBP comes under some selling pressure on Tuesday, though the downside remains cushioned. The mixed UK employment figures reaffirm further BoE rate hikes and underpin the British Pound. Talks for a more aggressive tightening ECB  benefit the shared currency and lend support to the cross. The EURGBP cross extends the previous day's modest pullback from the 0.8820-0.8830 resistance zone and edges lower through the early European session on Tuesday. The cross remains on the defensive around the 0.8770-0.8765 region and moves little following the release of the latest UK employment details. The UK Office for National Statistics reported that the jobless rate unexpectedly ticks higher to 3.6% during the three months to September from 3.5% previous. Adding to this, the number of people claiming unemployment-related benefits came in at 3.3K against consensus estimates pointing to a fall of 12.6K. The disappointment, however, was offset by stronger wage growth figures. In fact, the Average Earnings Excluding Bonuses rose to 5.7% from 5.5%, beating estimates for an uptick to 5.6%. The data reaffirms market bets for a further policy tightening by the Bank of England, which is seen offering some support to the British Pound. That said, a modest pickup in demand for the shared currency acts as a tailwind for the EURGBP cross and limits the downside. Against the backdrop of talks for a more aggressive policy tightening by the European Central Bank (ECB), the emergence of fresh selling around the US Dollar offers support to the Euro. This, in turn, warrants some caution before placing aggressive bearish bets around the EURGBP cross and positioning for any further intraday losses ahead of the German ZEW Economic Sentiment.
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

G10 Forex Market in 2023 To Be Characterised By More Volatility

ING Economics ING Economics 20.11.2022 11:30
After an 18-month bull trend in the dollar, the FX outlook has become less clear. Further position adjustment could prompt a little more short-term dollar weakness, but we do not believe the conditions are in place for a major dollar bear trend just yet. Instead, we expect FX markets in 2023 to be characterised by less trend and more volatility. Source: Shutterstock G10: Less trend, more volatility The final quarter of 2022 has seen a breakdown in the otherwise orderly dollar bull trend – a trend which had been worth 5% per quarter over the first nine months of the year. That dollar rally had largely been driven by a Federal Reserve wanting to take policy into restrictive territory – a trend only exacerbated by the war in Ukraine. For all the current discussions about peak dollar and peak macro pessimism, we think it is still worth examining whether the conditions will be in place to deliver an orderly dollar bear trend in 2023. We think not and here are three reasons why: Driving the dollar bull trend since summer 2021 has been a Fed at first abandoning Average Inflation Targeting and then trying to get ahead of the inflation surge. A call on a benign dollar decline in 2023 requires the Fed to be taking a back seat. That seems unlikely. The stark message from both the Fed’s Jackson Hole symposium and the IMF autumn meetings was that central banks should avoid relaxing too early in their inflation battle – a move which would deliver the pain of recession without any of the sustained gains on inflation. We suspect it will be too early for the Fed to sound relaxed at its 14 December meeting and March 2023 may be the first opportunity for a decisive turn in Fed rhetoric. While a softer Fed profile may be a necessary condition for a turn in the dollar, a sufficient condition requires a global economic environment attractive enough to draw funds out of the dollar. 2023 global growth forecasts are still being cut – dragged lower especially by recession in Europe. ING forecasts merchandise world trade growth below 2% in 2023 – not a particularly attractive story for the trade-sensitive currencies in Europe and emerging markets. A liquidity premium will be required of non-dollar currencies. 2023 will be a year when central banks are initially still hiking into a recession and shrinking balance sheets. The Fed will reduce its balance sheet by a further $1.1tn in 2023 and the European Central Bank will be looking at quantitative tightening, too. Lower excess reserves will tighten liquidity conditions still further and raise FX volatility levels. Again, the bar not to invest in dollar deposits remains high – especially when those dollar deposits start to pay 5% and the dollar retains its crown as the most liquid currency on the planet. What do these trends mean for G10 FX markets? This probably means that the dollar can bounce around near the highs rather than embark on a clean bear trend in 2023. If the dollar is to turn substantially lower, we would favour the defensive currencies such as the Japanese yen and Swiss franc outperforming. Here, the positive correlation between bonds and equity markets may well break down via the bond market rallying on the back of a US recession and easier Fed policy. ING forecasts US 10-year Treasury yields ending 2023 at 2.75% - USD/JPY could be trading at 130 under that scenario.  Recession in Europe means that EUR/USD could be trading in a 0.95-1.05 range for most of the year, where fears of another energy crisis in the winter of 2023 and uncertainty in Ukraine will hold the euro back. Sterling should also stay fragile as the new government attempts to restore fiscal credibility with Austerity 2.0. We cannot see sterling being rewarded much more on austerity and suspect that GBP/USD struggles to hold gains over 1.20.  Elsewhere in Europe, some differentiation could emerge between the Scandinavian currencies. The Swedish krona may struggle to enter a sustained uptrend next year given its elevated exposure to the eurozone’s growth story, while the Norwegian krone could benefit from its attractive commodity exposure. However, NOK is an illiquid and more volatile currency, and would therefore face a bigger downside in a risk-off scenario. As shown in the chart below, commodity currencies look undervalued versus the dollar on a fundamental basis. However, a stabilisation in risk sentiment is a necessary condition to close the misvaluation gap. For the Australian and New Zealand dollars, an improvement in China’s medium-term outlook is also essential, so the Canadian dollar may emerge as a more attractive pro-cyclical bet given low exposure to the economic woes of Europe and China. Another factor to consider is the depth of the forthcoming house price contraction. We think central banks will increasingly take this into consideration and will try to avert an uncontrolled fall in the housing sector. However, this is potentially a very sizeable downside risk, especially for the currencies of commodity-exporting countries, which generally display the most overvalued property markets in the G10. To conclude, we think FX trends will become less clear in 2023 and volatility will continue to rise. FX option volatility may seem expensive relative to historical levels, but not at all when compared to the volatility FX pairs are actually delivering. We suspect risk management through FX options may become even more popular in 2023.   Valuation, volatility and liquidity in G10 Source: ING, Refinitiv EUR/USD: Dollar bromance will take some breaking   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/USD 1.035 Bearish 0.98 0.95 0.98 1.00 1.00 Bullish leap of faith is too dangerous: We are bearish on EUR/USD into the end of the first quarter of 2023. Key factors which have driven EUR/USD lower this year will remain largely in place. The softish US October CPI print may give the Fed some pause for thought, but should not be enough to derail it from some further tightening – taking the policy rate close to 5.00% in the first quarter of 2023. Another key factor for EUR/USD this year has been energy. Here, our team sees prices for both natural gas and oil rising from current levels through 2023. A difficult 2023 European winter for energy may well restrain the EUR/USD recovery later in the year, continuing to depress the eurozone’s traditionally large current account surplus.   Necessary but not sufficient: Tighter Fed policy has been at the forefront of this year’s dollar rally and a shift in the Fed tone (more likely in March 2023 than December 2022) will be necessary to see the short end of the US yield curve soften appreciably and the dollar weaken. But the sufficient condition for a EUR/USD turnaround is the state of affairs amongst trading partners. Are they attractive enough to draw funds away from USD cash deposits potentially paying 5%? That is a high bar and why we would favour the EUR/USD 2023 recovery being very modest, rather than the ‘V’ shape some are talking about. ECB will blink first: The case for a central bank pivot is stronger for the ECB than the Fed. The German economy looks set to contract 1.5% next year and at its 15 December meeting, the ECB may well use its 2025 forecast round to show inflation back on target. We see the ECB tightening cycle stalling at 2.25% in February versus the near 3% currently priced by the market for 2023. This all assumes a seamless ECB introduction of quantitative tightening and one that does not upset peripheral bond markets. Add in global merchandise trade barely growing above 1% next year (recall how the 2017-19 trade wars weighed on the euro) plus the risk of tighter liquidity spilling into financial stability – all suggest the market’s bromance with the dollar will continue for a while yet.  USD/JPY: 1Q23 will be a crucial quarter   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/JPY 140.00 Bearish 145.00 145.00 140.00 135.00 130.00 Clash of the titans: The stark divergence in monetary policy between the Fed and the Bank of Japan has been the primary driver of this year’s 15%+ rally in USD/JPY. In 2023, investors may question whether the BoJ is ready to tighten. The default view is that the perma-dovish BoJ Governor, Haruhiko Kuroda, will not be moved. However, the end of Governor Kuroda’s term on 8 April 2023 will no doubt lead to frenzied speculation on his replacement and whether a less dovish candidate emerges. Interest rate markets are starting to price a change – e.g. the BoJ’s 10-year target sovereign yield of 0.25% is priced at 0.50% in six months’ time. March 2023 will be especially volatile: The first quarter of 2023 will also see huge focus on the Japanese wage round, where a rise in wages is a prerequisite for the BoJ to tighten policy. Japanese politicians have been encouraging business leaders to raise wages, while at the same time, the government has been quite aggressive with fiscal stimulus to offset the cost-of-living shock. This period will also see the Fed release its dot plots (22 March), which may be the first real chance for the Fed to acknowledge a turn in the inflation profile. As such, this period (March/April) could see a big reversal lower in USD/JPY. FX Intervention slows the move: Most agree that USD/JPY is higher for good reasons (including the energy crisis) and that Japanese FX intervention can only slow, not reverse the move. The Japanese have already spent around $70bn in FX intervention between the 146 and 151 region in USD/JPY and will likely be called into further action based on our view of a stronger dollar over coming months. FX reserves are not limitless, of course, but Japan’s large stockpile of $1.1tn means that this campaign can continue for several more months. The purpose here is to buy time before the Fed cycle turns. Unless we end up with 6%+ policy rates in the US next year, we would expect USD/JPY to be ending 2023 nearer 130. GBP/USD: Running repairs   Spot Year ahead bias4Q221Q232Q233Q234Q23 GBP/USD 1.19 Mildly Bearish 1.10 1.07 1.11 1.14 1.14 Fiscal rescue plan: After September’s government-inflicted flash crash, GBP/USD is now recovering on the expectation of more credible UK fiscal plans and the softer dollar. As above, we doubt 2023 will prove the year of a benign dollar decline. And the risk is that the Fed keeps rates at elevated levels for longer. Given sterling’s large current account deficit and its transition to high beta on the external environment, we think it is too early to be expecting a sustained recovery here. Instead, we favour a return to the 1.10 area into year-end as the government introduces Austerity 2.0 and the Bank of England cycle is repriced lower. Tighter fiscal/looser monetary mix: At its meeting in early November, the BoE pushed back against the market pricing of the rate cycle – arguing that hikes close to 5% would see the UK economy contract 5%. Our call is that the BoE terminal rate will be closer to the 3.75% area than the 4.50% that the market prices today. As the BoE assesses the degree of tightening needed to curtail inflation, the government is discussing ways to fill around a £60bn hole in the budget. The plan will be revealed on 17 November, probably in a roughly 50:50 split between tax hikes and real terms spending cuts. We look for the UK economy to contract every quarter in 2023 – making it a very difficult environment for sterling. Sterling suffers from liquidity outages: This year’s BIS triennial FX survey saw sterling retain its position as the fourth most traded currency pair. Despite this, sterling does occasionally suffer from flash crashes. We think liquidity will be at a premium in 2023 and that a Fed taking real rates even higher as economies head into recession is a dangerous combination for sterling – where financial services make up a large section of the economy. GBP/USD realised volatility is now back to levels seen during Brexit and our market call for 2023 is that these types of levels will become more, not less, common. EUR/JPY: A turn in the cycle   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/JPY 144.50 Bearish 142.00 138.00 137.00 135.00 130.00 Downside risks into 1Q23: EUR/JPY has defied typical relationships with risk assets by gently rallying all year even as both bond and equity benchmarks sold off 20%. Driving that JPY underperformance has probably been BoJ policy and USD/JPY’s strong relationship with US 10-year yields. Both the eurozone and Japan have been hit by the energy shock, where external surpluses have quickly dwindled. As above, we tend to think there are downside risks to EUR/JPY in the first quarter of 2023 as speculation mounts over BoJ Kuroda's successor as well as the ECB potentially calling time on their tightening cycle at the February meeting. US10yr can drag EUR/JPY to 130 in 2H23: A large part of the JPY underperformance during 2022 has been driven by developments in the US bond market. USD/JPY consistently shows the most positive correlation to US 10-year Treasury yields of any of the G10 FX pairs – and far higher than EUR/USD. Consistent with ING’s view on the Fed cutting rates in the third quarter of 2023, our debt strategy team sees US 10-year yields starting to edge lower in the second quarter of 2023, and then falling 100bp in the second half of 2023. In theory, this should heavily pressure EUR/JPY into the end of the year. Financial stability risks increase: Lower growth and tighter liquidity conditions – at least through the early part of 2023 – increase the prospect of financial stability risks. Recall the Fed will be shrinking its balance sheet by $1.1tn in 2023 even as liquidity and bid-offer spreads continue to create difficult market conditions. The yen lost its shine as a safe-haven currency in 2022, but we suspect relative to the euro, some of that shine can be regained in a softer US rate environment. The EUR/JPY cycle should also turn if the ECB calls time on its tightening cycle at the 2 February meeting. EUR/GBP: Listless in London   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/GBP 0.87 Neutral 0.89 0.89 0.88 0.88 0.88 In the same macro boat: Both the eurozone and UK economies have been hit hard by the war in Ukraine and the surge in energy prices. Both saw sharp terms of trade declines into August and then a sharp reversal as natural gas prices dipped into the warm winter. There is not a substantial amount of difference between our German and UK quarterly growth profiles for 2023 – both contracting every quarter of the year. Perhaps one could argue that the UK is more exposed to higher mortgage rates given the shorter duration of fixed-rate mortgages in the UK. This could all make for a trendless EUR/GBP environment. Energy price guarantees could differentiate: One important determinant for UK growth in 2023 will be how the new government handles the Energy Price Guarantee. Former UK Prime Minister, Liz Truss, offered a two-year programme – subsequently cut back to six months after the UK fiscal crisis. How the UK consumer copes with having to pay market prices for energy will be key to the UK story in 2023 as well as how the EU as a whole copes with similar challenges. Currently, it seems that the ECB is concerned that the fiscal programmes in Europe are too generous and not particularly targeted – adding to the inflation challenge.    Political wild cards: To pick out a few political wild cards, the first is a re-run of the Scottish independence referendum. The Scottish National Party (SNP) has picked 19 October 2023 as the date – although such an exercise would likely have to be approved by the UK parliament. Currently, the SNP is pursuing an action through the Supreme Court to see whether London can indeed still veto the referendum. In Europe, the focus will probably be on the fiscal path taken by the new right-wing Meloni government and also the reform of the Stability and Growth Pact. Budgets submitted in late 2023 could become an issue were the rules to be tightened again.   EUR/CHF: Swiss National Bank to guide it lower   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/CHF 0.98 Bearish 0.95 0.93 0.90 0.90 0.92 Does the SNB want a stronger Swiss franc?: The Swiss National Bank this year said it made a conscious decision to allow nominal Swiss franc appreciation in light of the inflation environment. The three-month policy rate has been raised 125bp to 0.50% and the SNB says it wants to keep the real exchange rate stable. With inflation running at 3% in Switzerland versus 10% in its largest trading partner, the eurozone, the SNB in theory should be happy with something like 5-7% per annum nominal appreciation in the Swiss franc. That certainly was the story into the end of September but does not quite explain the Swiss franc's weakness over the last six weeks. Two-sided intervention: When hiking rates earlier this year the SNB also said it would be engaging in two-sided FX intervention. Ever since the start of the financial crisis in 2008, the SNB has been more familiar as a seller of the Swiss franc – including its 1.20 floor in 2011-2015. Now its strategy is changing and we read that as an objective to potentially manage the Swiss franc stronger in line with its ambitions to tighten monetary conditions. Earlier this year, we estimated that the SNB could possibly drive EUR/CHF to the 0.90 area in summer 2023 based on expected inflation differentials and the need for a stable real exchange rate. The risk environment should favour the franc: Central banks are communicating that they need to tighten rates into recession and remove the excess liquidity poured out during a series of monetary bailouts. Tighter monetary and financial conditions typically spell stormy waters for risk assets. With its still sizable current account surplus (worth 8% of GDP in the second quarter of 2022) the Swiss franc should perform well during this stage of the global economic cycle. Closer to home, the European economic cycle and the ECB discussing quantitative tightening into early 2023 will prove a challenge to peripheral eurozone debt markets and likely reinforce the franc as a eurozone hedge. EUR/NOK: Not for the faint of heart   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/NOK 10.33 Bearish 10.30 10.15 9.95 9.70 9.60 Risk sentiment remains key: The krone is not a currency for the faint of heart. It is the least liquid currency in the G10 space, making it considerably exposed to negative shifts in global risk sentiment and equity market turmoil. It is, at this stage, way too early to call for a turn in equities, and a hawkish Fed into the new year may actually mean more pain for risk assets, at least in the near term. A recovery in global sentiment should offer support to NOK in the second half of next year, but restoring market confidence in a very high-beta currency is no easy feat. Norges Bank policy: The krone’s underperformance in 2022 was exacerbated by Norges Bank effectively sterilising oil and gas profits via a large increase in daily NOK sales. In November, FX daily sales have been scaled back from NOK4.3bn to NOK3.7bn, and we think there could be some interest by NB to further ease the pressure on the currency via smaller FX sales. With recent dovish hints suggesting that the NB hiking cycle may peak at 3.0% (with most of the country on variable mortgage rates, many more rate hikes could be difficult to tolerate), allowing a stronger currency to do some inflation-fighting sounds reasonable.  Energy prices: If indeed markets enjoy a calmer environment in 2023 and NB favours a stronger currency, then NOK is left with considerable room to benefit from a still strong energy market picture for Norway. There is probably an optimal range for oil and – above all – gas prices to trade at elevated levels but not such high levels that would significantly hit risk sentiment. For TTF, this could be somewhere around 150-200 €/MWh. This a plausible forecast for next year, but the margin for error can be very large. We see EUR/NOK at 10.50 in the fourth quarter of 2023, but NOK hiccups along the way are highly likely. EUR/SEK: Eurozone exposure a drag on SEK   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/SEK 10.80 Neutral 10.85 10.70 10.60 10.40 10.50 Riksbank’s policy: The Riksbank delivered more than one hawkish surprise in 2022, including a 100bp rate hike. This appeared to be part of a front-loading operation where lifting the krona was seen as a welcome side effect. In practice, and like in many other instances in the G10, the high volatility environment meant that short-term rate differentials played a negligible role in FX. So, despite a wide EUR-SEK negative rate differential throughout 2022, SEK was unable to draw any real benefit. That differential has now evaporated, but we expect 125bp of tightening (rates at 3.0%) in Sweden versus 75bp in the eurozone, which could suggest some EUR/SEK downside room in a more stable market environment. Also, a slowdown in FX purchases by the RB, now that reserves are back to the 1H19 levels, should remove some of the pressure on SEK. European picture: Sweden is a very open economy with more than half of its exports heading to other EU countries. Our expectations are that 2023 will see a rather pronounced eurozone recession and that the energy crisis will extend into the end of next year. Barring a prolonged period of low energy prices (and essentially an improvement in the geopolitical picture) in Europe, we doubt SEK will be able to enter a sustainable appreciation trend in 2023 as sentiment in the eurozone should remain depressed. Valuation: We are not fans of the euro in 2023, which means that our EUR-crosses forecasts reflect the weaker EUR profile. We see some room for EUR/SEK to move lower throughout the year – also considering that we estimate the pair to be around 9.0% overvalued. However, the high risk of a prolonged energy crisis in the eurozone means that SEK is significantly less attractive than other pro-cyclical currencies next year. Incidentally, SEK is highly correlated to the US tech stock market, which looks particularly vulnerable at the moment. A return to 10.00 or below would likely require a significant improvement in European sentiment. USD/CAD: Loonie is an attractive pro-cyclical bet   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/CAD 1.33 Bearish 1.34 1.32 1.30 1.26 1.24 Commodities and external factors: Our commodities team expects Brent to average slightly above $100/bbl next year, and Western Canadian Select around $85/bbl. Along with our expectations for higher gas prices, the overall commodity picture should prove rather supportive for the Canadian dollar in 2023. In our base-case scenario, where global risk sentiment gradually recovers but two major risk-off forces – Ukraine/Europe and China – remain, CAD would be in an advantageous position, since Canada has much more limited direct exposure to China and Europe compared to other commodity-exporting economies.  Domestic economy: If the US proves to be a relative 'safe-haven' in the global recession, therefore withstanding the downturn better than other major economies like the eurozone, this should offer a shield to Canada’s economy, which is heavily reliant on exports to the US. There is probably one major concern for the domestic economy: house prices. Canada is among the most vulnerable housing markets in the world, with price-to-income ratios around 9x in many cities (compared to 5-6x in the US). Whether we’ll see a sizeable but controlled descent or a fully-fledged housing crash will depend on the Bank of Canada and the depth of the recession. Monetary policy and valuation: It does appear that the BoC has started to consider domestic warning signals (probably, also house prices), and recently shifted to a more moderate pace of tightening. Markets are currently expecting rates to peak around 4.25/4.50% in Canada, and we tend to agree. Barring a rapid acceleration in the unemployment rate, a housing crash should be averted. It is also likely that the BoC will start cutting before the Fed in 2023. All in all, accepting the downside risks stemming from the housing market and/or a further deterioration in risk sentiment, we see room for a descent in USD/CAD to the 1.25 level towards the end of 2023. In our BEER model, CAD is around 20% undervalued in real terms. AUD/USD: Riding Beijing’s roller coaster   Spot Year ahead bias4Q221Q232Q233Q234Q23 AUD/USD 0.68 Mildly Bullish 0.66 0.66 0.68 0.69 0.70 Exposure to China: The Australian dollar is a high-beta currency, and the direction of global risk sentiment will be the key driver next year. We think that a gradual recovery in sentiment will be accompanied by a still challenging energy picture, which may force investors to choose which pro-cyclical currencies to bet on. When it comes to AUD, the China factor will remain very central, as Australia has the most China-dependent export machine in the G10. Our economics team’s baseline scenario is that the real estate crisis will be the main drag on growth in China and while retail should recover on looser Covid rules, slowing global demand should hit exports. One positive development: the new Australian government is seeking a more friendly relationship with Beijing, paving the way for the removal of export curbs next year. Commodities and growth: Iron ore remains Australia’s main export (estimated at $130bn in 2022), and it is a very sensitive commodity to China's real estate sector. Our commodities team thinks a return to $100+ levels is unlikely given the worsening Chinese demand picture, but still forecasts prices to average $90/t in 2023. The second and third largest exports are oil and natural gas ($100bn combined). Here, we see clearly more upside room for prices, especially on the natural gas side. On balance, we expect the commodity picture for Australia to be rather constructive next year, which could offer a buffer to the Australian economy during the downturn. Growth in 2022 should have topped the 4% mark, but that will be much harder to achieve in 2023. The combination of higher rates, reset mortgages, a slowing housing market and possibly softening labour market should bring growth back closer to 3%. This would still be an extremely strong outcome against the backdrop of global weakness.   Monetary policy and valuation: The Reserve Bank of Australia has been one of the 'pioneers' of the dovish pivot, and a return to 50bp increases seems unlikely, as the Bank is probably monitoring the rather overvalued housing market, and the inflation picture is less concerning than in the US or in Europe. Most Australian households have short-term fixed mortgage rates, and we could see a deterioration in disposable income (especially at the start of the year). We think the RBA will be careful to avert an excessively sharp housing contraction, and we expect rates to peak at 3.60% (well below the Fed and the Reserve Bank of New Zealand) and cuts from 3Q23. This would mean a less attractive carry – and less upside risk in an optimistic scenario for global sentiment; but also less damage to the economy, which may play in AUD’s favour in our baseline scenario. Valuation highly favours AUD, as the positive terms of trade shock means that AUD/USD is 20% undervalued in real terms, according to our behavioural equilibrium exchange rate (BEER) model. We have a moderately upward-sloping profile for the pair in 2023, but high sensitivity to risk sentiment and China suggests downside risks remain high. NZD/USD: Dodging the housing bullet   Spot Year ahead bias4Q221Q232Q233Q234Q23 NZD/USD 0.62 Mildly Bullish 0.60 0.60 0.62 0.63 0.64 Monetary policy: The Reserve Bank of New Zealand has given very few reasons to believe it is approaching a dovish pivot. Markets are currently expecting the Bank to hike well into 2023, and take rates to around 5.0%. While inflation (7.2% year-on-year) and job market tightness (unemployment at 3.3%) both remained elevated in the third quarter, there are growing concerns about the rapid downturn in the New Zealand property market, which in our view will trigger either an earlier-than-expected end to the tightening cycle or a faster pace of rate cuts in 2023. Housing troubles: The RBNZ recently published its financial stability report, where it showed relatively limited concern about households’ ability to withstand the forthcoming downturn in house prices. In its August 2022 forecasts, the RBNZ estimated that the YoY contraction in house prices will reach 11.6% in the first quarter of 2023. However, that implied an Official Cash Rate at 4.0%, so only 50bp of extra tightening from now, which seems too conservative now. House prices have fallen 7.5% from their first quarter 2022 peak so far, but the trend may well accelerate, especially given a hawkish RBNZ and the risk of slowing global demand hitting the very open New Zealand economy. External drivers and valuation: Even assuming a constructive domestic picture in the housing market and an attractive yield for the currency in 2023, external factors will determine how much NZD can draw any benefit. As for AUD, risk sentiment and China are the two central themes. The New Zealand dollar is more exposed to risk sentiment (as it is less liquid and higher-yielding) than AUD, but probably less exposed to China’s story. In particular, the real estate troubles in China may well hit Australia via the iron ore channel, while NZ exports (primarily dairy products) are much more linked to China’s Covid restrictions, which look likely to be gradually scaled back. In our base case, the two currencies should largely move in tandem next year. The real NZD/USD rate is 15% undervalued, according to our BEER model. EUR/DKK: Tricky mix of intervention and rates   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/DKK 7.44 Neutral 7.44 7.44 7.44 7.44 7.45 Central bank policy: Danmarks Nationalbank delivered FX intervention worth DKK45bn in September and October to defend the EUR/DKK peg. On 27 October, it opted for a smaller rate hike (60bp) compared to the ECB (75bp), which briefly sent EUR/DKK close to the 7.4460 February highs before rapidly falling back to 7.4380/90. We think it will be a busy year ahead for the central bank, as we expect very limited idiosyncratic EUR strength and potentially more pressure on EUR/DKK. Having now exited negative rate territory, DN has much more room to adjust the policy rate for a wider rate differential with the ECB if needed. However, with inflation running above 10% in Denmark, DN may prefer FX intervention over dovish monetary policy to support the peg. We have recently revised our EUR/DKK forecast, and expect a return to 7.4600 only in 2024. 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  
Hungarian inflation peak is behind us

FX Daily: In Hungary, The Central Bank Left Rates Unchanged

ING Economics ING Economics 23.11.2022 10:11
Risk sentiment is still being driven by news from China, with markets now turning a blind eye to Covid restrictions and instead speculating about an easing in tech regulation. Today, it's all about the Fed minutes, as bulls hope to find signs that Powell's hawkishness was conditional on a strong CPI reading. The USD correction may be nearing its bottom In this article USD: Ready to scan the Fed minutes EUR: Only a dollar function GBP: Hunt to testify CEE: The region remains quiet Source: Shutterstock   USD: Ready to scan the Fed minutes Global risk sentiment has rebounded after absorbing the news about China’s new Covid wave. One factor driving the rally has been increasing speculation that China is loosening its regulatory grip on the tech sector, essentially offering a lifeline to tech shares which have gone through some rough months. This sharp recovery in sentiment appears a bit premature in our view. While there is no clear evidence that the regulatory crackdown has taken a decisive turn (only yesterday, it was reported that China will fine Ant Group $1bn), there is plenty of evidence that Covid restrictions are rapidly being reintroduced into many parts of the country, including Shanghai. But today, all eyes are on the FOMC minutes, the big risk event before a quieter rest of the week as the US enters the Thanksgiving holiday break. Investors will scan the minutes for indications that the “higher for longer” plan is linked to short-term dynamics in CPI releases. Expect another rally in risk assets should the minutes provide hints of conditionality of Powell’s post-meeting hawkishness to a prolonged stickiness in inflation readings, which markets are now more convinced will not materialise after the latest CPI reading. In the absence of such hints, there may not be much for risk bulls to cling on to, given that the November meeting was still a largely hawkish one and the post-meeting (and also post-CPI) Fedspeak has been rather cautious on a dovish pivot. In FX, the dollar has faced a new round of selling. We don’t exclude that this correction will run a little further, but we continue to expect a rather radical inversion in the bearish dollar trend in December as the Fed remains broadly hawkish, energy prices rise again and the global economy slows. Elsewhere in the G10, the Kiwi dollar was stronger after a 75bp rate hike by the Reserve Bank of New Zealand overnight. Policymakers signalled they will take rates to 5.5% in 3Q22, that the economy will enter a recession and that the housing market will contract by 20% (more than previously expected) from its 2021 peak. We remain doubtful that the RBNZ will ultimately deliver this much tightening and tolerate such a sharp house market contraction, but for now, it remains a clear hawkish standout in the developed market. Francesco Pesole EUR: Only a dollar function The risk rally sent EUR/USD back above 1.0300. Indeed, some improvement in China-related sentiment is a positive development for eurozone assets and the euro, but swings in the pair remain primarily a function of broader dollar moves. The eurozone’s calendar includes November’s PMI numbers today. Which are expected to remain rather depressed despite the easing in energy prices. Barring a major upside surprise, it appears unlikely that the release will generate a strong market reaction. The same should be true for ECB speakers (Luis De Guindos, Pablo Hernandez De Cos, and Mario Centeno) today. The Fed minutes are the most important event for EUR/USD today, along with further changes in the market's sentiment on China. An extension of the rally to 1.0400/1.0450 is surely possible in the coming days, but a return to parity in the next few weeks remains our base case as we enter a challenging winter for the eurozone economy. Francesco Pesole GBP: Hunt to testify PMIs will be released in the UK today, and the consensus is looking for a further deterioration in both the manufacturing and composite gauges, possibly due to the prospect of austerity measures by the new UK government. On this topic, Chancellor Jeremy Hunt will testify before the Treasury Committee about his Autumn Statement this afternoon. The extended correction in the dollar is now pushing cable towards the 1.2000 gravity line. Expect some resistance around that level given the lack of strong domestic bullish drivers for the pound though. GBP’s greater sensitivity to risk sentiment compared to the euro means that further improvements in global risk sentiment can push EUR/GBP to test 0.8600 in the coming days. Francesco Pesole CEE: The region remains quiet Today, we expect a second round of monthly data from Poland, led by retail sales. Yesterday's data showed rather softer numbers. In our view, retail sales growth has slowed to low single-digit growth as wages are no longer keeping up with rising prices. We forecast growth of 3.8% year-on-year as high inflation is undermining consumers' purchasing power to such an extent that they are more cautious in their purchasing decisions. However, the attention grabber will be the POLGBs auction. Yields have moved down massively over the past month, completely changing the market picture. In the Czech Republic, we will see the Czech National Bank conference, including an opening speech by the governor, who rarely appears in public. In Hungary, the central bank left rates unchanged yesterday as expected. The National Bank of Hungary repeated its "whatever it takes" stance and the short-term focus remains on market stability until an improvement in risk perception occurs. The Hungarian forint ended slightly stronger after the press conference, but the EU story holds the main role here. Thus, we continue to wait for the European Commission's decision, which should have a positive impact on the market and move the forint closer to 400 EUR/HUF. Elsewhere, this week is more the domain of the rates market and FX remains without much enthusiasm. Impulses for bigger moves are hard to find both on the domestic and foreign side. Thus, our view hasn't changed much since Monday, and we can't expect much momentum from the region today either. The focus will thus be on the global story. Frantisek Taborsky 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
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The Actions Of The ECB May Be A Factor Providing Some Support For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 25.11.2022 09:35
EUR/GBP stages a modest recovery from the monthly low touched on Thursday. A combination of factors underpins the shared currency and offers some support. Rising bets for additional BoE rate hikes benefit the GBP and seem to cap gains. The EUR/GBP cross gains some positive traction on Friday and reverses a part of the overnight slide to a fresh monthly low. The cross maintains its bid tone through the early European session, though seems to struggle to capitalize on the strength beyond the 0.8600 mark and remains below the 100-day SMA. The shared currency's relative outperformance could be attributed to talks of a more aggressive policy tightening by the European Central Bank (ECB). This, in turn, is seen as a key factor offering some support to the EUR/GBP cross. The ECB Governing Council member Isabel Schnabel said on Thursday that the central bank will probably need to raise rates further into restrictive territory. Schnabel added that the incoming data suggests that the room for slowing down the pace of interest rate adjustments remains limited. Adding to this, the prevalent selling bias around the US Dollar, along with an upward revision of the German Q3 GDP print, benefit the Euro and act as a tailwind for the EUR/GBP cross. According to the final reading, the Eurozone's economic powerhouse expanded by 0.4% during the three months to September and the annual growth rate in Q3 2022 stood at 1.3% vs. the 1.2% estimated. The intraday uptick, however, lacks bullish conviction and remains capped amid the underlying bullish sentiment surrounding the British Pound. The recent sharp decline in the UK government bond yields represents an easing of financial conditions, which should allow the Bank of England to continue raising borrowing costs to tame inflation. This, in turn, is seen underpinning the Sterling Pound and keeping a lid on any further gains for the EUR/GBP cross, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and positioning for any meaningful appreciating move.
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

A Bleak Outlook For The UK Economy Acts As A Tailwind For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 29.11.2022 09:39
EUR/GBP lacks any firm intraday direction and remains confined in a narrow trading band. Talks for more aggressive rate hikes by the ECB underpin the Euro and lend some support. Traders look to the flash German CPI and BoE Governor Bailey’s speech for some impetus. The EUR/GBP cross struggles to capitalize on a two-day-old recovery move from the 0.8575-0.8570 support zone and oscillates in a narrow trading band on Tuesday. The cross, however, manages to hold above the 100-day SMA and trades around mid-0.8600s during the early European session. The downside for the EUR/GBP cross remains cushioned in the wake of more hawkish comments by European Central Bank (ECB) policymakers recently, which point to a series of interest rate hikes ahead. In fact, ECB President Christine Lagarde said on Monday that Eurozone inflation has not peaked yet. Adding to this, Dutch central bank chief Klaas Knot noted that the risk of doing too little is clearly more pronounced than doing too much. This, along with the emergence of fresh US Dollar selling, continues to underpin the shared currency and offers support to the cross. Adding to this, a bleak outlook for the UK economy contributes to the British Pound's underperformance and acts as a tailwind for the EUR/GBP cross. This, however, is offset by expectations that the Bank of England (BoE) will continue to raise borrowing costs to combat stubbornly high inflation. The mixed fundamental backdrop, in turn, is holding back traders from placing aggressive directional bets and capping the upside for the EUR/GBP cross. Market participants also seem reluctant ahead of the flash German CPI figures and BoE Governor Andrew Bailey's scheduled speech on Tuesday. From a technical perspective, repeated failures to find bearish acceptance below the 100 DMA warrants some caution for bearish traders. That said, the EUR/GBP pair's inability to gain any meaningful traction makes it prudent to wait for strong follow-through buying before confirming a near-term bottom and positioning for further gains.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

EUR/GBP Cross Pair Is Likely To Remain The Latest Recovery

TeleTrade Comments TeleTrade Comments 30.11.2022 10:14
EUR/GBP teases confirmation of a bullish chart pattern, reverses the previous day’s losses. 200-SMA adds to the upside filters, 0.8570 restricts short-term downside. RSI, MACD suggests further upside momentum toward the monthly high. EUR/GBP picks up bids to reverse the previous day’s losses around 0.8650 during the initial European session on Wednesday. In doing so, the cross-currency pair extends Friday’s rebound from the lowest levels since September while poking the neckline of a short-term inverse head-and-shoulders (H&S) bullish chart formation. It’s worth observing that the upward-sloping RSI (14), not overbought, joins the bullish MACD signals to suggest a clear break of the 0.8660 hurdle. Following that, the 200-SMA level of 0.8685 could probe the advances toward the theoretical target surrounding the monthly high near 0.8830. On the contrary, pullback moves remain elusive unless staying beyond the latest swing low of 0.8607. Even so, the lows marked during late October and in the last week, around 0.8570, appear a tough nut to crack for the EUR/GBP bears. In a case where the pair remains weak past 0.8570, September’s bottom near 0.8565 may act as a buffer as sellers aim for the August 19 peak of 0.8511. Overall, EUR/GBP is likely to remain firmer and can extend the latest recovery as the inverse H&S formation joins upbeat oscillators, namely the RSI and MACD. EUR/GBP: Four-hour chart Trend: Further upside expected  
FX: The Gap Versus The FX spot Rate In Poland Is Already The Largest In The CEE Region

FX: The Gap Versus The FX spot Rate In Poland Is Already The Largest In The CEE Region

ING Economics ING Economics 01.12.2022 10:02
The dollar is around 1% lower across the board after what was seen as a less hawkish speech from Fed Chair Powell softened US interest rates. A softening of China’s Covid policy is also helping emerging market currencies today. The relatively large adjustment in US rates and the dollar on Powell’s speech probably says a lot about positioning In this article USD: Overreaction? EUR: 1.05/1.06 is the risk for EUR/USD GBP: 1.22/1.23 for cable CEE: Hard to be positive on the zloty   Federal Reserve Chair Jerome Powell speaking at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institute, in Washington USD: Overreaction? The dollar came off sharply late yesterday on comments from Federal Reserve Chairman Jerome Powell which signalled that December would probably be the occasion to shift to a slower pace of rate hikes. The market has been expecting the shift to a 50bp versus 75bp rate hike for a while, although it felt the need to price the terminal rate next summer some 10bp lower at 4.90%. Indeed, US yields came off quite a sharp 20bp across the curve. We are tempted to say that looks an overreaction in that while Chair Powell did acknowledge the slowing in the pace of hikes, his core message was one of stubbornly high core inflation, particularly in the core services ex-housing category. This category is largely driven by wages and an area where the Fed struggles to see labour supply improving anytime soon. Inputs into this story will come today and tomorrow in the form of the October core PCE deflator and the November jobs report, respectively. On the former, consensus expects October core PCE to decelerate to 0.3% month-on-month from 0.5%. This basket is different from the national CPI basket, where the 0.3% MoM release on 11 November triggered a huge drop in the dollar and rally in risk assets. Any upside surprise in today’s core PCE reading could see the dollar reverse overnight losses. In the bigger picture, we continue to take the view that a trade-weighted measure like DXY can hold support levels around the 105 area (or at least will not sustain any break under it). One challenge, though, is the EM picture. If we are seeing a sea-change in China’s Covid stance – e.g., a shift to home quarantine from city lockdowns, EM currencies may be due a re-rating. On the day then, the core PCE inflation data is the biggest input, and we prefer DXY to find support near 105.00. Chris Turner EUR: 1.05/1.06 is the risk for EUR/USD EUR/USD weakness in late Europe yesterday looked a function of end-month portfolio rebalancing (European equities had vastly outperformed) and it is no surprise to now see EUR/USD well above 1.04 on the sharp drop in US yields. Resistance is clearly set at the 1.0480/1.0500 area, above which we could see a spike to the 1.0600/0620 area. That is not our preferred view, but thinning December markets and seasonal dollar weakness mean that such a scenario cannot be ruled out. Bigger picture, however, weak global demand (note Korea’s poor November export data overnight) is not a good story for the pro-cyclical euro. Additionally, colder weather coming to northern Europe is starting to push gas prices higher again and keep the eurozone trade balance under pressure. We would like to think that 1.05/1.06 is as good as it gets for EUR/USD in December. Elsewhere, look out for Swiss November CPI today. We have been bearish EUR/CHF on the view that the Swiss National Bank wants a stronger nominal Swiss franc to fight inflation. That view will be challenged, of course, should inflation surprise on the downside.  Please also see Francesco Pesole’s article on the Norwegian krone. Yesterday, Norway’s central bank announced it will trim daily FX purchases from NOK 3.7bn to 1.9bn, which sent NOK rallying across the board. As discussed in the article, we see the two consecutive cuts in FX purchases as an indication of higher appetite for a stronger krone, which would help combat inflation at a time when economic woes and property market fragility may curb the appetite for monetary tightening. Chris Turner GBP: 1.22/1.23 for cable The softer dollar environment is giving cable another lift. This rally could extend to the 1.22/23 area unless either today’s US core PCE data or tomorrow’s US jobs data can put a floor back under US yields. EUR/GBP continues to hold support near 0.86 and that may well be the case into year-end. Both the Bank of England (BoE) and the European Central Bank (ECB) should be hiking by 50bp in December. But we are taking the view that risk assets will come under more pressure over coming months – which will lead to renewed – if mild – sterling underperformance. Chris Turner   CEE: Hard to be positive on the zloty Today, we will see PMI numbers across the region. We expect a rebound from lows in Poland from 42.0 to 42.6 and in the Czech Republic from 41.7 to 42.7, following the trend in Germany. On the other hand, in Hungary we forecast a drop below the 50-point level. As in Poland yesterday, the GDP breakdown for the third quarter will be published today in Hungary, which was the only country in the region to surprise negatively in the flash reading (-0.4% quarter-on-quarter) a few weeks ago. Later today, the Czech Republic's state budget result for November will be published. Given the recent increase in the deficit for this year and the question marks over funding, the number will get more attention than usual. However, the start of pre-funding needs for next year through CZGBs switches in recent days indicates a better-than-expected MinFin situation. On the FX front, two main topics remain on the table in the region: the Polish zloty and the Hungarian forint. Yesterday's downside inflation surprise pushed down the interest rate differential in Poland by around 25bp, further widening the gap versus the FX spot rate, which is already the largest in the CEE region in our view. So, it is hard to be positive on the zloty, but for now, apart from any rally in the US dollar, we don't see a trigger for a correction. Until then, the zloty is likely to remain below 4.70 EUR/PLN. Meanwhile, the market seems to be running out of patience in Hungary and the normalisation of relations with the EU is not progressing as fast as expected. Although yesterday's news did not bring anything really new in our view, the forint returned to the 410 EUR/HUF range, which probably cleared the long positioning built up in recent weeks. Thus, in our view, it is still worth waiting for the final decision of the European Council in December and we expect the forint back to stronger levels. Frantisek Taborsky 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
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Weak US Data Took US Yields Lower All Along The Curve

Saxo Bank Saxo Bank 02.12.2022 08:52
Summary:  Risk sentiment fizzled after the strong from the prior day on Fed Chair Powell’s less hawkish than feared speech. That was despite softer than expected October PCE inflation data that helped US treasury yields trade to new local lows all along the curve. Today’s US November jobs report will carry a bit more weight for the treasury market, where yields have helped drag the US dollar to new lows.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) U.S. stocks fluctuated between modest gains and losses and finished the session nearly flat. Investors weighed the decline in bond yields from softer US data (see below). Eight of the eleven sectors within the S&P 500 were lower except for communication services, healthcare, and information technology which registered modest gains. Salesforce (CRM: xnys) dropped 8% after the enterprise software maker reported earnings miss, a weak outlook, and CEO resigning. Dollar General (DG:xnys) shed 7.5% on disappointing results and an outlook cut. Snowflake (SNOW:xnys) gained 7.8% on an earnings beat. Netflix (NFLX:xnas) gained 3.7% on news that the company is expanding a program to seek comments from preview audiences. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index and CSI300 Index consolidated and were modestly lower on Friday after the recent rally on signs of further easing of Covid restrictions in mainland China. Profit-taking selling weighed on Chinese property developers, with leading names dropping 4-5%. Online health platform stocks surged. Alibaba Health (00241:xhkg), JD Health (06618:xhkg), and Ping An Healthcare and Technology (01833:xhkg) gained 9-13%. USD lower still on falling treasury yields, fresh incoming data Weak US data, including a slightly softer than expected core PCE inflation reading and ISM Manufacturing survey, took US yields lower all along the curve and took the US dollar lower as well, with EURUSD trading above the psychologically key 1.0500 area this morning. The next important resistance there is perhaps the pandemic-outbreak low around 1.0636 or the 38.2% retracement of the entire sell-off from the 1.2350 top at 1.0611. The yield-sensitive USDJPY continued lower as well, nearly hitting the 135.00 level overnight after a chunky further drop yesterday and not far from its 200-day moving average at just above 134.50. An important test for US yields and the US dollar today with the November jobs data releases. Strong week for precious metals on Fed pivot speculation Gold rose above $1800 on Thursday supported by softer US data sending the dollar and yields lower, thereby underpinning speculation about a slower pace of future rate hikes. US 10-year real yields have fallen to a two-month low at 1.14% after hitting 1.82% in October while the Bloomberg Dollar Index has lost close to 8% during the past month alone. A break above resistance at $1808 may add further fuel to an ongoing sentiment change towards the metal but with ETF investors not yet engaging the importance of the dollar and yield developments remain key. Silver, supported by a firmer industrial metal sector, trades above $22.25 with the next level of interest being $23.36. Focus today on the US job report given its potential impact on the dollar and yields. Crude oil (CLF3 & LCOF3) trades up on the week Crude oil is heading for its best week in two months following another roller coaster week that saw Brent test support at $80 before finding resistance at $90. From an early lockdown scare in China on Monday, the sentiment improved ahead of Sunday’s OPEC+ meeting and the beginning of an EU embargo on Russian seaborne oil from Monday. Additional support was provided by a weaker dollar, China softened its virus approach and Washington calling for halt to further sales from its Strategic Petroleum Reserves. Ahead of the OPEC+ meeting a Bloomberg survey found that OPEC, led by the four major Gulf producers cut production by 1 million barrels a day last month. We expect the online meeting is likely to be strong on words but low on actions. Focus on today’s US job report given its potential impact on the dollar. US treasury yields edge lower still on weak US data. (TLT:xnas, IEF:xnas, SHY:xnas) The weak US data (see below) took US treasury yields lower all along the curve, with the 10-year benchmark within a basis point of the important 3.50% area yesterday. That level was a major pivot high posted around the time frame of the June FOMC meeting. But the weak data has not seen much steepening in the US yield curve, even if 2-year yields dropped to new lows cine early October yesterday near 4.25% as the market prices in a slightly lower Fed cycle peak next year (currently 4.87% peak priced) and steeper pace of cuts by late 2023 and especially into 2024. The US November jobs report later today offers an important test for the treasury market as the 10-year has hit this pivotal level. What is going on? Weaker US data continues to take the air out of US yields The October PCE inflation data came in softer than expected for the core month-on-month reading at +0.2% vs. +0.3% expected, while the year-on-year level of 5.0% was expected. Another soft data point was the November ISM Manufacturing survey which came in at 49.0 vs. 49.7 expected and suggesting modest contraction in US manufacturing activity for the first time since the pandemic outbreak months. The New Orders component of that survey dropped to 47.2, Prices Paid plunged further to 43.0 and Employment nudged lower to 48.4. Sterling boost yesterday on hopes for Northern Ireland deal EU Commission president Ursula von der Leyen said that Britain and the EU said that the latest talks with UK Prime Minister Rishi Sunak were “encouraging” and that she is “very confident” a solution is possible if the UK government is on board, with Sunak seen as motivated to iron out a deal with a more pragmatic approach to the issue than former Prime Ministers Boris Johnson and Liz Truss. EURGBP briefly touched a multi-month low yesterday below 0.8560 and traded within 10 pips of the the 200-day moving average before rebounding overnight. Blackstone limits withdrawals from large property fund The company said it would limit how much the wealthy individual investors in its $69 billion real estate fund can withdraw funds to 2% of the net asset value of the fund monthly and 5% quarterly. Real estate is a notoriously illiquid asset. What are we watching next? US November Jobs report on tap The November jobs data is up today, theoretically expected to show payrolls growth of +200k, but with the market perhaps leaning a bit lower after the softest ADP private payrolls growth number in more than 20 months. The Unemployment Rate is seen steady at 3.7%, and Average Hourly Earnings are anticipated to rise +0.3% month-on-month and +4.6% year-on-year after the October data point at 4.7% YoY was the lowest year-on-year reading in just over a year. The Atlanta Fed’s median wage tracker, meanwhile, has shown entirely different levels of earnings growth, with +6.4% in October and 6.7% in both of the prior two months. Earnings to watch Earnings next week are a mish-mash of companies, and include high-end homebuilder Toll Brothers on Tuesday, as it will be interesting to hear their outlook on the new home market after the enormous surge in US mortgage rates and collapse in home sales activity. Broadcom (AVGO: xnas) is the market cap giant of the week to report, with the CEO of the company having said that the semiconductor market will not be affected by the US’ new export restrictions on technology to China. Tuesday:  MongoDB, AutoZone, Toll Brothers, Ferguson Wednesday: Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 1330 – Canada Nov. Employment Change / Unemployment Rate 1330 – US Nov. Change in Nonfarm Payrolls 1330 – US Nov. Unemployment Rate 1330 – US Nov. Average Hourly Earnings 1415 – US Fed’s Barkin (non-voter) to speak 1900 – Us Fed’s Evans (voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source:
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/GBP Pair Is Displaying A Sideways Auction Profile

TeleTrade Comments TeleTrade Comments 13.12.2022 09:40
EUR/GBP is auctioning below 0.8600 as investors await UK Employment data. Increment in households’ earnings data could be a double-edged sword for the UK economy. The ECB is expected to hike its interest rates by 50 bps to 2.50%. The EUR/GBP pair is displaying back-and-forth moves marginally below the crucial hurdle of 0.8600 in the early European session. The cross is displaying a sideways auction profile as investors are awaiting the release of the United Kingdom Employment data. The asset remained topsy-turvy on Monday despite upbeat UK Gross Domestic Product (GDP) data. The monthly GDP data (October) reported an expansion of 0.5% while the street was expecting a contraction of 0.1%. Also, Industrial and Manufacturing Production data remained better than anticipation but were contracted on an annual basis for October month. Now, investors have shifted their focus to the UK Employment data. As per the projections, the jobless claims gamut will witness a decline of 13.3K. While the quarterly Unemployment Rate (October) is seen higher at 3.7% against the former release of 3.6%. Apart from that, Quarterly Average Earnings data excluding Bonuses is seen higher at 5.9% vs. the former release of 5.7%. An increment in households’ earnings could be a double-edged sword. No doubt, higher earnings will delight households in offsetting inflation adjusted-payouts but will also increase retail demand, which will escalate inflation further. This week, the interest rate policy by the Bank of England (BOE) will hog the limelight. Analysts from Danske Bank are expecting a 50 basis point (bps) rate hike announcement.  On the Eurozone front, investors are awaiting a monetary policy announcement from the European Central Bank (ECB), which is scheduled for Thursday. Analysts at Rabobank think that the ECB is likely to raise the policy rate by 50 basis points in December but note that they are not fully discounting the possibility of a 75 bps hike. They have forecasted a terminal rate of 3%.
Market Focus: European Data Releases, ECB Survey, US FOMC Minutes, and UK Bond Supply

The Kiwi (NZD) Saw A Sharp Further Run To The Downside Yesterday, The EUR/GBP Pair Tests The Highs

Saxo Bank Saxo Bank 23.12.2022 14:26
Summary:  After Q3 GDP data revision that reminds us that the UK is in the vanguard for economies lurching into recession, sterling has lurched into a new slide and is even threatening a break down versus the euro as EURGBP tests the highs since the Truss-Kwarteng mini-budget sterling wipeout. Elsewhere, a plunge in the kiwi is likely down to position squaring and rebalancing ahead of year end after a remarkable recent run. Today's Special Edition Saxo Market Call podcast: Investors' Wish List for 2023.  FX Trading focus: Sterling stumbles after weak GDP, Kiwi longs take profit. Last important US data point of the year up today: November PCE inflation. The latest Q3 UK GDP revisions suggest the economy is weakening even more quickly than previously thought last quarter, as growth was revised down to -0.3% QoQ from -0.2% previously, and the Private Consumption figures was revised to -1.1% QoQ vs. -0.5% previously. The combination of a Bank of England that wants to soft-pedal further tightening and the promises of fiscal austerity from the Sunak-Hunt duo are a powerful negative for sterling as we look ahead into the New Year, which will likely bring relative UK economic weakness even if our thoughts that  recession fears for next year globally are over-baked for the first two and even three quarters. The FX fundamentals are entirely the opposite for the euro, as the ECB attempts a maximum hawkish stance as it recognizes the risks that the fiscal impulse can keep inflationary pressures elevated from here. The two-year yield spread is close to its highest since October of last year. Chart: EURGBPA weak GDP revision yesterday didn’t appear to be the proximate trigger for sterling’s latest lurch lower, but does remind us of the relative weakness of the UK outlook and the combination of a heel-dragging BoE (on further tightening) and austere fiscal picture could set up further declines in the weeks and months. Worth noting that the key EURGBP is pushing on the top side of the range established since the volatile days surrounding the Truss-Kwarteng mini-budget announcement. A hold above 0.8800 could lead to a test of the higher end of the range since the 2016 Brexit vote above 0.9200. A higher euro is straightforward if ECB maintains its hawkish stance as the EU fiscal impulse is far stronger from here. The wildcard for the euro side of the equation is the usual existential one of peripheral spreads and whether these stay orderly if yields resume their rise next year. Source: Saxo Group Elsewhere, the kiwi saw a sharp further run to the downside yesterday with no proximate identifiable trigger. AUDNZD traded all the way to 1.0719 before backing off to below 1.0650 at one point this morning. I suspect that this was an extension of the position squaring after a the remarkable run higher in the kiwi over the last two months, driven both by relative RBNZ hawkishness, but in particular by RBA (and arguably BoC), sparking heavy flows in AUDNZD just after the pair had traded almost to a decade high on hopes for a Chinese reopening boosting the outlook for Australia. The current reality on the ground in China is even worse than during the zero Covid tolerance days, but we know that the Arguably, recent record low consumer confidence readings in New Zealand suggest that the RBNZ will need to climb down from its hawkishness, at least in relative terms to its peers, going into next year. After an incredible slide in AUDNZD and rally in NZDCAD, I suspect we will see powerful mean reversion in the coming three months in those pairs. It feels like USD traders have checked out for this year. Hard to tell if today’s US November PCE inflation data can generate any excitement on a soft print after the soft CPI print earlier this month generated a lot of fuss that quickly faded on the very same day. A more interesting development would be a slightly hot core set of PCE core readings than expected today (the month-on-month core reading expected at +0.2% and year-on-year expected to have decelerated sharply to 4.6% from 5.0% in October. EURUSD has traded within a 100-pip range for more than a week and the 1-month implied volatility has recently plumbed lows (around 7.50%) not seen since the beginning of this year and would probably be lower still had not the Bank of Japan roiled markets this week. But the USD will have a hard time ignoring any further slide in risk sentiment to close out the year. And the beginning of the calendar year is nearly always interesting for new themes and often for demarcating key highs or lows for the year. Consider the following from the last six years of the EURUSD trading history: 2022: High for the year in EURUSD posted in February, but that high was only a few pips above the 1.1483 high water mark of January. Low for year posted in September 2021: High for the year was in January, on the third trading day of the year, low in late November 2020: Exceptional pandemic year, low for year posted in March, high in December 2019: High for quite year posted on January 10, low on October 1 2018: High for year posted in February, but highest daily close not above intraday high in January. Low posted in November 2017: Low for year in January, high in September (December high less than a figure from September high water mark) Table: FX Board of G10 and CNH trend evolution and strength.The JPY still sits with a strong positive reading, but has yet to “trend” after the huge one-day move this week – a few more days of lack of movement and questions marks would begin to flourish around its status. Elsewhere, note the NZD going full circle and now broadly outright weak after its status as king of the G10 as recently as less than two weeks ago. Gold posted a sharp reversal yesterday. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Note that the weakness in risk sensitive currencies like SEK, NZD, AUD & GBP are seeing those edging into a downtrend versus the US dollar – worth watching for a deepening of these moves if risk assets continue south into the New Year. The EURCHF bears watching if the pair can take out 0.9900-0.9950 as currently the pair is caught in a very tight range. NZD is rolling over in many pairings. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1330 – Canada Oct. GDP 1330 – US Nov. PCE Inflation 1330 – US Nov. Flash Durable Goods Orders 1500 – US Dec. Final University of Michigan Confidence   Source:
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair Is Likely To Witness More Inaction

TeleTrade Comments TeleTrade Comments 29.12.2022 09:12
EUR/GBP struggles to extend pullback from 11-week high. US Treasury yields retreat from three-week top, EU bond coupons grind near 11-year high but Gilts stay depressed. Geopolitical fears from Russia join China Covid woes but lack of market participation, absence of major data bore momentum traders. EUR/GBP remains sidelined around 0.8825, after reversing from a nearly two-month high the previous day, as traders seek more clues amid the market’s indecision headline into Thursday’s London open. Even so, the cross-currency pair remains pressured as the geopolitical concerns surrounding Russia and fears of economic slowdown propel the Eurozone Treasury bond yields while the UK’s Gilts dropped to the lost levels for seven weeks. Russia’s rejection of peace with Ukraine unless it accepts the treaty allowing additional territories joins an escalated war in the city of Kherson to weigh on the sentiment. On the same line could be the major nations’ notification to require the Covid tests for Chinese travelers amid doubts over Beijing’s reporting of data and a hidden jump in the virus numbers. It’s worth noting, however, the comparatively stronger hawkish bias of the European Central Bank (ECB) policymakers versus the Bank of England (BOE) decision-makers challenge the EUR/GBP bears. Even so, the chatters surrounding the bloc’s recession seem to have gained more attention of late, which in turn should have recalled the bears the previous day. Against this backdrop, the US 10-year Treasury yields dropped 2.8 basis points to 3.86% by the press time, after rising the most since October 19 the previous day. That said, the Eurozone 10-year Treasury bond yields rose to the highest levels since July 2011 before retreating to 2.51% while the UK’s 10-year Gilt coupons dropped for the third consecutive day to refresh multi-day low. Looking forward, the EUR/GBP is likely to witness more inaction but the recent escalation in the Russia-Ukraine fight and the economic slowdown fears surrounding the bloc could weigh on the prices. Technical analysis Despite the failure to cross the 0.8855-65 resistance zone, comprising multiple levels marked since late September, EUR/GBP remains on the bear’s radar unless breaking the 200-DMA support, close to 0.8575 at the latest.
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USD/JPY Pair Bounced Off Support Area, GBP/USD Pair Broke Bearish Out Of Its Rising Wedge

Saxo Bank Saxo Bank 29.12.2022 12:10
Summary:  USDJPY bounced from strong support but still in a down trend. The pair needs to break bullish out of falling channel for 140EURGBP testing key resistance at 0.8867. Upside potential to 0.92GBPUSD broken out of rising wedge but sellers have failed to take control. 1.19 support is key USDJPY bounced off support area 131.49-130.38 and the lower trendline in the falling channel like pattern. Divergence on RSI indicates that could have been the lows for now. There is still negative sentiment however, but if USDJPY breaks above the upper falling trend and back above 200 daily SMA there could be short-term upside momentum to 140-141.25.If USDJPY slides back and closes below 130.38 it is likely to fuel a sell-off down to around 126.35 . That scenario is likely to unfold if RSI also breaks below its lower rising trendline.   All charts and data : Saxo Group EURGBP has at first attempt been rejected at the resistance at around 0.8867. A close above could move the pair for 0.92 i.e., same distance a wide sideways consolidation area illustrated by the vertical arrows.However, if EURGBP slides back below 0.8754 it could stay range bound for quite some time.RSI is showing positive sentiment however and all Simple Moving Averages (SMA) are rising i.e., showing underlying bullish sentiment indicating we are to see higher levels in EURGBP. GBPUSD broke bearish out of its rising wedge like pattern now hovering around the 200 daily SMA. Bears don’t seem to be able to push the pair lower. RSI is still showing positive sentiment and there is no divergence indicating we could see a GBPUSD moving higher and have another attempt reaching resistance 1.2667.If sellers succeed in pushing GBPUSD below 1.19 that could change and give them more energy to push GBPUSD down to around 1.1629. Medium-term pictureGBPUSD got rejected at the 55 weekly SMA which is dropping sharply and has not managed to close a week above resistance at 1.2293. Weekly RSI is still showing negative sentiment indicating GBPUSD bounce from September trough has run its course and lower levels is in the cards. GBPUSD could slide back down to around 1.14For GBPUSD to gain further upside a weekly close above 1.2293 is needed combined with RSI closing above 60 threshold.       RSI divergence explained: When  price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend Source: Technical Update - USDJPY, EURGBP & GBPUSD | Saxo Group (
The GBP/USD Pair Did Not Reach The Nearest Target Level Of 1.2259

FX: The Fall In The Pound Also Saw Egyptian Hard Currency Foreign Debt Rally

ING Economics ING Economics 05.01.2023 10:49
The December FOMC minutes caused barely a ripple in the FX market. Instead, investors are left to interpret China's battle with Covid and plunging energy prices. The sharp fall in natural gas prices is a boon to European energy importers, but a Fed still concerned with tight labour markets suggests the European FX recovery against the dollar is limited USD: FOMC minutes barely move the needle Last night's release of FOMC minutes could have been perceived as slightly hawkish, yet FX and interest rate markets barely budged. At the heart of the 2023 story is the risk management trade-off of the Federal Reserve under-appreciating sticky inflation versus over-tightening and delivering weaker-than-needed growth. For the time being, the Fed is still more concerned by the former and plans ongoing rate increases. In practice, we think that means another 50bp hike from the Fed in February (the market seems to prefer 25bp hikes in February and March) and then rate cuts from the third quarter onwards. For rate markets the battle this year seems to be whether inflation will allow the Fed to deliver the roughly 50bp of easing expected in the second half of the year. For today's session, the focus will be on the December ADP jobs data, where a +150k number is expected after last month's 127k rise. Currently, the consensus expects tomorrow's December nonfarm jobs reading at +200k. Yesterday we highlighted the importance of the JOLTS job opening data. The December figure showed a surprise rise, which will fan Fed fears of the US labour market staying tight. A firm ADP number today could also deliver a little support to US yields and the dollar. Away from the Fed story, the market's early year focus is on China's Covid battle and slumping energy prices. Commodity markets - always very sensitive to the China demand story - are taking a cautious approach here. In other words, they are not prepared to look through (presumably) surging infections towards the second half growth story. Equally the China story, in addition to very warm weather, is weighing on energy prices where both oil and gas are plunging. Indeed, European natural gas now trades at a discount to Asian natural gas and warns that LNG shipments will be re-routed to Asia. For the time being this fall in natural gas is prompting a re-assessment of European growth prospects and supporting European FX - especially CE4 currencies. That may well remain the near-term trend unless US price data is sufficient to re-price the Fed tightening cycle to the 5.50% area and lift the dollar. As above, ADP will be key for the dollar today. A subdued DXY range well within 104-105 looks likely. Chris Turner EUR: A welcome reprieve from energy The sharp fall in energy prices is being welcomed across Europe. That is already showing up in softer-than-expected German and French inflation data. Today the focus will be on Italian inflation data ahead of tomorrow's eurozone December CPI release, currently expected at 9.5% year-on-year. As discussed yesterday, the sharp fall in natural gas is generating even further improvement in the euro's terms of trade and is a euro positive. However, EUR/USD may struggle to make further upside gains until key event risks have been surmounted such as tomorrow's December US jobs release and next Thursday's US December CPI reading. Expect EUR/USD to continue trading in a 1.0580-1.0640 range, though we would probably say the upside risks are greater given developments in the energy story and the re-rating underway of European equities. Elsewhere, the National Bank of Poland left rates unchanged at 6.75% yesterday. Our team feels that sticky inflation will not allow an easing cycle to materialise in the second half of this year, however. Look out for the press conference from NBP Governor Adam Glapinski at 15CET today. 7.5% implied yields for the zloty and a rally in European bond markets amid lower energy prices can probably keep EUR/PLN gently offered for the time being. Chris Turner GBP: PM Sunak's new targets The UK Conservative government came out on the offensive yesterday with Prime Minister Rishi Sunak announcing five strategic targets for this year, among which were halving inflation, stabilising debt to GDP and ensuring a return to growth. The reduction in inflation may be the most attainable of these three and the one over which the government has the least control.  On the subject of inflation, today sees the 1030CET release of the Bank of England's Decision Maker Panel (DMP) survey. This looks at inflation expectations in the business sector. The November survey, published in early December, saw one-year inflation expectations drop to 7.2% from 7.6% YoY. Presumably, this should fall again in today's survey. We still think the market is over-pricing the BoE tightening cycle at a peak near 4.50% (+100bp) in August this year. But that pricing has been resolute. EUR/GBP should continue in a 0.8800-0.8850 range for the time being, while cable can loiter well within this week's 1.19-1.21 range. Chris Turner EGP: Another devaluation in the Egyptian pound The Egyptian pound (EGP) sold off another 6-7% yesterday. This is a heavily managed exchange rate and the decline is taken as a controlled move by local authorities. The fall in the pound also saw Egyptian hard currency foreign debt rally on the view that authorities were conforming to IMF conditionality of a flexible exchange rate in return for the $3bn IMF facility agreed in October. The legacy of the 2022 inflation and interest rate shock to emerging markets continues to play out in Africa, where sovereign CDS premia remain among the highest in the world. Among those sovereign credits under pressure is Nigeria, which also has a heavily managed exchange rate. The Nigerian naira was allowed to depreciate 4% in December, but with implied yields still at 50% - expecting further naira depreciation - we can only think that lower energy prices will be heaping more pressure on this currency. Those forwards price USD/NGN at 500 in three months' time - which certainly looks to be the direction of travel. Chris Turner 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  
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The EUR/GBP Pair Sticks To Its Modest Intraday Gains

TeleTrade Comments TeleTrade Comments 10.01.2023 09:57
EUR/GBP attracts fresh buying on Tuesday and recovers further from over a two-week low. Dovish BoE expectations weigh on the British Pound and remain supportive of the move. The recent hawkish ECB rhetoric underpins the Euro and supports prospects for further gains. The EUR/GBP cross regains positive traction following an early dip to sub-0.8800 levels and moves away from over a two-week low touched the previous day. The cross sticks to its modest intraday gains through the early European session and is currently placed near the top end of its daily range, around the 0.8825-0.8835 region. The British Pound's relative underperformance comes amid a bleak outlook for the UK economy, which has been fueling expectations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. Apart from this, a modest pickup in the US Dollar demand is seen weighing on the Sterling and lending some support to the EUR/GBP cross. The shared currency, on the other hand, benefits from hawkish European Central Bank (ECB) rhetoric. In fact, ECB Governing Council member Francois Villeroy de Galhau said last Thursday that it would be desirable to reach the right terminal rate by next summer. Furthermore, ECB expects wage growth to be very strong over the next few quarters. In the absence of any major market-moving economic releases, either from the UK or the Eurozone, the aforementioned bullish fundamental backdrop supports prospects for additional gains. That said, any subsequent move up might continue to confront stiff resistance and is more likely to remain capped near the 0.8865-0.8875 heavy supply zone.  
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The Bank Of England (BoE) Is Coming To The End Of The Current Cycle Of Interest Rate Increases And Support The EUR/GBP Rate

TeleTrade Comments TeleTrade Comments 13.01.2023 09:53
EUR/GBP struggles to gain any meaningful traction and oscillates in a narrow band on Friday. A bleak outlook for the UK economy undermines the Sterling and continues to lend support. The recent hawkish ECB rhetoric underpins the Euro and supports prospects for further gains. The EUR/GBP cross consolidates its recent gains to the highest level since September 29 touched earlier this Friday and seesaws between tepid gains/minor losses through the early European session. The cross remains below the 0.8900 round-figure mark following the release of the UK macro data, though seems poised to prolong the uptrend witnessed since the beginning of this week. The UK Office for National Statistics reported that the economy expanded a modest 0.1% in November as compared to estimates for a 0.2% contraction. This, however, marked a notable slowdown from the 0.5% growth recorded in October. Moreover, weaker-than-expected UK industrial and manufacturing production data adds to the bleak outlook for the UK economy, which has been fueling speculations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. This, in turn, could undermine the British Pound and lend some support to the EUR/GBP cross. The shared currency, on the other hand, continues to draw support from more hawkish signals from the European Central Bank (ECB). In fact, several ECB officials spoke this week and confirmed that they will have to raise interest rates further in the coming months to tame inflation. That said, a modest US Dollar recovery keeps a lid on the Euro and holds back traders from placing aggressive bullish bets around the EUR/GBP cross. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside. Read next: The New Disney Drama: Disney Is Opposing Activist-Investor Nelson Peltz| FXMAG.COM Even from a technical perspective, the overnight convincing breakout through the 0.8865-0.8875 supply zone supports prospects for a further near-term appreciating move. Some follow-through buying beyond the 0.8900 round figure will reaffirm the positive outlook and allow the EUR/GBP cross to reclaim the 0.9000 psychological mark.
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

Forex: The EUR/GBP Pair May Struggle To Trade Sustainably, The Reserve Bank Of Australia's Policy Remains An Open Question

ING Economics ING Economics 18.01.2023 09:55
The Bank of Japan defied hawkish speculation and held policy steady this morning, sending the yen lower. Some market confusion was also generated by a headline suggesting the European Central Bank is mulling slower rate hikes: clarifications may come from Davos by the end of the week, and the euro may recover. In the US, the data calendar picks up again The Bank of Japan in Tokyo USD: US data back in focus An exceptionally grim Empire Manufacturing reading for January has been the only noteworthy data release out of the US so far this week, and the dollar has continued to be a bystander as developments in Japan, Europe and China drive most market moves. Today, retail sales, PPI, industrial production and TIC flows data will be in focus. The market's scrutiny over the US economic outlook has grown exponentially since the ISM service report pointed to an imminent recession: expect more pain for the dollar should fresh signs of a slowdown emerge now that the US data calendar is picking up again. The Fed’s Raphael Bostic, Patrick Harker and Lorie Logan are set to speak today. The fall in the yen after the BoJ announcement (more details in the JPY section below) is offering some relief to the dollar this morning. However, we suspect this may only prove temporary and downside risks into the 101-102 area still prevail in the very near term. After all, the global environment continues to be rather benign for the ongoing rerouting of flows into emerging markets and high-beta currencies. The growing feeling that China may face a reality check on the sustainability of looser Covid rules may be contributing to halting CNY gains, but recent data gave reasons for optimism on Chinese growth, as noted by our colleague Iris Pang here. We are also approaching the lengthy Chinese New Year holiday season, which may be keeping some investors on hold before moving significantly into Chinese assets. Our commodities strategists have revised their forecasts for iron ore and copper prices higher on the back of China’s reopening. A demand-driven improvement in the metal price outlook is an ideal scenario for commodity currencies: the Australian dollar is a good example here, also considering the tentative conciliatory steps in Sino-Australian diplomatic relations. Indeed, the Reserve Bank of Australia's policy remains an open question: the resilience of inflation poses risks to our conservative call for only two more 25bp hikes before the end of the hiking cycle, and could add some more steam to the AUD rally. A 0.70-0.72 range could easily become the norm for AUD/USD in the next few weeks. Francesco Pesole EUR: Conflicting news Yesterday was a day of conflicting headlines for the euro. In a long interview to the Financial Times, Chief Economist Philip Lane offered elaborate reasoning to support the ECB’s recent hawkish rhetoric. However, later in the day, a Bloomberg report cited some ECB officials saying that Governing Council members are actually considering a slower pace (25bp) of tightening. EUR/USD dropped below 1.08 on the news. It does seem premature for the ECB to unwind its hawkish narrative just yet, and we would not be surprised to see some remarks aimed at “mitigating” yesterday’s dovish headline. Francois Villeroy (today) and President Christine Lagarde (tomorrow) have a chance to do so in Davos. Either way, the overall environment looks likely to stay largely supportive for EUR/USD and a return to 1.0850-1.0900 seems possible by the end of this week. Other conflicting headlines came from Germany. Chancellor Olaf Scholz said he’s sure that Germany will avoid a recession, while his finance minister suggested in a previous interview that there will indeed be a recession, but it should be very mild. The ZEW expectation survey (which spiked into positive territory yesterday) surely seemed to favour more optimism on the German outlook, and undoubtedly fed into the divergence in growth narratives between the eurozone (increasingly upbeat) and the US (increasingly downbeat). This ultimately makes us believe EUR/USD can stay mostly supported for now. Francesco Pesole GBP: Inflation matches expectations December CPI numbers were released in the UK this morning and largely matched consensus expectations. Headline inflation decelerated from 10.7% to 10.5%, while the core rate held at 6.3%. With the peak apparently past us, we could see headline inflation return to 6% in the summer and 3.5-4% by year-end, according to our economists. It’s important to note that core services jumped from 6.4% to 6.8%, a development that the BoE should particularly take into consideration, and when added to yesterday’s wage data should tilt the balance towards a 50bp hike in February. EUR/GBP is back to pre-Christmas – sub-0.8800 levels – thanks to some idiosyncratic EUR underperformance and a supported pound. As discussed in the euro section above, ECB-related weakness in the euro may not last long, and EUR/GBP may struggle to trade sustainably below 0.8800 for now – also given the lack of strong bullish forces in the pound. Francesco Pesole JPY: No hawkish surprise by the BoJ The Bank of Japan’s decision to leave its policy tools unchanged has seen USD/JPY live up to its pricing as one of the most volatile pairs in the G10 space. We expect that to continue. The big correction higher in USD/JPY may endure for a little while. This is because the BoJ’s forecasts for CPI ex-food remain below 2% for FY23 and FY24 and could make the case for the new BoJ governor in April to continue with the current ultra-loose policy. Yet USD/JPY is down at 130 on both the BoJ and the dollar story. We look for a broadly weaker dollar – especially in the second quarter when US core inflation should fall more quickly. This means USD/JPY should again come under pressure from the dollar side. And plenty of speculation over a BoJ policy shift in April should limit USD/JPY upside too. We see this correction stalling in the 132.50/133.00 area (outside risk to 135), with a bias to 126/128 for the end of the first quarter. Later in the year USD/JPY will probably be trading under 125. Chris Turner 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  
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Yields On JGB's Fell Back Sharply, Markets May Expect To See Another 50bps Rate Hike From The Bank Of England

Michael Hewson Michael Hewson 18.01.2023 11:34
Yesterday saw another positive session for European markets, although the FTSE100 underperformed despite hitting a new 4 year high. US markets returned from their long weekend break with a choppy and somewhat mixed session, with the Dow and S&P500 struggling while the Nasdaq 100 finished slightly higher, as various earnings announcements painted a mixed picture of the US economy. Bond yields also chopped between negative and positive territory as yields ended the day little changed. BoJ tweaks bond program Asia markets have spent the day still digesting yesterday's economic numbers from China, as well as today's Bank of Japan rate decision. The Japanese yen has seen some decent gains over the past few weeks, with those gains accelerating after the Bank of Japan caught markets by surprise last month by widening the band of its yield curve control to between -0.5% and +0.5%, from +/-0.25%. It would appear that with current governor Kuroda set to leave in April that the BoJ wanted to start seeding the ground for a possible shift in the coming months, however as with everything related to monetary policy markets have already started to front run any possible change.. The 10-year JGB has consistently tested above the upper bound of the 0.5% in the past few days testing the central banks resolve in the process. The central bank has been consistent in maintaining that they aren't in any rush to make major adjustments to its yield curve control policy yet, however events appear to have overtaken them, as volatility has increased. The Bank of Japan's challenge today has been to try and reset market expectations, as well as try to avoid a further rapid appreciation in the yen, in the same way they wanted to manage the declines in their currency over the past few months. Suffice it to say they appear to have succeeded, pushing back on the recent moves that have pushed the yen higher. This morning the Bank of Japan kept monetary policy unchanged, which wasn't a surprise, but they also announced they would continue large scale bond buying and be more flexible about duration in order to keep policy settings loose. Yields on JGB's fell back sharply from the 0.5% upper bound in the wake of the announcement. Today's pushback or reset whatever you want to call it, shouldn't have been too much of a surprise given recent yen moves. Japanese central bank officials have always been particularly sensitive to sharp short term moves in either direction where the yen is concerned in the same way they were about recent yen weakness. The direction of the move is less of a concern rather than the speed of it, and in slowing the yen move lower the BoJ is merely resetting market expectations about future policy change, with the US dollar rising back above 130.00 UK inflation set to slip back in December After the peak of 11.1% in October, headline CPI fell back to 10.7% in November in a welcome sign that we could well be past the peak, when it comes to price rises.Recent falls in oil and gas prices are also likely to start to feed into the underlying numbers, while PPI inflation has also been falling in recent months, though given problems with the PPI calculations we haven't had clear visibility on that in the past couple of months, as the ONS continues to review how that is calculated. Today's December inflation numbers are expected to show that inflationary pressures continue to subside, but are only expected to fall modestly to 10.5%, with core prices also still high at 6.2%. We already know that food price inflation is trending in the mid-teens, which means that headline CPI is expected to remain above 10% for a while. It's also important to remember that RPI is even higher. With average wage growth trending at 6.4% and unemployment still low, the gap between wages and inflation is still quite wide, although it is narrowing from both directions. This probably means we can expect to see another 50bps rate hike from the Bank of England when it meets in just over 2 weeks' time, although any decision is unlikely to be unanimous, given the 3-way split last time. Headline CPI in the EU is also expected to be confirmed at 9.2% in December with core prices at 5.2%. EUR/USD – has struggled to overcome the 1.0870 area, prompting a fall to 1.0780. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. GBP/USD – ran out of steam at 1.2300 yesterday, with the risk that the move above 1.2000 level is running out of steam, despite the decent rebound from the 1.1830/35 area. The next big resistance lies at the 1.2350 area. We need to hold above the 1.2000 area for further gains to unfold. EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a drift back towards last week's low at 0.8770/80. Below 0.8770/80 retargets the 0.8720 area. USD/JPY – has recovered off 127.20 area this week, just shy of the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Has squeezed back above the 130.00 area and could extend back through 132.60 on towards 134.80 without undermining the downward momentum. FTSE100 is expected to open 10 points lower at 7,841 DAX is expected to open 32 points higher at 15,219 CAC40 is expected to open 11 points higher at 7,088 Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Fed Needed To Get Rates Above 5% Sooner Rather Than Later

Michael Hewson Michael Hewson 19.01.2023 13:34
Yesterday saw another broadly positive session for European markets, with the FTSE100 once again underperforming, after UK inflation data showed itself to be much stickier than was anticipated, putting upward pressure on the pound in the process.   US markets initially started the day on the front foot until a double punch of weak data saw yields slide sharply on both the short and long end, prompting concerns that US economic activity was being impacted by the lagging effects of multiple rate hikes.   This concern about the economic outlook, along with announcements from the likes of Amazon and Microsoft about job losses, saw US markets roll over after European markets had closed, closing sharply lower, as once again the S&P500 failed above the 4,000 level.   Yesterday's weakness came as a result of concerns about the health of the US consumer. After a strong performance throughout most of 2022, consumer spending appears to have run out of steam with November and December retail sales declining 1% and 1.1% respectively. US PPI for December also saw a lower-than-expected rise of 6.2%, a sharp drop from the 7.4% seen in November.   The Fed Beige Book added little to the picture when it came to how the US economy is doing, apart from an acknowledgement that price pressures are starting to slow, however St. Louis Fed President James Bullard added to the uncertainty by insisting that the Fed needed to get rates above 5% sooner rather than later. This view conflicts with the prevailing market narrative of a 25bps hike next month, as concerns rise that the Fed could well be hiking into a potential recession.   These economic concerns also translated into crude oil prices which having hit their highest levels since the beginning of December early on the day, promptly reversed course to close the day sharply lower.   One thing in the favour of the US economy in the face of disappointing economic reports is a resilient labour market, with today's weekly jobless claims expected to see a modest rise from 205k to 214k.   We also have housing starts and building permits data for December, with the recent cold weather not expected to offer much hope of a respite here.   Last night's weaker US close looks set to translate into a lower European open.   The US dollar had a mixed day slipping to a marginal 8 month low against the euro before recovering, while against the Japanese yen we saw a 400-point range, after the Bank of Japan pushed back on market expectations of further measures to tweak its monetary policy settings around yield curve control.   Governor Kuroda went on to say that a further widening of the YCC band wasn't needed yet, as he looked to finesse the central banks messaging around its next policy move. The BoJ's biggest problem is that yesterday's events only delay the inevitable, with national CPI for December expected to reach a 42 year high of 4% later today.   With the Fed closer to the end of its rate hiking cycle, and the Bank of Japan yet to start its tightening regime, the line of least resistance for USD/JPY is likely to be a move towards 120 and possibly lower in the coming weeks.   EUR/USD – made a marginal new high of 1.0887 yesterday, before sliding back again, as the market struggles for direction. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110.   GBP/USD – ran out of steam just shy of the December peaks at 1.2440. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.   EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a move below last week's low at 0.8770/80, with the risk we could see a move towards the 0.8720 area, and 50- and 100-day SMA. The next support below 0.8720 targets 0.8680.   USD/JPY – the failure to hold onto the gains above 130.00 yesterday suggests the prospect of further weakness and a move towards the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Below 126.50 targets the 120.60 area.   FTSE100 is expected to open 38 points lower at 7,792   DAX is expected to open 60 points lower at 15,121   CAC40 is expected to open 30 points lower at 7,081   Email:   Follow CMC Markets on Twitter: @cmcmarkets   Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

European Markets Have Started To Lose Some Of Their Early Year Momentum

Michael Hewson Michael Hewson 24.01.2023 11:32
US markets started the week very much on the front foot yesterday, with the S&P500 closing above the 4,000 level and the Nasdaq 100 leading the way higher with its second successive 2% daily gain.   The outperformance in tech appears to point to a growing conviction on the part of investors that the Fed will soon have to look at cutting rates before the end of the year, although to look at bond markets yesterday, yields also moved higher, as money flowed out of treasury markets.   With a lot of tech companies starting to announce job cuts, as well as other measures to rein in costs, and inflationary pressures showing further signs of easing, it would appear that US investors are starting to think in terms of the next move higher, despite concerns over lower profits   Given the uncertain economic backdrop this comes across as a bit of a leap of faith, and its also notable that while US markets have started to gain momentum in the past few days, European markets have started to lose some of their early year momentum.   While US markets surged higher yesterday it is notable that today's European market open is likely to be a much more tepid affair, suggesting perhaps that investors in Europe don't share the same enthusiasm about the economic outlook, despite the reopening of the Chinese economy, which may help to provide a demand boost.   This increase in optimism is likely to be reflected in today's flash PMI numbers for January, which have already seen a pickup in economic activity in the past few months due to the sharp declines in energy prices from the peaks in August and September.   In Germany manufacturing PMI fell to 45.1 in October, but has recovered since then, albeit is still very much in contraction territory. Services have seen a similar pattern, dropping to two-year lows of 45, before showing small signs of a recovery. We expect to see a further improvement in today's January numbers to 48 for manufacturing and 49.5 in services.     In France, we've seen a similar pattern in manufacturing, although services have been more resilient due to the energy price subsidies provided by the French government to cushion French households from the worst effects of higher prices. France manufacturing is expected to improve to 49.5 from 49.2, and services to 49.8 from 49.5.   In the UK, manufacturing has struggled over the past 3 months and looks set to continue to do so, while services have been slightly more resilient. As we head into 2023 the challenges for business will be whether we see new investment, and a pick-up in economic activity, after the rising pessimism seen at the end of last year. Manufacturing is expected to remain subdued at 45.5, while services could slip back from 49.9 to 49.5.   Public sector borrowing in December is expected to remain high on the back of rising debt interest and energy price support with expectations of a small fall from November's £22bn to £18bn.   US manufacturing and services are expected to remain weak at 46 and 45 respectively.      EUR/USD – a marginal new high at 1.0927 yesterday, before slipping back again. The main resistance remains at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – ran out of steam just below the 1.2450 area yesterday slipping back towards the 1.2320 area. Has managed to hold above the 1.2300 area for the last three days. Above 1.2450 could see a move towards 1.2600. A move below 1.2290 could see a move towards 1.2170.   EUR/GBP – slid back from the 0.8815 area but while above the 50- and 100-day SMA which acted as support last week the bias remains for a return to the recent highs at 0.8890. The next support below 0.8720 targets 0.8680.   USD/JPY – has squeezed back above the 130.20 area, with a move through 131.60 and last week's high potentially targeting a return to the 132.50 area in the short to medium term. Support currently at the 128.20 area as well as the lows last week at 127.20.     FTSE100 is expected to open 20 points higher at 7,804   DAX is expected to open 47 points higher at 15,150   CAC40 is expected to open 23 points higher at 7,055   Email: Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Cross-Currency Pair Rises For The Fourth Consecutive Day

TeleTrade Comments TeleTrade Comments 25.01.2023 10:15
EUR/GBP grinds near weekly high, up for the fourth consecutive day. Clear rebound from 50% Fibonacci retracement, upside break of 100-SMA favor bulls. One-week-old resistance line restricts immediate upside ahead of monthly top. EUR/GBP picks up bids to 0.8845 as bulls poke intraday high, as well as the weekly top, heading into Wednesday’s European session. In doing so, the cross-currency pair rises for the fourth consecutive day after reversing from the 50% Fibonacci retracement of its run-up from early December to January 13. In addition to a successful rebound from the key Fibonacci retracement level of 0.8722, the EUR/GBP pair’s ability to cross the 100-SMA hurdle, as well as the bullish MACD signals, favor the bulls. It should be noted, however, that a downward-sloping resistance line from January 13, close to 0.8860 at the latest, guards the quote’s immediate upside. That said, the quote’s run-up beyond 0.8860 could enable the EUR/GBP bulls to refresh the monthly high, currently around 0.8900. In that case, the 61.8% Fibonacci Expansion (FE) of its moves between December 01, 2022, and January 13, 2023, close to 0.8955, will gain the market’s attention. Alternatively, pullback moves may initially aim for the 100-SMA level surrounding 0.8815 ahead of targeting the 0.8800 round figure. Following that, the 50% Fibonacci retracement level of 0.8722 should lure the EUR/GBP bears. In a case where the quote remains bearish past 0.8722, the 61.8% Fibonacci retracement level near 0.8680, also known as the “golden ratio”, will be crucial to watch. EUR/GBP: Four-hour chart Trend: Further upside expected
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair Is Likely To Witness Further Recovery

TeleTrade Comments TeleTrade Comments 27.01.2023 09:51
EUR/GBP takes the bids to refresh intraday low after snapping two-day downtrend. Convergence of 200-EMA, immediate descending trend line guards recovery moves. 50% Fibonacci retracement appears the key support for bears to watch. EUR/GBP bulls struggle to retake control as the cross-currency pair renews intraday high near 0.8785 heading into Friday’s European session. In doing so, the quote jostles with the 200-bar Exponential Moving Average (EMA) and a downward-sloping resistance line from Wednesday, close to the 0.8785-90 hurdle. It’s worth noting that the receding bearish bias of the MACD and the RSI (14) attempt to regain the 50 level keeps the EUR/GBP buyers hopeful. Also luring the EUR/GBP bulls could be the cross-currency pair’s bounce off the 50% Fibonacci retracement level of December 01, 2022, to January 13, 2023 upside, close to 0.8720. Hence, the quote’s one more attempt to break the two-week-old resistance line, around 0.8840 by the press time, can’t be ruled out. Following that, a run-up to the monthly peak of 0.8897 becomes imminent. Meanwhile, the EUR/GBP pair’s fresh weakness remains unimportant till it stays beyond the 50% Fibonacci retracement level of 0.8722. In a case where EUR/GBP remains bearish past 0.8720, the 61.8% Fibonacci retracement level, also known as the golden ratio, could act as the last defense of the buyers around 0.8680. Overall, EUR/GBP is likely to witness further recovery but the bulls are far from retaking control. EUR/GBP: Four-hour chart Trend: Corrective bounce expected
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Four Bank of England scenarios for February’s meeting

ING Economics ING Economics 27.01.2023 12:35
Persistently high wage and service-sector price inflation points to another 50bp rate hike from the Bank of England next Thursday. If we're right, then we expect one final 25bp rate hike in March, marking the top of this tightening cycle Governor of the Bank of England, Andrew Bailey Four scenarios for the Bank of England meeting Market pricing based on spot values on 27 January Source: ING   The Bank of England looks more likely to follow the European Central Bank than the Federal Reserve next Thursday, and we expect a 50 basis point rate hike for the second consecutive meeting. While the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move in February – and this meeting looks like a closer call than markets are pricing – the reality is that the recent data has looked relatively hawkish. Wage growth is persistently high, looking both at the official numbers and the BoE’s own business surveys. Headline inflation came in a little lower than the Bank projected back in November, but services CPI – seen as a better gauge of domestically-driven inflation – has come in above expectations. Still, if we get a 50bp hike on Thursday then it’s likely to be the last. BoE officials have hinted previously that much of the impact of last year’s rate hikes is yet to hit, and cracks are forming in interest-rate-sensitive parts of the economy. Headline inflation should begin to come down more rapidly from March too, as the impact of last year's energy bill surges drop out, and core goods/food pressure begins to ease more noticeably.  We expect one final 25bp hike in March, taking the Bank Rate to a peak of 4.25%. The key question for Thursday is whether the Bank itself acknowledges its work is nearly complete. We suspect it’s more likely to keep its options open. Here's what we expect: 1 The vote split December’s meeting saw the number of policymakers voting for a 75bp hike drop from seven to one, and the committee’s two most dovish officials opted for no rate hike at all. The lesson then and throughout 2022 was that the committee tends to move by consensus, and that means that the vote split is unlikely to be particularly narrow, even if the meeting is a tough one to call. Either we’ll get a similar number of officials voting for 50bp again, or we’ll see the vast majority scale back their vote to 25bp, akin to the kind of shift we saw in December. Our base case is that we see six of the nine policymakers voting for a 50bp hike, one for 25bp and two for no change. How each official has voted on interest rate decisions since 2021 Dr Swati Dhingra joined the committee in August 2022 and began voting in September Source: Bank of England, ING 2 New forecasts Calmer markets and scaled-back rate hike expectations since the mini-Budget crisis last year mean we shouldn’t be surprised to see the Bank upgrade its growth forecasts. Lower gas prices should theoretically help too, though this is a little more awkward for the BoE given that the government hasn’t yet cancelled plans to increase household bills in April, even if such a move now looks unlikely. That also means we’ll have to take the new inflation forecasts with a slight pinch of salt, and our own view is that headline CPI will end the year 1pp lower if April's planned increase is scrapped and consumer bills return to levels consistent with market pricing from the third quarter.  Still, it's the medium-term story that matters more. Keep an eye on the so-called ‘constant rate’ inflation forecasts, where the Bank assumes the Bank rate will remain unchanged from now on. If these show inflation at, or very close to, 2% in a couple of years' time, then that would be a sure-fire sign that policymakers think we’re close to the peak for Bank Rate. 3 Guidance on future policy decisions Governor Andrew Bailey hinted recently that current market pricing, which sees a peak for Bank Rate at 4.4%, is in the right ballpark. That suggests little reason for the Bank to rock the boat too much on Thursday with new forward guidance, and we suspect it will want to keep options open. The Bank will likely repeat that it’s prepared to act ‘forcefully’ in future if required (though we learnt in December’s minutes that 50bp hikes classify as ‘forceful’). We also doubt Bailey will be willing to be drawn on whether the Bank could pivot back to a 25bp hike in March, nor indeed whether that would be the last move in the cycle. Where he may be tempted to push back is on policy easing, especially now markets are almost pricing in one 25bp rate cut by the end of this year. Chief Economist Huw Pill’s recent emphasis on the UK sharing the worst bits of the US and eurozone’s inflation problems – structural labour shortages with the former, the energy crisis with the latter – feels like a line we’ll hear a lot over the coming months as officials try to dampen expectations of policy easing. Sterling rates to tighten to euro, and a more inverted curve The sterling rates curve still trades with a remnant of the risk premium that appeared in the run-up to the September budget debacle, making it one of the few markets where we think rates are unjustifiably high. Things have changed since then, however. Markets have come around to our more benign view on the terminal rate in this cycle, now implying hikes will stop around 4.25%. Instead, the discrepancy is to be found in longer maturities where the curve implies the Bank rate will remain elevated longer than at other central banks. Read next: Ukraine Is Calling For More Sanctions Against Russia| FXMAG.COM What markets expect from the Bank of England over the coming months Source: Refinitiv, ING   That markets taking a more hawkish view of BoE policy than signalled, for instance in its forecast, is nothing new. What’s changed is the way participants look at inflation risk. This has prompted yield curves to take a much more benign view of Fed and ECB policy. Each country is different but we find the treatment of sterling rates increasingly at odds with that of the dollar and euro. As a result, we expect the differential between 5Y sterling and euro swap rates to shrink to 75bp. This convergence should also be helped by the worsening of UK economic surprise indices, just as their eurozone equivalent goes from strength to strength. The spread between euro and sterling swap rates is likely to narrow Source: Refinitiv, ING   We also think the GBP curve is due to flatten further. One likely driver is the market's growing confidence that the BoE, like the Fed, will soon be in a position to cut rates, although we wouldn’t expect this before 2024. Another less probable driver would be if the BoE feels the need to tighten policy more than expected in the coming meetings. We very much doubt that longer rates would follow the short end higher, pricing instead a growing risk of rate cuts down the line to cushion the economic hit. We think the GBP curve is due to flatten further Source: Refinitiv, ING GBP: Temporary strength The BoE’s broad trade-weighted measure of sterling has bounced around 6% since the dark days of September and will marginally ease the BoE’s fears of imported inflation. Given that a 50bp hike is not fully priced for Thursday, sterling could enjoy some limited and temporary strength should the BoE indeed hike 50bp. Depending on the post-FOMC state of the dollar, that could briefly send GBP/USD back into the 1.24/25 range and EUR/GBP back to the low 0.87s. However, the challenges facing sterling have not gone away. Large twin deficits, weak growth and what throughout the year should be building expectations that falling prices – especially from March/April onwards – will provide room for the BoE to cut rates around the turn of the year. In terms of a profile, we think a continued narrowing in GBP rates premium to the EUR can push EUR/GBP higher through the year towards the 0.90/91 area. GBP/USD should be supported by the better EUR/USD trend, but will probably struggle to hold any gains to the high 1.20s – potentially seen in the second quarter. Read this article on THINK TagsInterest rates 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 US PCE Data Is Expected To Confirm Another Modest Slowdown

The US PCE Data Is Expected To Confirm Another Modest Slowdown

Michael Hewson Michael Hewson 27.01.2023 13:26
European markets have struggled for direction this week, finishing the day modestly higher after two days of minor losses.   US markets on the other hand finished the day strongly higher, with the Nasdaq 100 leading the way higher on the belief, rightly or wrongly, that the US economy is heading for a soft landing whatever the Fed does next week.   Yesterday's Q4 GDP numbers showed the US economy expanded by 2.9%, while weekly jobless claims fell again to 186k from 192k the week before.   If there are any concerns that the US economy is on the brink of a recession it's certainly not being reflected in the economic data, which still looks solid, as we look towards next week's Federal Reserve rate meeting.   Today we get a look at the latest personal spending numbers for December, after seeing a sizeable slowdown in the November numbers to 0.1%, after a strong October showing of 0.9%.   If we get a similar weak reading today, and all the forecasts suggest we might, then that would suggest a rising caution amongst US consumers about how the economy is evolving as we head into 2023. We've already seen US banks setting aside hefty loan loss provisions in their most recent earnings numbers, a move which might suggest rising unease that consumers are becoming more frugal with their spending, or that a slowdown might result in credit losses.   Expectations are for December personal spending to decline by -0.1%, which seems somewhat conservative given that retail sales showed a decline of -1.1% a couple of weeks ago.   Whatever numbers we get today it seems almost certain that we will see the Federal Reserve raise rates by another 25bps next week, and judging by the rally in US stocks yesterday, the market has increasingly priced in that outcome instead of what might have been a 50bps move.   The big concern is what markets aren't pricing, and while the Bank of Canada earlier this week signalled a pause in its rate hiking cycle, that doesn't mean the Fed will follow a similar path, even though markets appear to be pricing exactly that sort of outcome.   While yesterday's GDP numbers increasingly appear to support the prospect of a soft landing, the labour market data also suggests that the Fed has the headroom to continue to be much more aggressive.   Today's PCE Core Deflator inflation data is expected to confirm another modest slowdown from 4.7% to 4.4%, and the lowest reading since October 2021. It would also support the case for a more modest 25bps next week, however as we get nearer to the end of the Fed's rate hiking cycle there is some divergence with respect to what might come next.   Judging by the bond market reaction which saw yields move higher there may be a realisation that rates are likely to remain higher for longer, while the strong close for stocks might suggest the market believes rate cuts might not be too far away.   That seems doubtful if last night's Tokyo CPI is any guide, after inflation there surged to a new 42 year high at 4.4%, well above expectations of 4%. This suggests that global inflation is likely to be stickier than markets are currently pricing.   We'll soon see who is right when Fed chair Powell speaks next week, but if markets think a pause is coming, they could be in for a bit of a wake-up call.   EUR/USD – another fairly tight range yesterday with resistance at 1.0927 and the highs this week, as well as wider resistance at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – made another attempt to move towards the 1.2450 resistance area yesterday, before slipping back. We need to see a move through the 1.2450 area to target further gains towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – the failure to make progress through the 0.8850 area has seen the euro slip back. Also have resistance at the previous highs at 0.8900. Still have support above the 50- and 100-day SMA which we saw last week at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – needs to break through the 131.00 area to target a move back towards 132.60. While below the risk is for further declines towards the lows at 127.20. We have interim support at the 128.20 area initially.   FTSE100 is expected to open 13 points higher at 7,774   DAX is expected to open 44 points higher at 15,176   CAC40 is expected to open 3 points higher at 7,099   Email:   Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

Eurozone GDP May Put Challenges For The EUR/GBP Buyers

TeleTrade Comments TeleTrade Comments 31.01.2023 09:49
EUR/GBP reverses the previous day’s corrective bounce off one-week low. Euro struggles to defend hawks after downbeat German data challenge hawkish ECB bias. IMF’s warning over the UK’s economic conditions challenge EUR/GBP bears. Preliminary readings of Eurozone Q4 GDP will be crucial for immediate directions, ECB vs. BoE battle eyed. EUR/GBP remains depressed around 0.8780, fading the week-start recovery, as traders await Eurozone Q4 GDP for fresh impulse during early Tuesday. The cross-currency pair managed to begin the key week comprising central bank announcements on a positive side amid fears of the UK drama over tax cuts. However, downbeat prints of German GDP, later on, weighed on the prices. That said, Economic Sentiment Indicator for the Euro area improved to 99.9 in January from an upwardly revised 97.1 prior and 97.0 market forecasts. The Consumer Confidence, however, matched 20.9 market forecast and previous readings during the stated month. That said, the Industrial Confidence and Services Sentiment also improved during January. On the other hand, the preliminary readings of Germany’s fourth quarter (Q4) Gross Domestic Product (GDP) came in softer than 0.0% expected and 0.4% prior to -0.2% QoQ. "After the German economy managed to perform well despite difficult conditions in the first three quarters, economic performance slightly decreased in the fourth quarter of 2022", Destatis noted in its publication. The same raises fears of downbeat Eurozone GDP and challenges the EUR/GBP buyers. Alternatively, the International Monetary Fund’s (IMF) downbeat economic projections for the UK seem to keep the EUR/GBP on the front foot. As per the latest forecasts, the IMF projects the British economy will mark the weakest performance among the Group of Seven (G7) nations. Read next: Glovo Is Planning To Layoff 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM Also read: IMF: Emerging markets growth slowdown bottomed out in 2022, but risks remain Looking forward, the first readings of the Eurozone Q4 GDP, expected 0.0% QoQ versus 0.3%, will offer immediate directions to the EUR/GBP and is likely to witness further weakness unless marking a surprise. However, major attention should be given to Thursday’s monetary policy meetings of the European Central Bank (ECB) and the Bank of England (BOE) for clear directions. Technical analysis Although a convergence of the 100-DMA and the 50-DMA provides strong support to the EUR/GBP price around 0.8740-35, recovery remains elusive unless the quote stays below a 12-day-old resistance line, close to 0.8830 at the latest.
RBA Pauses Rates, Australian Dollar Slides 1.3% on Economic Concerns; ISM Manufacturing PMI Expected to Remain Negative

Weak Performance For EU Q4 GDP, The UK Economy Is Also Expected To Experience A Weak Quarter

Michael Hewson Michael Hewson 31.01.2023 13:10
European markets struggled for direction yesterday, after German Q4 GDP showed a surprise contraction of -0.2% and core CPI in Spain rose to a record high of 7.5%, pushing yields across the bloc sharply higher. With the ECB due to meet later this week and expected to raise rates by 50bps, yesterday's weakness appears to have been driven by concern that the EU economy might not be as strong as thought, and inflation a lot stickier.   US markets also continued their own Jekyll and Hyde behaviour with the Nasdaq 100 posting its biggest one-day loss this year, as the strong rally of last week gave rise to a more tempered approach as the Federal Reserve gets set to kick off its two-day meeting later today.   Yesterday's surprise increase in Spanish core inflation for January to record highs also appears to have raised concerns that high prices might not come down as quickly as thought, and growth a lot slower, despite the recent sharp falls in energy prices. With Asia markets also sliding back this morning, markets here in Europe look set to open lower as we come to the end of what has been a strong month.   Later today we should get a better idea of whether the contraction in the German economy in Q4 was a localised issue, or symptomatic of more widespread economic weakness across the EU.   The French economy is expected to slow in Q4, down from 0.2% in Q3, to 0%, while the Italian economy is expected to contract by -0.2% in Q4. This is expected to translate into a similar weak performance for EU Q4 GDP which is forecast to show a contraction of -0.1%.   The UK economy is also expected to experience a weak quarter, however we won't know the actual numbers on that until next week, but recent lending data has already shown that consumers have already started to rein back on their spending, although we did see a bit of a pickup in November.   Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM   Net consumer credit in November more than doubled from 700k in October, to £1.5bn. This may well have been driven by a surge of holiday bookings judging by the recent November GDP numbers, which showed a strong performance from the travel sector. This resilience may well extend into December with an expectation of £1.1bn.   Mortgage approvals on the other hand, have slowed sharply since the summer months, and are expected to remain subdued in December, with expectations of a fall from 46.1k to 45k.   In the US the latest consumer confidence numbers for January are expected to see another gain to 109, after a surprise surge in December saw this indicator rise sharply to 108.3 from 101.40. This rise in consumer confidence is a little puzzling given that retail sales in the US for both November and December showed sharp declines.   One indicator that is likely to be of particular interest to the Federal Reserve as they convene their latest meeting today is the employment cost index for Q4 which is expected to slow from 1.1% from 1.2% in Q3. This is another key indicator for the Federal Reserve after last week saw core PCE fall to its lowest levels in over a year.  An upside miss on the ECI would be bad news for any sort of dovish expectations from tomorrow's decision.   EUR/USD – we saw another failed attempt to push above the 1.0900 area before slipping back again. The main resistance remains at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – has continued to struggle above the 1.2400 area after last week's failure to move through the 1.2450 resistance area. We need to see a move through the 1.2450 area to target further gains towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – the failure to make progress through the 0.8850 area last week has seen the euro slip back. Key support remains at the 50- and 100-day SMA which we earlier this month at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – needs to break through the 131.00 area to target a move back towards 132.60. While below 131.00 the risk is for further declines towards the lows at 127.20. We have trend line support at the 129.00 area initially.   FTSE100 is expected to open 18 points lower at 7,767   DAX is expected to open 50 points lower at 15,076   CAC40 is expected to open 22 points lower at 7,060     Email: Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The MPC Is On The Horns Of A Dilemma But The ECB Will See Another 50bps Rate Hike

Michael Hewson Michael Hewson 02.02.2023 08:51
Having seen the Federal Reserve hike rates yesterday evening by 25bps and signal that they are far from done, equity markets reacted by rallying strongly with the Nasdaq 100 surging to its highest levels since early September.   For all of Fed chair Jay Powell's insistence that more rate hikes were coming, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, as well as the loosening of financial conditions has created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy is likely to evolve. To borrow a line from Cool Hand Luke, "what we've got here is a failure to communicate".    Long story short, the market thinks the inflation job is done, even if the Fed hasn't arrived at that conclusion yet. Consequently, this goes a long way to explaining why US markets closed strongly higher and yields and the US dollar plunged to 9-month lows, with the euro hitting 1.1000 for the first time since April last year. Last night's rally in the US looks set to translate into a higher European open as we now look towards the Bank of England and the European Central Bank to outline their messaging when it comes to the timeline of their own rate hiking cycle.   Starting with the Bank of England, the MPC is on the horns of a dilemma as the UK economy continues to struggle with double digit inflation, although the economy may well not be as bad as perhaps was thought at the end of last year, which could prompt a modest tweak to some of its economic forecasts.   The slide in energy prices in recent months has alleviated some of the pressure on wage packets, when it comes to petrol prices, however with food price inflation still at 16%, they will also be acutely aware that a weak pound will make headline inflation much sticker than it needs to be if they show any indication, they are going soft when it comes to hit its inflation target.   There will be the usual concerns about the impact on mortgage costs from another 50bps move but 5-year gilt yields have barely moved since the lows set back in November, although 2-year yields are higher.   Whatever we get today we are likely to see a split again, with the likes of Tenreyro and Dhingra likely to be the most averse to another hike given that they voted for no change in December.   The likes of Catherine Mann are likely to push for another 50bps, while the rest of the committee are expected to split between 25bps and 50bps, from the current 3.5%. If we do get 50bps will the Bank of England signal it is done, and signal a pause, or will they move by 25bps and signal there is more to come. With core prices looking sticky and wages rising at over 7% any procrastination on the MPC's part when it comes to forward guidance could well do more harm than good.   Whatever we get from the MPC today history has taught us it's unlikely to help the pound in the short term given the Bank of England's propensity to talk the pound lower whenever they meet. There is also the fact that the pound has been under pressure on the back of the belief that the Bank of England is much closer to the end of its rate hiking cycle than the ECB.     After the Bank of England, it is the turn of the European Central Bank and here there is little doubt that we will see another 50bps rate hike later today. It is what comes next that is likely to dominate the discourse today.   When the most recent ECB minutes were released, it became apparent that a raft of ECB governing council members wanted a much more aggressive approach, pushing for a 75bps move.   In the wake of the recent Davos Economic Forum ECB President Lagarde doubled down on her December messaging of multiple successive rate hikes, saying that inflation is still way too high, and markets are underestimating the ECB's resolve to drive prices back towards their 2% inflation target. This hawkish message is unlikely to be softened despite the recent fall in headline inflation to 8.5%, given core prices have remained steadfast at record highs of 5.2%.   When the ECB met in December, Lagarde more or less pre-committed the ECB to at least another 3 50bps rate hikes at the next 3 meetings, in a move that has seen the euro push higher and which has finally seen it break above the 1.1000 level, although that has mainly come about as a result of the market reaction to last night's Fed decision, rather than any intrinsic euro strength.   This would suggest that markets are still not convinced the ECB will be able to follow through on the number of hikes indicated given the risks it might pose to the borrowing costs of the more highly indebted members of the euro area.   EUR/USD – finally pushed through the 1.0930 area and the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. Yesterday's move through 1.0950 now opens up a move towards 1.1110. Support now comes in at 1.0920.   GBP/USD – the recent lows at 1.2260 remain a key support after another failure last week at the 1.2450 resistance area. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – edging back towards the recent highs just below the 0.8900 area. A move through these highs could trigger a move towards 0.9000. Key support remains at the 50- and 100-day SMA which we saw earlier this month at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – slipped below trend line support at 129.00 from the recent lows at 127.20, raising the prospect of a retest of those lows, and potentially on towards 126.50. Resistance now at 129.30.   FTSE100 is expected to open 30 points higher at 7,791   DAX is expected to open 102 points higher at 15,282   CAC40 is expected to open 35 points higher at 7,112   Email: Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The Key Central Banks Event Risk Keeps A Lid On Further Gains For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 02.02.2023 09:29
EUR/GBP scales higher for the fourth straight day and touches a fresh multi-month top. Expectations for additional jumbo rate hikes by the ECB continue to underpin the Euro. Speculations that the BoE is nearing the end of the rate-hiking cycle weigh on the GBP. Traders now seem reluctant as the focus shifts to the BoE and the ECB policy decisions. The EUR/GBP cross gains traction for the fourth successive day and climbs to the 0.8900 neighbourhood or its highest level since late September on Thursday. The shared currency continues to draw support from expectations for additional jumbo rate hikes by the European Central Bank (ECB) in the coming months. The bets were reaffirmed by the recent hawkish commentary by several ECB officials, which, in turn, acts as a tailwind for the EUR/GBP cross. The British Pound's relative underperformance could further be attributed to speculations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. That said, the prevalent US Dollar selling bias lends some support to the Sterling Pound. Furthermore, signs of inflationary pressures in the Eurozone might have forced investors to scale back expectations for a more aggressive policy tightening by the ECB. This, along with reluctance ahead of the key central bank event risk, keeps a lid on any further gains for the EUR/GBP cross. This warrants some caution before positioning for an extension of the ongoing move-up. Both the BoE and the ECB are scheduled to announce their policy decisions during the mid-European session this Thursday. The market focus, however, will be on clues about the future rate hike path, which will determine the next leg of a directional move for the EUR/GBP cross. Nevertheless, the fundamental backdrop favours bullish traders, though a sustained move beyond the 0.8900 round-figure mark is needed to support prospects for a further near-term appreciating move.
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/USD Pair Is Expected A Further Upside Movement

TeleTrade Comments TeleTrade Comments 13.02.2023 09:02
EUR/GBP fades bounce off monthly support, grinds near intraday high of late. Sustained trading beyond 200-SMA, looming bull cross on MACD favor buyers. Weekly resistance line guards immediate upside ahead of monthly high. EUR/GBP grinds near an intraday high surrounding 0.8850 during the initial hours of Monday morning in London. In doing so, the cross-currency pair stays above the 200-Simple Moving Average (SMA) despite fading bounce off the monthly support line. It’s worth noting that the impending bull cross on the MACD and steady RSI (14) joins the quote’s successful trading above the key moving average to keep buyers hopeful. That said, a one-week-old descending trend line restricts the EUR/GBP pair’s immediate upside to near 0.8870. Following that, the 0.8900 round figure and multiple hurdles near 0.8910 could act as the last defense of the pair buyers before directing the quote toward the monthly high of near 0.8980. It should be observed that the EUR/GBP run-up beyond 0.8990 will need validation from the 0.9000 psychological magnet to aim for the previous yearly high surrounding 0.9250. Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM On the contrary, the 200-SMA and an ascending trend line from January 19, close to 0.8835 and 0.8828 in that order, restrict the short-term downside of the EUR/GBP pair. Following that the 61.8% Fibonacci retracement level of the pair’s January-February upside and the late January swing low, respectively near 0.8820 and 0.8760, will be in focus. Overall, EUR/GBP is likely to remain firmer unless offering clear trading below 0.8828. EUR/GBP: Four-hour chart Trend: Further upside expected remaining time till the new event being published U.S.: Leading Indicators
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The EUR/GBP Cross-Currency Pair Remains On The Buyer’s Radar

TeleTrade Comments TeleTrade Comments 14.02.2023 09:18
EUR/GBP reverses bounce off key support confluence on strong UK employment data. UK Unemployment Rate stays unchanged but Claimant Count Change drops. Divergence between ECB and BoE policymakers may recall pair buyers if EU Q4 GDP improves. EUR/GBP reverses from intraday high while declining nearly 20 pips to 0.8830 on the upbeat UK jobs report during early Tuesday. In doing so, the cross-currency pair reversed the early-day run-up from the key 0.8830 support confluence. UK’s Unemployment Rate matches market forecasts and reprints the 3.7% figure for three months to December. However, a slump in January’s Claimant Count Change to -12.9K versus -3.2K prior, as well as strong prints of the  Average Earnings Excluding Bonus for the said month seemed to have favored EUR/GBP bears of late. In contrast to the upbeat UK data, a comparatively more hawkish bias at the European Central Bank (ECB) versus the Bank of England (BoE) joins the upbeat European Commission (EC) economics forecasts to underpin the regional currency’s bullish bias. On Monday, the European Commission (EC) released its quarterly economic projections for the Eurozone wherein it revised up the economic growth forecast to 0.9% for 2023 from 0.3% previously expected, projecting 2024 growth unchanged at 1.5%. The EC, however, lowered the Eurozone inflation forecast for 2023 to 5.6% YoY from 6.1% earlier expected. Further, the EC also cut 2024 inflation predictions to 2.5% for 2024, versus 2.6% previously anticipated. That said, European Central Bank (ECB) Vice-President Luis de Guindos said on Monday, “Rate increases beyond March are to depend on data.” On the same line, ECB policymaker Mario Centeno said, “Inflation is going down faster than we expected,” while adding that smaller hikes would need mid-term inflation nearing 2%. On the other hand, Bank of England’s (BoE) policymaker Jonathan Haskel cited a rise in inactivity in the UK labor market and challenged the British Pound (GBP) buyers previously. BoE’s Haskel also mentioned, “I would prefer to make policy with much more attention on the data flow over the next few months.” On a broader front, the cautious mood ahead of the top-tier data/events joins softer US Treasury bond yields to favor the mild optimism in the market, which in turn seems to favor the Euro (EUR). Having witnessed the initial reaction to the British data and EU fundamentals, EUR/GBP pair traders should wait for the preliminary readings of the fourth quarter (Q4) Gross Domestic Product (GDP) data for the Eurozone for clear directions. Given the recently upbeat economic projections from the European Commission and the ECB’s hawkish bias, the EUR/GBP pair is likely to remain firmer unless the EU GDP disappoints. Technical analysis Unless breaking 0.8830 support confluence comprising the 21-DMA and a one-month-old ascending trend line, the EUR/GBP remains on the buyer’s radar.
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

Analysis Of The EUR/GBP Cross Currency Pair Movement

InstaForex Analysis InstaForex Analysis 15.02.2023 08:09
On the 4-hour chart, the EUR/GBP cross currency pair can be seen that the price movement is continuing its decline to go to the target level 0.8771 as the main target and the 0.8721 level as the second target where this can be seen as confirmation from the movement of the candlestick moving below the moving average. because of the appearance of deviations in price movements with the MACD Histogram indicator, in the near future there will be a upward correction movement to test the 0.8836 level before returning to the original downward movement but the important thing is as long as the upward correction movement does not exceed the 0.8874 level, then a bearish scenario will occur. has been described is still valid.   Relevance up to 02:00 2023-02-16 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more:
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The Bank Of England's (Boe) Current Rate-Hiking Cycle Might Be Nearing The End And This Acts As A Tailwind For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 17.02.2023 10:01
EUR/GBP gains positive traction for the third straight day and climbs to over a one-week high. The upbeat UK Retail Sales for January fail to impress the GBP bulls or provide any impetus. Bets for additional jumbo rate hikes by the ECB support prospects for further near-term gains. The EUR/GBP cross builds on this week's goodish bounce from the 0.8800 mark and edges higher for the third successive day on Friday. Spot prices hold steady above the 0.8900 round figure through the early European session and react little to the latest UK macro data. The UK Office for National Statistics reported that domestic Retail Sales grew 0.5% in January against consensus estimates for a 0.3% fall. Furthermore, sales excluding fuel also surpassed market expectations and rose by 0.4% during the reported month. The better-than-expected prints, however, were offset by a downward revision of the previous month's already weaker readings. This, in turn, fails to provide any meaningful impetus to the British Pound or move the EUR/GBP cross. That said, the softer UK consumer inflation figures released earlier this week fueled expectations that the Bank of England's (BoE) current rate-hiking cycle might be nearing the end. This continues to weigh on the Sterling and acts as a tailwind for the EUR/GBP cross. That said, broad-based US Dollar strength exerts some follow-through downward pressure on the shared currency. This, in turn, holds back bulls from placing aggressive bets and caps the upside for the cross, at least for now. Meanwhile, bets for additional jumbo rate hikes by the European Central Bank (ECB) might contribute to the Euro's relative outperformance against its British counterpart. This, in turn, supports prospects for a further near-term appreciating move for the EUR/GBP cross. Hence, some follow-through strength back towards the 0.8975-0.8980 region, or the highest level since September 2022 touched earlier this month, looks like a distinct possibility. Technical levels to watch remaining time till the new event being published U.S.: Leading Indicators
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/GBP Pair Is Expected Limited Downside Movement

TeleTrade Comments TeleTrade Comments 20.02.2023 08:46
EUR/GBP fades bounce off immediate horizontal support, 200-HMA. Sluggish oscillators suggest limited downside room but bulls need validation from 0.8930. Monthly low lures bears past 200-HMA buyers have a bumpy road to the north to track. EUR/GBP holds lower ground near 0.8880 during the early Monday morning in Europe. In doing so, the cross-currency pair fades bounce off the 200-HMA and eight-day-old horizontal support. Also teasing the pair sellers is the lower high formation, marked since February 07. However, the aforementioned support line, close to 0.8875 at the latest, precedes the 200-Hour Moving Average (HMA) level surrounding 0.8865, to put a floor under the EUR/GBP prices. In a case where the EUR/GBP pair drops below 0.8865, the odds of witnessing a slump toward the monthly low near the 0.8800 round figure can’t be ruled out. It’s worth noting, though, that January’s low near 0.8720 could challenge the pair sellers afterward. Meanwhile, the 50% and 61.8% Fibonacci retracement levels of the EUR/GBP pair’s fall between February 03 and 14, near 0.8890 and 0.8910 in that order, could challenge the short-term upside of the pair. Following that, a downward-sloping resistance line from February 07, close to 0.8930 by the press time, will be the key as a clear break of the same towards the north might endanger the monthly peak of 0.8978. Overall, EUR/GBP is likely to grind lower amid mixed catalysts and sluggish prints of the MACD and RSI. Though, the downside room appears limited. EUR/GBP: Hourly chart Trend: Limited downside expected
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

Bears Of The EUR/GBP Pair Keep The Reins For The Third Day

TeleTrade Comments TeleTrade Comments 21.02.2023 09:34
EUR/GBP retreats from intraday high to extend Friday’s U-turn from two-week high. Full market’s return, cautious mood probe Euro bulls ahead of Eurozone ZEW Sentiment data, monthly PMI. The British Pound braces for UK PMI amid mixed concerns surrounding Brexit. EUR/GBP holds lower ground around 0.8870, after recently reversing from the daily top, as bears keep the reins for the third consecutive day to early Tuesday in Europe. In doing so, the cross-currency pair portrays the broad retreat in the Euro, as well as the recovery in the British Pound (GBP), ahead of the key data for the bloc and Britain. That said, a fresh run-up in the US Treasury bond yields, and the fears emanating from China, North Korea and Russia seemed to have underpinned the market’s rush for the US Dollar as traders from Washington return after a long weekend. As a result, the Euro witnesses a pullback in the demand due to its contrast with the greenback. It’s worth noting that the recent statistics from the Euro area have been firmer while those from the UK have been mixed, which in turn keeps the pair buyers hopeful ahead of the key numbers. Additionally teasing the EUR/GBP buyers are the hawkish comments from the European Central Bank (ECB) official. That said, ECB governing council member and Finnish central bank Chief Olli Rehn recently said, per Reuters, “ECB should keep raising interest rates beyond March and the rate peak, which should be stuck to for some time, could be reached over the summer.” On the same line, upbeat prints of Eurozone Consumer Confidence matched the market forecasts of -19 versus -20.9 prior. Further, Germany's Bundesbank released its monthly report and noted that the economic outlook was somewhat brighter with the short-term outlook turning more favorable than seen just a few months ago. Alternatively, fears of no imminent Brexit deal should have weighed on the British Pound (GBP) as the UK’s Conservative Members of the Parliament (MPs) dislike the deal with the European Union (EU) on Northern Ireland (NI). Some of them are threatening to resign, per The Times, amid fears of the compromised deal. The news also mentioned that UK Prime Minister Rishi Sunak spent notable time in the House of Commons to convince the MPs that no deal had yet been agreed and talks were continuing. “He was told he ‘hasn’t got a hope’ of succeeding without the support of the Democratic Unionist Party,” per The Times. Amid these plays, stock futures are down and the Treasury bond yields, as well as the US Dollar, are firmer, which in turn weigh on the Euro amid a sluggish start to the key day. Looking forward, Eurozone ZEW sentiment figures for February will precede the preliminary readings of the bloc’s, as well as the UK’s, Purchasing Managers Index (PMI) data for the said month to direct short-term pair moves. Given the cross-currency pair’s latest retreat, backed by the market speculations that the Euro rally is about to end amid the European Central Bank’s (ECB) inability to offer higher rates, the sellers may keep the reins unless the scheduled data mark any surprise. Technical analysis EUR/GBP fades bounce off the 50-day Exponential Moving Average (EMA), around 0.8815 by the press time, which in turn joins bearish MACD signals and failure to cross the 0.8915-10 horizontal hurdle to keep bears hopeful.
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/GBP Cross Pair Is Expected To Display More Weakness

TeleTrade Comments TeleTrade Comments 23.02.2023 08:32
EUR/GBP looks vulnerable around 0.8800 as hawkish BoE bets soar after a recovery in UK preliminary PMI data. UK’s Hunt is facing calls from within his Conservative Party to cut taxes and raise pay for public service workers. ECB Lagarde is set to continue its policy tightening spell of 50 bps to March. The EUR/GBP pair is struggling to find any direction in the Tokyo session amid the absence of a potential trigger. The cross is juggling around 0.8800 and is expected to display more weakness as an economic recovery in the United Kingdom and a shortage of labor is demanding the continuation of policy tightening by the Bank of England (BoE). Investors were in a dilemma whether the Bank of England (BoE) should pause policy contraction as the economic outlook was expected extremely bleak or continue pushing rates higher to tame stubborn inflation. Shortage of labor and escalating food inflation is continuously maintaining havoc that the inflation could be underpinned anytime to new highs. No doubt, the UK Consumer Price Index (CPI) has eased in the past few months, however, the headline CPI figure is still in double-digit and sufficient to trouble households. Meanwhile, a recovery in the economic activities shown by the preliminary S&P Global PMI (Feb) data, released this week, indicates that labor demand could be fueled further and BoE Governor Andrew Bailey should consider continuation of policy tightening. A figure below 50.0 for the preliminary Manufacturing activities indicates contraction, however, the pace of decline in activities has squeezed significantly. BoE panel sees the interest rate peak around 4.5% and the continuation of the rate hike in the March monetary policy meeting looks warranted. Meanwhile, UK Finance Minister (FM) Jeremy Hunt is facing calls from within his Conservative Party to cut taxes in his March 15 budget and from trade unions to raise pay for public service workers, as reported by Reuters, which could propel inflationary pressures further. On the Eurozone front, clarity on the extent of the rate hike by the European Central Bank (ECB) President Christine Lagarde has eased some uncertainty. ECB Lagarde has announced a continuation of 50 bps rate hike spree for March to keep the downside momentum in Eurozone inflation intact.
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The EUR/GBP Cross Pair Is Expected Further Downside Movement

TeleTrade Comments TeleTrade Comments 24.02.2023 08:46
EUR/GBP retreats from intraday high, snaps two-day rebound from monthly low. One-week-old resistance line, key Fibonacci retracement level challenge immediate upside. 0.8840 appears a tough nut to crack for the EUR/GBP bulls. Multiple levels surrounding 0.8760 can probe bears afterward. EUR/GBP bears return to the table, after a two-day absence, as the quote eases from the intraday high to 0.8815 during the initial hour of Friday’s European session. In doing so, the cross-currency pair fades bounce off the lowest levels since January 31 while retreating from the convergence of the one-week-long descending trend line and 61.8% Fibonacci retracement level of January 19 to February 03 upside, close to 0.8820 at the latest. Adding strength to the pullback moves is the sluggish RSI (14) near the 50 levels, as well as the pair’s previous downside break of the support lines from late January. As a result, the EUR/GBP bears are all set to revisit the latest trough surrounding 0.8780. However, multiple levels marked during late January could challenge the pair sellers near 0.8760 then after. Should the quote remains weak past 0.8760, the odds of witnessing a fresh low of the year 2023, currently around 0.8720 can’t be ruled out. On the contrary, a successful break of the 0.8820 resistance confluence isn’t an open welcome to the EUR/GBP bulls as the previous support line from January 30, around 0.8830 by the press time, could challenge the upside moves. It’s worth noting that the support-turned-resistance from January 19 joins the 200-Simple Moving Average (SMA) to highlight the 0.8840 as the key upside hurdle. EUR/GBP: Four-hour chart Trend: Further downside expected
FX Daily: Upbeat China PMIs lift the mood

FX Daily: Upbeat China PMIs lift the mood

ING Economics ING Economics 01.03.2023 09:50
Financial markets are caught between the two narratives of a softer landing (helped by China's reopening) and sticky inflation keeping policy rates higher for longer. That will probably keep bond markets on the back foot and FX markets volatile in ranges. Today's highlights will be PMI releases around the world and presumably high German inflation USD: Foreign Direct Investment trends of interest The dollar has softened marginally in Europe and emerging market currencies are generally bid after China released an encouraging set of February PMIs. There were strong rebounds for both the manufacturing and service sectors which are feeding the narrative that a 2023 China recovery is the real deal. The PMIs come ahead of this weekend's 'Two Sessions' political gathering where we expect a growth target of 5.5-6.0% to be outlined. So far, so good and the China PMI data trumped some local news where AUD/USD has ended up higher on the session despite some softer-than-expected GDP and CPI data. Catching our eye this morning has been a survey by the US Chamber of Commerce (AmCham) that only 45% of American companies see China as their top three investment destination, compared to 60% a year ago. Clearly, geopolitics is driving this. Of the 24% of companies which said they might relocate out of China, one-third said they would relocate to the US. This topic of re-shoring/friendshoring will be an important multi-year factor driving Foreign Direct Investment (FDI) trends and could provide some resistance to those looking for the secular decline of the dollar. On that subject, we also note that Tesla will be building its next plant in Mexico. That only adds to the attraction of the Mexican peso, which remains our high yield/EM currency of choice. Back to today. The US releases ISM manufacturing data which should remain soft at 48. More interest will be had in Friday's services ISM. We suspect the China PMI story might dominate FX trading today and maintain a slightly offered tone for the dollar. Yet DXY will probably trade well within Monday's range of 104.55-105.35. Chris Turner EUR: Inflation, inflation, inflation EUR/USD got a lift yesterday from data showing Spanish February core inflation pushing to a new cycle high. The fact that Spanish core inflation includes food may not mean such a large read-through to tomorrow's eurozone core CPI data which is expected at 5.3% year-on-year. Yet our team thinks that this figure could now push up to a new cycle high of 5.4/5.5%. The worrying trend in prices continues to feed into European Central Bank expectations where the market looks to be pricing an extended tightening cycle into 2024, with the deposit rate (now 2.50%) possibly being raised as high as 4.00%. Feeding into that story today will be German CPI, which is released around 14CET. The continued re-pricing of the ECB curve is providing EUR/USD with some support against higher US rates and suggesting 1.05 will be the bottom of the EUR/USD's first quarter range after all. Certainly, the disinflation story is taking a back seat this month.  Today, we have a few ECB speakers and we should expect a relatively quiet 1.0565-1.0645 range for EUR/USD. The more aggressive ECB pricing is also providing some support to EUR/CHF, which looks like it might end March near our 1.00 target. Chris Turner GBP: More focus on the Northern Ireland deal Yesterday, we wrote a piece on what the new Northern Ireland deal - or 'Windsor Framework' - meant for sterling. While welcome news, we doubted that it would prove a game changer for sterling. Some other FX strategists felt that the news could be a lot more positive for sterling - even triggering a 2/3% rally in the pound were the DUP to come on board, support the deal and return to government in Northern Ireland.  We think the small rally in the pound that was seen (and has since partially reversed) is probably sufficient in that it reflects a warmer political relationship between the UK and the EU. We doubt any approval by the DUP makes much difference to the pound. As we discussed in the article, weak UK growth and an increasingly hawkish ECB will probably keep EUR/GBP supported for most of the year.  We do note, however, that some of last year's policy uncertainty is still being taken out of sterling via the FX options market. For example, the one-year EUR/GBP risk reversal - the price for a EUR call option over an equivalent EUR put option - has fallen to 0.95% from 2.5% last September. And one-year EUR/GBP traded volatility has fallen to 7% from 11%. But those moves may well have come far enough for the time being. Our baseline sees EUR/GBP staying supported under 0.88. Look out for a speech by Bank of England Governor Andrew Bailey at 11CET today. Money markets price the Bank Rate at 4.75% into September. Our team thinks that BoE rates will not need to be hiked that far, yet with inflation staying high for the time being, Governor Bailey may find it too early to disabuse the markets of that pricing. GBP/USD could drift back to 1.2100 on the slightly softer dollar today. Chris Turner CEE: Gas prices support the region again The National Bank of Hungary (NBH) left rates unchanged yesterday. Even though at face value it looks like nothing has changed, our impression is that the central bank still means business when it comes to fighting inflation and was able to sound a bit more hawkish. The central bank will not be distracted by promises and outliers. The NBH wants to see a permanent improvement in every aspect and will not rush policy easing. However, looking at the market reaction, it is clear that the market already understood the NBH's message in January and the February meeting did not bring much fresh news. As we mentioned in our NBH preview, we expect the forint to take a break in March and the central bank meeting is the last chance for gains below 380 EUR/HUF for now. We remain positive on the forint, but the current drivers have run out of steam. Plus we could see some negative news in the EU story in the coming days and a downgrade in the outlook from Moody's this Friday.  Today, we will see the PMIs across the region for February. We expect a slight improvement in sentiment in Poland and the Czech Republic and a deterioration in Hungary. In Hungary, the PPI for January will be published. The Czech Republic's state budget numbers for February will also be revealed, which could shed more light on the financing and issuance of CZGBs.  In the FX market, we have seen new gains for CEE again in recent days. The Czech koruna, in particular, has attracted attention, breaking below 23.50 EUR/CZK for the first time since 2008. The main reason, in our view, is the renewed decline in gas prices and the testing of new lows. However, the rest of the market does not indicate favourable conditions for the koruna and the region. With core rates rising further, interest rate differentials have compressed across the board and the US dollar is once again on the stronger side. Thus, we are hard-pressed to find reasons to see the current gains as sustainable.  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
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

Analysis Of Price Movement Of The EUR/GBP Cross Pair

TeleTrade Comments TeleTrade Comments 10.03.2023 09:02
EUR/GBP takes offers to refresh intraday low, prints three-day downtrend. UK GDP improved in January, Industrial Production, Manufacturing Production deteriorated. Hopes of Britain’s economic rebound due to the latest reshuffle in governing policies, Brexit allow GBP to remain firmer. BoE versus ECB drama could check pair sellers as the key data begins in London. EUR/GBP slides 10 pips to refresh intraday low near 0.8860 as the UK’s Office for National Statistics releases the monthly Gross Domestic Product (GDP) on early Friday. It should be noted that the optimism surrounding the British economic transition and mixed sentiment, as well as likely challenges for the Euro, seem to exert additional downside pressure on the cross-currency pair. UK GDP grew 0.3% MoM in January versus 0.1% expected and -0.5% previous, which in turn pushes back the recession woes and propels the British Pound (GBP) despite mixed readings on the other fronts. That said, UK Industrial Production figures reversed the 0.3% previous expansion with -0.3% MoM marks whereas the Manufacturing Production growth dropped to -0.4% compared to -0.1% market forecasts and 0.0% prior. Also read: UK Manufacturing Production declines 0.4% MoM in January vs. -0.1% expected Elsewhere, hopes of economic recovery and more stock market listings seem to help the Cable pair amid a light calendar during the week. “The country's economy is on track to shrink less than expected this year and avoid the two-quarters of negative growth which mark a technical recession,” the British Chambers of Commerce (BCC) forecast on Wednesday per Reuters. Further, Britain’s finance ministry said on Wednesday it will launch a review into how investor research on companies could be improved to attract more listings, a step that follows a decision by UK chip designer Arm Ltd to only list in New York, reported Reuters. On the same line, Britain's revamped financial market rules will largely be aligned with U.S. and European Union regulations to minimize disruption to global companies, its financial services minister Andrew Griffith said on Thursday per Reuters. It should be noted that Bank of England (BoE) policy maker Swati Dhingra warned against interest rate hikes on Wednesday while saying that overtightening poses a more material risk at this point. On the other hand, fears of more economic pain for the bloc amid geopolitical tensions with Russia and sticky inflation, as well as higher rates, seem to drag the Euro. It should be noted that the risk-off mood underpins the US Dollar’s haven demand and reduces the demand of its major rival, namely the EUR. Having witnessed the initial market reaction to the UK’s data dump, EUR/GBP pair traders may concentrate on European Central Bank (ECB) President Christine Lagarde for clear directions. Also important to watch will be a slew of top-tier data from the US and Canada that can entertain the momentum traders across the board. Technical analysis Failure to overcome the 0.8930 horizontal hurdle joins the EUR/GBP pair’s clear downside break of a one-week-old ascending trend line, around 0.8895 by the press time, to direct bears towards the 100-DMA support of 0.8765.
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.03.2023 10:31
EUR/GBP drifts lower for the fifth straight day and drops to a nearly two-week low on Tuesday. The GBP’s relative outperformance comes amid rising bets for additional rate hikes by the BoE. The mixed UK jobs data fails to push back against hawkish BoE expectations or lend any support. Speculations for more jumbo rate hikes by the ECB warrant caution for aggressive bearish traders. The EUR/GBP cross remains under some selling pressure for the fifth successive day on Tuesday and drops to a nearly two-week low during the early European session. The selling bias remains unabated following the release of the mixed UK monthly employment details and drags spot prices below the 0.8800 mark, with bears now eyeing to challenge a technically significant 100-day Simple Moving Average (SMA). In fact, the UK Office for National Statistics reported that the number of people claiming unemployment-related benefits fell by 11.2K in February, less than the 12.4 decline anticipated. The slight disappointment, however, was offset by a sharp downward revision of the previous month's reading to show a drop of 30.3K in the Claimant Count Change against the 12.9 fall estimated. Furthermore, the jobless rate held steady at 3.7% during the three months to January as compared to a modest uptick to 3.8%, while the rolling three-month average indicated that the UK wages are cooling. Nevertheless, the data is strong enough to allow the Bank of England (BoE) to hike interest rates again later this month, which continues to underpin the British Pound and exerts downward pressure on the EUR/GBP cross. Apart from this, a goodish pickup in the US Dollar demand is seen weighing on the shared currency, which further contributes to the heavily offered tone surrounding the EUR/GBP cross. That said, the recent hawkish comments by several European Central Bank (ECB) officials, stressing the need for more interest rate hikes beyond March, could lend some support to the Euro. Traders might also refrain from placing aggressive bearish bets ahead of the ECB monetary policy meeting, scheduled on Thursday. The focus will then shift to the BoE meeting next week, which should help determine the next leg of a directional move for the cross. Hence, any subsequent decline is more likely to find decent support near the 100-day SMA, which should act as a pivotal point ahead of the key central bank event risks.
RBI's Strategic INR Support: Factors Behind India's Stable Currency Amidst Global Challenges

BoE Faces Inflation Challenge, Expected to Hike Rates; Central Bank of Turkey's New Leadership Takes Action; Swiss National Bank Set to Raise Rates

Ipek Ozkardeskaya Ipek Ozkardeskaya 22.06.2023 08:08
BoE decides after another bad inflation report  The Bank of England (BoE) meets after another shocker inflation report, and is broadly expected to hike the rates by another 25bp points.   The BoE is the first major central bank that started hiking the rates to fight inflation. It proved to be the least efficient bank doing this job; British inflation is the worst among developed economies at nearly 9%. Consequently, the BoE will certainly be the last to finish hiking. The bank is expected to hike six more times, by 25bp, to reach a peak rate above the 6% by the end of this year, or the beginning of the next.   And I don't see how the UK will avoid recession in this morose macroeconomic setting.   The British pound didn't find an army of buyers after the UK inflation report yesterday. After an initial attack on the 1.28 resistance, Cable came back to pre-data levels and even traded at five-session lows. The EURGBP made a sharp U-turn from a nearly oversold market and jumped above 0.86. There is room for a hawkish surprise from the BoE (a 50bp hike?), and if not today, in one of the next meetings. The latter should keep Cable on path for more gains, in the actual environment of softening US dollar.    Let's see what's the new Team is worth!  The new leadership team of the Central Bank of Turkey (CBT) will give the first policy verdict of its new mandate today. The bank is expected to hike the rates from 8.5% to 20%. It looks like a big hike – and it is a big hike – but the Turkish Central Bank will have to   1. regain its credibility that has been shattered   2. repeat a similar operation in the next few meetings to bring the Turkish rates to where they should be in accordance with the economic fundamentals, and not where the government wants them to be.   3. if all goes well, get rid of the expensive and ineffective side measures – like FX interventions and FX protected savings – that served to keep the lira afloat while the monetary policy was no longer.   The USDTRY is again put to sleep near the 1.23 level after a tentative relaxation of FX interventions at the start of this month. Hiking interest rates, regaining credibility, then relaxing FX interventions sounds like a plan, but it will take ZERO verbal intervention from the government to conduct a healthy policy normalization.   Note that, in no case, do I expect the selloff in lira to stabilize or the reverse – without external intervention – below the 30/35 range – if left free.    Swiss will hike as well The Swiss National Bank (SNB) is about to announce a 25bp hike at today's meeting taking the Swiss policy rate to 1.75%. The dollar-franc sees resistance into the 0.90 psychological level, but most of the price action is driven by USD appetite. Given the sharp fall in Swiss inflation toward the 2% target, the SNB will unlikely let the franc run too strong from here. 0.88 seems to be a floor to franc appreciation.    
US Corn and Soybean Crop Conditions Decline, Wheat Harvest Progresses, and Weaker Grain Exports

Economic Data Dampens Market Sentiment: PMI Contractions and Yield Concerns

Ipek Ozkardeskaya Ipek Ozkardeskaya 24.08.2023 10:57
PMI disappointment  The US 2-year yield slipped below 5% as both manufacturing and services PMI fell unexpectedly in August, adding a layer of complexity to US data, which strong enough to push Atlanta Fed's GDP forecast for Q3 to 5.8% last week.   August PMI numbers in Europe printed even worse numbers than in the US. The manufacturing PMI was slightly better than expected but remained well below the 50 threshold – in the contraction zone. More disquietingly, the euro-area's services PMI slipped below 50 – to the contraction zone for the first time since January. What's even more worrying is that, the services PMI fell into the contraction for the busiest summer month for mass holidays.   As a result, traders now price around 40% chance for a 25bp hike in European Central Bank's (ECB) next policy meeting, down from 55% before the release. The EURUSD tested the 200-DMA to the downside and remains under the pressure of rising dovish voices for the ECB. And the European bond markets rally: the German 10-year yield fell more than 5.5% yesterday. We see the same gloom across the Channel. All British PMI figures were below 50, and came in worse than expected, pushing Cable shortly below its 100-DMA, which stands near 1.2635. The EURGBP on the other hand fell to a fresh year low, as the continent is now expected to join the UK in its economic demise.   This being said, slow PMI numbers could eventually convince the ECB to slow down on its rate normalizing policy, but it won't be enough to reverse the policy stance if inflation remains high. The ECB, as the Fed, won't hesitate to push economies into further economic trouble if inflation doesn't come down toward their 2% policy target.    The set of morose economic data kept the US crude below the $80pb level, even though the US inventories dived more than 6 mio barrels for the second consecutive week. Trend and momentum indicators remain comfortably negative, and the market conditions are far from the oversold territory, meaning that there is room for a deeper downside correction in oil prices. The key level to watch is the $78.40 level, the major 38.2% Fibonacci retracement on the latest rally and which should, if broken to the downside, call the end of the rally and encourage a bearish reversal, which would then pave the way for a further fall to the 200-DMA, which stands near $75.80pb.   
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Apple's iPhone 15 and Apple Watch Series 9 Unveil Disappoints Investors, Nasdaq 100 Falls 1.1%, Adobe's Stock Declines 4% Ahead of Earnings Report, and OPEC Predicts Tight Oil Market: Market Recap

Saxo Bank Saxo Bank 13.09.2023 08:32
Investors were not impressed by the iPhone 15 and Apple Watch Series 9 reveal, causing Apple's shares to drop 1.8% and affecting the Nasdaq 100, which fell 1.1%. Adobe's stock also declined by 4% ahead of its upcoming earnings report. Meanwhile, OPEC's forecast of a tight oil market led to crude oil prices surging to 10-month highs. OPEC anticipates a significant 3.3mb/d supply deficit in Q4, one of the largest in over a decade. CAD outperformed in the G-10, while EUR made gains following an ECB leak about potential inflation forecast increases. Today's focus is on the US CPI report.     US Equities: Investors were not impressed by the iPhone 15 and Apple Watch Series 9 unveiled on Tuesday, seeing the shares of Apple drop by 1.8%. The Apple decline weighed on the Nasdaq 100 which slid 1.1%. Adding to the selling was a 4% decline in Adobe ahead of reporting on Thursday. Another focus in the tech space was Oracle, which plummeted 13.5% on weak cloud sales. The S&P500 shed 0.6%. Fixed income: The curve flattened as the 2-year yield rose 3bps to 5.02% while the 10-year yield slid 1bp to 4.28%. The short end was under some pressure ahead of today’s CPI data while the long ends held firm and absorbed the USD35 billion 10-year auction and around USD20 billion corporate bond issuance well. China/HK Equities: The Hang Seng Index ended a lackluster session with a thin trading volume session, down 0.4%. Energy and pharmaceutical names weighed on the benchmark. The Hang Seng Tech Index shed 0.5% as gains in Xiaomi and EV makers were offset by losses in Internet stocks. FX: Higher crude oil prices made CAD the G-10 outperformer with USDCAD down to 1.3550 from 1.3590 but EUR attempted to catch up in late NY/early Asian hours on ECB leak that inflation forecasts may be raised higher which are seen to be raising the prospect of a hike this week. EURUSD jumped higher to 1.0760 with EURGBP above the 0.86 hurdle as GBPUSD dipped below 1.25 on not-so-hawkish labor market. USDCNH sticking close to 7.30 and AUDUSD around 0.6425. Commodities: Crude oil prices rallied to fresh 10-month highs after OPEC forecast a significantly tight market. In its latest monthly outlook, the oil group said the market may experience a shortfall of 3.3mb/d in the fourth quarter of the year. This would make it one of the largest deficits in more than a decade. OPEC’s estimate was at odds with EIA’s predicted deficit of 230kb/d, and the IEA’s monthly report will be on watch today. Prices eased from the peaks as API reported a crude inventory build after four straight weekly draws although Cushing hub stockpiles declined, and official data will be reported today. Gold dropped below 200DMA as inflation concerns returned, bringing more fear of rate hikes and US CPI will be on watch today.    
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ECB Leak Sparks Rate Hike Speculation: What's in Store for the Euro (EUR)?

Saxo Bank Saxo Bank 13.09.2023 08:40
EUR: ECB leak points to a potential rate hike? Reuters reported, according to an unnamed source, that ECB’s new 2024 inflation projection could be above 3% vs. 3% in June. This has firmed up the case for another interest rate hike this week, with market now pricing in a more than even chance of a rate hike. We noted earlier that markets may be under-pricing the risk of an ECB rate hike in last week’s Macro/FX Watch, and the scenario still holds. Stagflation concerns are picking up in the Eurozone, which keeps rate hike bets measured. But worth considering that if some of the ECB members think that inflation is entrenched beyond the near-term disinflation, then the window to hike rates is extremely small until the Fed pause turns out to be the end of the tightening cycle. Next ECB meeting will be October 26, by when we may have started to see a more clear weakness in US spending data. However, even if the ECB decided to hike rates this week, sending out hawkish vibes may remain tough, which suggests that the upside for EUR may be limited and short-lived. EURUSD rallied to 1.0765 before reversing and the message will have to be extremely hawkish along with a 25bps rate hike for EURUSD to challenge the 200DMA at 1.0828. Market Takeaway: EURUSD could remain supported into the September 14 ECB meeting but upside could evade even if the ECB hikes rates. More upside likely in EURGBP which is seen challenging 100DMA at 0.8614.
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Potential Corrections in EURUSD and GBPUSD, EURGBP's Descending Triangle, and Dollar Index Outlook

Saxo Bank Saxo Bank 14.09.2023 15:23
Downtrends in EURUSD and GBPUSD are a bit stretched. Corrections from key supports could be seen before downtrends are likely to resume. EURGBP forming Descending triangle pattern. Break out direction is 50/50. Dollar Index still has room up to 105.80 but a short-term correction seems likely   EURUSD is trading in a falling channel pattern and seems to be finding support around the middle of the Consolidation area at 1.0685. RSI divergence is indicating downtrend exhaustion which could result in a correction. A correction that could take EURUSD 0.382 retracement at 1.0911. However, the 100 and 55 Moving Averages are declining just around that area adding to the overhead resistance limiting the rebound potential.EURUSD rebound could run out of steam at the 200 Moving Average and the upper falling trendline.A break below 1.0685 is likely to test the Consolidation area low at 1.0635 and a close below paves the road towards 1.05.    If EURUSD is closing a week below 1.0635 the medium-term uptrend has been reversed – see weekly chart.However, there is strong support around the 1.0635 level, the weekly 55 Moving Average is coming up adding to that support.If closing below 1.0635 there is room down to around 1.05     GBPUSD has found support at the 200 Moving Average and could bounce from here.  A test of the upper falling trend line could be seen. If GBPUSD is breaking above the trendline a bullish move to the 0.382 retracement at 1.27 is quite likely However, the upside potential seems fairly limited with the 55 Moving Average and 100 Moving Average coming down adding some resistanceRSI is in negative sentiment without divergence indicating lower GBPUSD levels are likely thus a correction I very likely to be short-lived and limited. If GBPUSD breaks below 1.2430 the sell-off is likely to push the pair down to support at around 1.23     EURGBP is testing the upper falling trendline in what could be a Descending triangle like pattern. Break out is needed for direction and break out direction is 50/50 up/down.If breaking out bullish there is upside potential to around 0.8750-0.88 but the price should at least move to the highest peak in the triangle i.e., at around 0.87.Some resistance at around 0.8668If breaking bearish out of the triangle there is downside potential to 0.8350     Dollar Index uptrend is weakening indicated by RSI divergence, RSI values have been declining as Dollar Index has moved higher.A correction could be seen possibly down to the 0.382 retracement and strong support at 102.87 before uptrend is likely to resume.If the Dollar Index is taking out last week’s peak at 105.13 a spike up to strong resistance at around 105.80 is a quite likely outcome  
ECB Raises Rates by 25 Basis Points but Hints It May Be the Last in the Cycle

ECB Raises Rates by 25 Basis Points but Hints It May Be the Last in the Cycle

Craig Erlam Craig Erlam 15.09.2023 08:37
ECB raises rates another 25 basis points but signals it may be the last New forecasts show stubborn inflation but weak growth Close above 55/89-day SMA band suggests breakout still valid   The ECB raised interest rates again today, probably for the last time in the tightening cycle although it did leave itself some flexibility on that front. This certainly falls into the dovish hike category, with the ECB acknowledging inflation remains too high but also that growth is suffering. What’s more, it clearly indicated that it believes the current stance should be tight enough to return inflation to target, given time. It would appear the decision wasn’t unanimous though, with only a solid majority backing the decision. Again, we shouldn’t be surprised at this stage of the cycle that, considering the uncertain outlook, not everyone is in agreement on their assessment of the situation. The euro slipped after the decision and following comments from President Christine Lagarde, as did euro area yields. Further progress on inflation over the coming months, as the ECB anticipates, should enable pauses over the coming meetings, at which point the focus will gradually shift to the timing of the first rate cut.   Does the dovish hike change the outlook for the pair? Not necessarily. While markets were leaning towards a pause today, it was always expected to be either a dovish hike or a hawkish hold.   EURGBP Daily Source – OANDA on Trading View   The difference that would mean for the euro probably isn’t enormously different as the terminal rate would highly likely have been the same. But does the chart confirm this or not? It’s hard to say whether it confirms it but what I would say is the decline we’ve seen in the pair doesn’t necessarily change it in a bearish way. The pair had already broken 55/89-day simple moving average band and closed above it so, in my opinion, this corrective move does invalidate that. The fib levels for the September lows to highs may offer clues on whether the decline we’ve seen today and yesterday is corrective or just bearish.        
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EURGBP Faces Pressure as Germany Nears Double-Dip Recession and Grapples with Budget Uncertainty"

Kenny Fisher Kenny Fisher 27.11.2023 15:40
German double-dip recession likely after 0.1% contraction in Q3 UK consumer confidence improves but remains weak EURGBP appears to fail again near range high German uncertainty weighing on the single currency The euro is slipping against the pound at the end of the week with economic data highlighting the challenges facing the bloc. Nowhere is that more evident than in Germany which appears to be on the brink of a double-dip recession and facing immense uncertainty over its budget for next year as it scrambles to patch up finances for this one. A supplementary budget next week alongside a proposal to suspend the debt brake now looks likely but even this is just a temporary solution that won’t give investors much confidence in the outlook for an economy already under significant strain. The economy was confirmed to have contracted by 0.1% in Q3 this morning and as we move into the final month of Q4, it’s looking likely data early next year will confirm the country is back in recession. The Ifo business climate survey was a little better and appears to be turning a corner which is hopefully a good sign but at 87.3, it’s still printing figures near historical lows. The early months of the pandemic were understandably much worse, as you’d imagine, but that aside, recent readings have fallen close to 2001 and 2009 levels. UK consumers buoyed by improving real earnings UK consumer confidence is also gradually improving, albeit from very weak levels. At -24, the Gfk survey is 25 points from last September’s lows but still some way below all surveys from mid-2013 through to the pandemic. Still, the direction of travel is more promising and inflation is now running below wage growth which should continue to support that.     A big test of technical support The euro has been struggling near range highs against the pound for a number of weeks but that now appears to be turning into some weakness in the pair. EURGBP Daily Source – OANDA on Trading View Not only did it not break the range highs, it’s now trading at a more than two-week low and testing what could prove to be a key support level. The lower part of the rising channel coincides with the bottom of the 200/233-day simple moving average band. A move below here could be viewed as a very bearish signal and would take the pair much deeper into correction territory. Arguably it could just reaffirm its position in a sideways channel, where it’s traded since May. And based on the size of the rising channel which could be viewed as a slanted double top, a breakout could be seen as a sign of a much deeper correction to come.  

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