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Navigating Financial Markets: Insights on Central Bank Decisions and Currency Quotes

Navigating Financial Markets: Insights on Central Bank Decisions and Currency Quotes

FXMAG Team FXMAG Team 21.06.2023 14:00
In the dynamic world of financial markets, the interplay between macroeconomic data and central bank decisions can significantly impact various asset classes. We had the opportunity to speak with an FXPrimus expert to gain valuable insights into the current market situation and the influence of these factors on currency quotes, particularly the Turkish lira (TRY) and the British pound (GBP), as well as the broader effects on the US and European stock markets. FXMAG.COM: How will Thursday's (22.06) Turkish central bank's decision on interest rates affect TRY quotes? FXPrimus expert: The past rate cuts by Turkish President Erdogan led to a dramatic decline in the price of the Turkish lira, inflation hit 85.5% last year and as a result the overall cost of living of the country had dramatically increased . In a big U-turn, the central bank of Turkey is expected to increase interest rates to 20% to target the negative impacts of a rising inflation and attract investors to its currency.   FXMAG.COM: How will Thursday's (22.06) Bank of England interest rate decision affect GBP quotes? FXPrimus expert: The Market is already pricing in an interest rate hike from the Bank of England and given that CPI data on the 21st of June was higher than expected and at 8.7%, the BoE has no other choice but to act. More interest rate hikes will be expected after this one to target inflation but this will have negative effect on other aspects of the economy i.e. Bank crisis   FXMAG.COM: In the mid-term, how will last week's Fed and ECB decisions affect the US and European stock markets? FXPrimus expert: As interest rates increase, stock investors become unwilling to trade stock prices as the value for future earnings becomes less attractive against bonds which have a higher yield today, the FED have paused interest rate hikes but it remains to be seen in the upcoming economic data releases whether they will change course. The ECB has slowed the pace at which the interest rates where increased however they have indicated that more hikes are yet to come.
Unraveling the Path Ahead: Gold and Silver Prices Amidst Fed Expectations

Unraveling the Path Ahead: Gold and Silver Prices Amidst Fed Expectations

Craig Erlam Craig Erlam 13.07.2023 08:19
The recent retreat of gold prices to around $1,900 per ounce and silver prices to the area of $22 per ounce has sparked questions about the future direction of these precious metals. Market participants are eager to determine if gold and silver will find support at these levels, potentially leading to a rebound or a push towards historic highs. In seeking insights into this matter, we turn to the expertise of financial analyst Craig Erlam. According to Erlam, the expectations surrounding the actions of the Federal Reserve (Fed) play a significant role in shaping the outlook for both gold and silver prices. The impact of Fed decisions on yields and the value of the US dollar cannot be underestimated.   Erlam highlights the recent boost that gold and silver prices received following positive inflation data. This indicates that unless there is a substantial shift in the opposite direction, the current momentum could support prices in the short term. While economic data has been volatile, there is a growing sense of progress. The key lies in the policymakers' interpretation of this progress in the days ahead.       FXMAG.COM: The gold price has made a retreat to the vicinity of $1,900 per ounce. What's next for gold prices - will the King of Metals find support there from which to bounce? The silver price has made a retreat back to the area of $22 per ounce and what's next for the metal - does it have a chance to head toward historic highs?   Craig Erlam: In both cases, a lot comes down to what the Fed is expected to do, and what impact that has on yields and the dollar. As we've seen today, some very encouraging inflation data has given both gold and silver a big lift and unless we see a significant shift the other way, that could support prices in the near term. The economic data has been volatile but it does feel like we're finally seeing progress. We'll see from policymakers over the coming days whether they view recent progress to be substantial enough.
USD/JPY Technical Analysis: Resistance at 147.80, Target Support at 145.90 Amid Uncertainty

Uncomfortably Strong US Outlook Raises Speculation on Further Rate Hike

ING Economics ING Economics 08.09.2023 10:24
Uncomfortably strong US outlook.  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Eurozone services PMI were disappointing in August, yet the ISM services index printed its strongest expansion across the Atlantic Ocean. The US ISM services index flirted with 55; employment, new orders, and ISM prices also showed significant progress last month. The strong ISM data bolstered the speculation that the Federal Reserve (Fed) could opt for another rate hike before the year end and keep the rates at restrictive levels for longer. The US 2-year yield advanced above 5%, the 10-year yield is around the 4.30% mark. Oh, and by the way, the US yield curve has been inverted since more than a year, but the resilience of the US economy continues surprising, and recession is nowhere around (at least in the data).  The US dollar index extends gains toward the 105 level. At 105.40, traders will decide whether the dollar deserves to reverse its yearly bearish trend, and step into a medium-term bullish configuration. Even though Fed's Waller sounded happy and satisfied with last week's weakish economic data – both for inflation and jobs – James Bullard said that the Fed should stick with a plan of one more hike this year. Maybe in November? For now, the market is positioned for no rate hike this year, but strong data and rising oil prices could change that expectation in the next few weeks. There is a growing chatter that the Fed could double its growth projection when it publishes an updated outlook later this month. I hope for the rest of the world that that does not happen!   
Tesla's Market Surge, Apple's Recovery, and Market Dynamics: A Snapshot

Tesla's Market Surge, Apple's Recovery, and Market Dynamics: A Snapshot

Ipek Ozkardeskaya Ipek Ozkardeskaya 12.09.2023 08:49
Tesla fuels market rally By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank    Tesla jumped 10% yesterday and reversed morose mood due to the Apple-led selloff. Tesla shares flirted with the $275 per share on Monday, thanks to Morgan Stanley analysts who said that its Dojo supercomputer may add as much as $500bn to its market value, as it would mean a faster adoption of robotaxis and network services. As a result, MS raised its price target from $250 to $400 a share.   Tesla rally helped the S&P500 make a return above its 50-DMA, as Nasdaq 100 jumped more than 1%. Apple recorded a second day of steady trading after shedding almost $200bn in market value last week because of Chinese bans on its devices in government offices, and Qualcomm, which was impacted by the waves of the same quake, recovered nearly 4%, after Apple announced an extension to its chip deal with the company for 3 more years. Making chips in house to power Apple devices would take longer than thought.   Speaking of chips and their makers, ARM which prepares to announce its IPO price tomorrow, has been oversubscribed by 10 times already and bankers will stop taking orders by today. The promising demand could also encourage an upward revision to the IPO price, and we could eventually see the kind of market debut that we like!    Today, at 10am local time, Apple will show off its new products to reverse the Chinese-muddied headlines to its favour before the crucial holiday selling season. The Chinese ban of Apple devices in government offices sounds more terrible than it really is, as the real impact on sales will likely remain limited at around 1%.   In the bonds market, the US 2-year yield is steady around the 5% mark before tomorrow's much-expected US inflation data. The major fear is a stronger-than-expected uptick in headline inflation, or lower-than-expected easing in core inflation. The Federal Reserve (Fed) is torn between further tightening or wait-and-see as focus shifts to melting US savings, which fell significantly faster than the rest of the DM, and which could explain the resilience in US spending and growth, but which also warns that the US consumers are now running out of money, and they will have to stop spending. So, are we finally going to have that Wile E Coyote moment? Janet Yellen doesn't think so, she is on the contrary confident that the US will manage a soft landing, that the Fed will break inflation's back without pushing economy into recession. Wishful thinking?   But everyone comes to agree on the fact that the Eurozone is not looking good. The EU Commission itself cut the outlook for the euro-area economy. It now expects GDP to rise only 0.8% this year, and not 1.1% as it forecasted earlier, as Germany will probably contract 0.4% this year. The slowing euro-area economy has already softened the European Central Bank (ECB) doves' hands over the past weeks. Consequently, the EURUSD gained marginally yesterday despite the fresh EU commission outlook cut and should continue gently drifting higher into Thursday's ECB meeting. There is no clarity regarding what the ECB will decide this week. The economy is slowing but inflation will unlikely to continue its journey south, giving the ECB a reason to opt for a 'hawkish' pause, or a 'normal' 25bp hike. 
Central Bank Policies: Hawkish Fed vs. Dovish Others"

Central Bank Policies: Hawkish Fed vs. Dovish Others"

Ipek Ozkardeskaya Ipek Ozkardeskaya 25.09.2023 11:05
Hawkish Fed vs. Dovish others  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The Swiss National Bank (SNB) and the Bank of England (BoE) surprised by maintaining their rates unchanged at yesterday's trading session. The Bank of Japan (BoJ) surprised by maintaining its ultra-lose monetary policy stance unchanged. Combined with a hawkish pause earlier this week, the major currencies further sank against the greenback. The USDCHF advanced past the 200-DMA, and Cable slipped to 1.2232, a fresh low since March, and whispers of a potential return to parity against the US dollar sparked, yet again. Reasonably, the pound-dollar could return to 1.20, and below, if the major 38.2% Fibonacci support – which stands at 1.2080 is pulled out and lets the pair slip into a medium-term bearish consolidation zone. But we will likely see the Federal Reserve (Fed) soften its tone before we start talking about parity in Cable.   Now, looking at what the BoE did, you know that I was surprised, and intrigued with the decision. In Switzerland for example, inflation – official inflation – steadied below the SNB's 2%, target. The latest data shows that the Swiss CPI is at no higher than 1.6% - even though we are expecting a monstrous rise in health insurance costs, and another 20% rise in average in electricity costs that will certainly drill holes in our pockets at the start of next year, but for now inflation is at 1.6%, say the numbers, and alone, it justifies a SNB pause. But in Britain, the no action is quite premature. Inflation in Britain is almost at 7%, the energy prices are rising, the war in Ukraine is nowhere close to being over, sterling pound is now losing value, which means that whatever the Brits will import from now will cost them more than during the last months, when the pound was appreciating. It's hard to see how, with all these developments, the BoE won't be obliged to hike, again. The only way is a really bad economic performance.  
Uncertain Waters: Saudi's Oil Production Commitment and Global Economic Jitters

Uncertain Waters: Saudi's Oil Production Commitment and Global Economic Jitters

Ipek Ozkardeskaya Ipek Ozkardeskaya 05.10.2023 08:17
Saudi's commitment is not written into a law By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Markets are on an emotional rollercoaster ride this week. The slightest data is capable of moving oceans. Yesterday, the significantly softer-than-expected ADP report, and the announcement that 75'000 healthcare workers at Kaiser went on strike sparked a positive reaction from the market in a typical 'bad news is good news' day. The US economy added only 89K new private jobs in September, much less than 153K penciled in by analysts. It was also the slowest job additions since January 2021. The rest of the data was mixed. US factory orders were better than expected in August, but the services PMI came close to slipping into the contraction zone, and the ISM's non-manufacturing component also hinted at slowing activity. Mortgage activity in the US fell to the lowest levels since 1995, as the 30-year mortgage rates spiked higher toward 8%. Housing and services are among the biggest contributors to high inflation besides energy prices, therefore, seeing these sectors cool down has a meaningful impact on inflation expectations, hence on Federal Reserve (Fed) expectations. As such, yesterday's soft-looking data tempered the Fed hawks, after the stronger-than-expected JOLTs data triggered panic the day before. The US 2-year yield took a dive toward the 5% mark, the 10-year yield bounced lower after flirting with the 4.90% level, while the 30-year hit 5% for the very first time since 2007 before bouncing lower on relieving news of soft job additions. Hallelujah.  The US dollar index retreated across the board, and equities rebounded. The S&P500 jumped from the lowest levels since the beginning of June. The score is now one to one. One good news for the US jobs market, and one bad news. Everyone is now holding his or her breath into Friday's jobs data, which will determine whether we will end this week with a sweet or a sour taste in our mouth. Sweet would be loosening jobs data, sour would be a still-strong jobs data which would fuel the hawkish Fed expectations and further boost US yields while the US yields are at a critical moment.   For the first time since 2002, the US 10-year yield comes at a spitting distance from the S&P500 earnings. The index is just about 60 points above its critical 200-DMA. Looking at the seasonality chart, the S&P500 could dip at about now. In this context, there is a chance that soft jobs data from the US marks a dip in the S&P500 selloff. But one thing is sure: the yields and the US dollar must come down to keep the S&P500 on a rising path. Profits at the S&P500 companies are inversely correlated with the US dollar as their international profits account for about a third of the total. If the yields and the US dollar continue to rise, the S&P500 will face severe headwinds into the year end.    Oil fell nearly 6%!  Rising suspicions that the global economy is headed straight into a wall didn't spare oil bulls yesterday. The barrel of American crude dived almost 6%, slipped below the 50-DMA ($85pb), and below the positive trend base building since the end of June. The 6.5-mio-barrel build in gasoline stockpiles last week helped bring the bears back to the market even though the data also showed a more than 2-mio-barrel draw in crude inventories over the same week.   Yesterday's move shows that what matters the most for intraday moves is the rhetoric. This summer, the market focus was on the tightening global oil supply and how the US will 'soft land' despite the aggressive Fed tightening. Now we start talking about slowing economies and recession worries.   OPEC decided to maintain its oil production strategy unchanged at yesterday's decision. Saudi and Russia repeated that they will keep their production restricted to maintain the positive pressure on oil. But if global demand cools down and volumes fall, both Saudi and Russia will be tempted to increase profits by selling more oil at a cheaper price. Saudi Arabia shouldering all the production cuts for OPEC is not written into a law, it could become uncertain if market conditions turn sour.
Shift in Central Bank Sentiment: Czech National Bank Hints at a 50bp Rate Cut, Impact on CZK Expected

When do you start to worry about Chinese stimulus? - Market Analysis by Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank

Ipek Ozkardeskaya Ipek Ozkardeskaya 25.01.2024 16:00
  When do you start to worry about Chinese stimulus?  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  The stock rally continued on both sides of the Atlantic on Wednesday; the technology and chip stocks remained in the driver seat. Sentiment in Europe was bolstered by an almost 9% rally in ASML on news that their orders more than tripled last quarter. Now, there is a catch. A third of the $10 billion dollar worth of orders came from China as Chinese companies rushed to buy these machines by the end of last year before the US and Dutch chip ban came into effect. But even if the Chinese demand will fade away, ASML says that it expects its sales to remain steady thanks to AI demand..  As such, the ASML news also boosted the stock prices of our favourite AI plays. Nvidia hit another record yesterday, TSM extended gains, Microsoft was worth $3 trillion for some time. The S&P500 and Nasdaq 100 hit a fresh record, and Netflix – which has nothing to do with AI, but which was just cheering its 13-mio new subscribers for the latest quarter - jumped 10%.   In summary, all goes well for those who are in the technology boat sailing north. For the rest, skepticism best describes how they feel about an unsustainable rise in valuations.   Tesla misses, Intel next.  Tesla missed estimates in its latest quarterly earnings report and warned that its EV sales growth will be 'notably lower' and that the numbers will suffer until the company comes up with a cheaper model. The series of price cuts weren't enough to bolster demand in a way to keep the company smiling and profits rising – sufficiently. As such, Tesla refused to offer a specific growth target and its share price took a 6% hit in the afterhours trading. Intel is due to report its earnings today.   Connecting the dots  The Chinese are serious about bolstering their economy and they look like they are getting to a place where they are ready to do whatever it takes to reverse the slowing trend.  In addition to a series of market stimulus news, the People' Bank of China (PBoC) announced yesterday that it will cut the reserve ratio for the banks by 50bp from February to release more liquidity to bolster stock valuations The latter will free up to an additional trillion yuan, which equals $139bn US dollars.  Will it help? Well, we will see. The good news is, if it doesn't, the Chinese will continue until it does.   The CSI 300 finally sees some positive reaction, stocks in Hong Kong are up 10% since Monday, American crude is drilling above the $75pb per barrel and copper futures – which are a gauge of global growth – also seem gently convinced that the Chinese will put all their weight – all they need to – to make things better.   But note that China's supportive policies may not echo well across the developed markets' central banks, because the Chinese stimulus – if successful – should boost global inflation and interfere with DM central banks' plans to loosen policies.   BoC calls the end of tightening, ECB next to speak.  But until we see concrete results from Chinese measures, softer policies remain the base-case scenario for the Federal Reserve (Fed) and the other major central banks (except Japan). In this context, the Bank of Canada (BoC) kept its rates unchanged at yesterday's meeting and called the end of rate hikes. The European Central Bank (ECB) will meet today and will certainly vehicle the same message - that policy tightening is over. But that's not enough.  When it comes to the ECB, what investors want to know is WHEN the ECB will start cutting the inteerest rates. If we had this conversation two weeks ago, I would say that the ECB would push back on expectations of premature rate cuts. But after having heard Christine Lagarde say that the first rate cut could come in summer, I am more balanced going into the meeting. Inflation has come lower – but we saw an uptick in the latest figures. The rising shipping costs and the positive pressure in oil prices mean that upside risks prevail. Yet the slowdown in European economies calls for lower rates. Released yesterday, the Eurozone PMI figures showed that aggregate activity remained in the contraction zone for the 8th straight month and slow down accelerated in January – except for manufacturing.   A hedge fund called Qube apparently built a $1 bn short position against German stocks, and Goldman Sachs says that a Trump presidency would increase risks for European businesses, and economically sensitive pockets of the market, like the German industries, would be the most exposed.  

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