hawkish

Summary: US inflation at 9.1%. Retreating USD and buoyant commodity prices offered NZD support. UK GDP data beat market expectations. EUR remains under pressure due to gas crisis. Read next: US Inflation Reaches Nearly 41 Year High, RBNZ & BoC Increase Their Cash Rates  EUR/USD The market is reflecting bearish signals for this currency pair. Early on Wednesday the EUR/USD currency pair hit parity, a level not seen in 20 years. US inflation data for June was released on Wednesday and came in at 9.1%, a level that had increased since the May reading of 8.6%. Inflation has risen further despite the Fed’s continuous effort to drive inflation rates down through aggressive interest rate increases. The Euro will continue to remain under pressure amidst the European gas crisis which is far from over. EUR/USD Price Chart UK GDP Data beat expectations The market is reflecting mixed signals for this currency pair. With the UK GDP data coming in surprisingly strong in the mid-trading week has led Goldman Sachs to lower their expectations for a looming recession in the UK economy. All components of the UK economy played their part in contributing to the better than expected data: manufacturing production increased 2.3% in May against a consensus forecast for 0.2%. Industrial production grew 0.9% against expectations for flat output and construction output increased 4.8% against the 4.4% expected. EUR/GBP Price Chart EUR/CHF Currency pair The market is reflecting bearish signals for this currency pair. The Swiss National Bank (SNB) surprised the markets in June with a 50 bps hike in interest rates. The SNB hosts quarterly meetings to discuss monetary policy, the next meeting is due in September whereas the European Central Bank (ECB) will make its decision regarding monetary policy at the end of the month. EUR/CHF Price Chart GBP/NZD pushing downwards The Reserve Bank of New Zealand increased their cash rate by 50 bps on Wednesday in an attempt to reign in persistent inflation. Although the move from the reserve bank was fully priced-in to the financial markets, the retreating US Dollar and buoyant commodity prices allowed room for the NZD to a number of currencies downward, including the pound sterling. GBP/NZD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Eurozone energy crisis persists. Potentially more hawkish BoE could be on the horizon. BoC 1% raise in interest rates offers CAD support. Read next: Platinum Prices Touchine 22-month Lows, RBOB Gasoline, Wheat Consumption Expected To Decrease  Stock Markets weighing an even more aggressive Fed The market is reflecting bearish signals for this currency pair. The Euro to US Dollar exchange rate has fallen below parity in the wake of a surge in US Dollar demand. Looking at the combination of events leading to the fall of the EUR/USD, we observe that the stock markets are in the red as they attempt to anticipate the potential effects from a potential 100 basis point hike from the Federal Reserve. The Euro is still struggling as concerns around the seemingly unwavering energy crisis in the Eurozone persists. EUR/USD Price Chart Potentially more hawkish BoE could be on the horizon The market is reflecting bearish signals for this currency pair. The most recent commentary suggests to the market that the Monetary Policy Committee at the Bank of England (BoE) is only one employment report or one inflation number away from a step change in the pace the Bank Rate is being lifted, and that a change of this sort could come as soon as August. This move could offer the pound support going forward. EUR/GBP Price Chart BoC hawkish moves offering CAD support The market is reflecting bearish signals for this currency pair. The US Dollar had a strong start to Thursday's trading day as investors priced in the growing expectations for a 100 basis point increase in interest rates from the Fed in the wake of the 9.1% US inflation data that was released on Wednesday. On Wednesday the Bank of Canada (BoC) shocked markets with their largest interest rate hike since 1998. The hawkish move from the BoC has offered the Canadian Dollar support and has thrown a curveball at investors, leaving a range of responses from analysts. USD/CAD Price Chart USD/JPY The market is reflecting bearish signals for this currency pair. The US Dollar has reversed yesterday's pullback which occurred in the wake of US inflation data being released. The BoJ continues on their dovish monetary policy path. USD/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: EUR recovering against the USD. ECB interest rate decision due on Thursday. UK economic data to be released this week. NZ CPI inflation rose 1.7%. Read next: Hawkish Fed Is Driving Gold’s Value Down , Corn Prices At 5-week Lows, Brent Crude Oil Prices Falling  Euro attempting to recover against the USD The market is reflecting bullish signals for this currency pair. The Euro has been attempting to recover against the US Dollar during the Monday trading day and could continue to rise in the coming days if all goes well for Eurozone economies on Thursday after the European Central Bank (ECB) announces their policy decision. In addition there is still market uncertainty around whether Russian gas flows will continue through the Noord Stream 1 after its maintenance ends on July 21st, this remains one of the greatest risks to the Euro. EUR/USD Price Chart Pound sterling could weaken more against the EUR The market is reflecting bullish signals for this currency pair. The EUR/GBP currency pair could strengthen more in the coming days as the market awaits the ECB’s interest rate decision. There is however, some UK economic data that is due to be released which could offer the pound sterling support against the Euro and other currencies. EUR/GBP Price Chart NZ inflation data weakening the NZD. A rise in New Zealand inflation data shocked investors and raised bets for a faster and more hawkish response from the Reserve Bank of New Zealand (RBNZ). However, fears of a ‘hard landing’ for the Kiwi economy have grown as investors are fearing that the combination of rising interest rates and high inflation will negatively impact economic expansion, which may aid in explaining the NDZ’s negative reaction to the data. According to Stats NZ, CPI inflation in NEw Zealand rose 1.7% quarter on quarter, surpassing the markets expectation of a 1.5% increase/ GBP/NZD Price Chart USD/CAD The market is reflecting bearish signals for this currency pair. The Canadian Dollar has continued its rally against the US Dollar after the Bank of Canada (BoC) surprised markets last Wednesday with a 100 basis point hike in interest rates. USD/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com  

Summary: EUR/USD, EUR/GBP currency pairs Netflix earnings report Tesla earnings report Read next: S&P 500 Amongst Major Indexes That Are Rising, Markets Are Waiting For Thursdays ECB Policy Decision  Euro stole headlines on Wednesday The EUR/USD currency pair ended the Wednesday trading day showing mixed market sentiment as the market awaits the European Central Bank’s (ECB) monetary policy decision due on Thursday. The Euro is still facing uncertainty regarding high inflation in the Eurozone and how the ECB plans to tackle it, in addition as the Noord Stream 1 opens after its routine maintenance period, there are still concerns as to whether Russia will open the gas taps. The recovery of the Euro against the dollar could be reflecting a possible market inflection point. The Euro has recovered half of its July losses so far, this could mean a turn around against the Dollar for many other major currencies aswell. The Euro stole the headlines on Wednesday as both Bloomberg News and Reuters reported that the market could see an outsized interest rate yield rise from the European Central Bank on Thursday. EUR/USD Price Chart EUR/GBP currency pair The market is reflecting mixed signals for this currency pair. According to a number of new reports, it is predicted that UK inflation could reach up to 12% by October, the report also showed that the inflation rate was growing at its fastest rate in 40 years. The Euro remains supported ahead of the ECB’s policy decision on Thursday EUR/GBP Price Chart Netflix Earnings Report Netflix's earnings report on Wednesday indicated they lost around 970,000 subscribers, beating the 2 million that was predicted last quarter, thus causing the company's stock price to jump. Its EPS beat market expectations. The company also warned that the rallying US Dollar would have an impact on international revenue. The streaming giant also indicated they had more time to understand and address the issues that have been impacting their streaming, revenue and other major indicators. NFLX Price Chart Tesla earnings report Tesla’s quarter 2 earnings report indicated the company beat market expectations with regards to adjusted EPS. Automotive margins came in at 27.9% down from the 32.9% seen in the first quarter, impacted by inflation, increased competition for battery cells and other components that are required for electric vehicles. In addition the invasion of Russia in the Ukraine and in conjunction with covid-19 lockdown measures in China caused supply chain issues and parts shortages. TSLA Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com, cnbc.com

Summary: Federal reserve interest rate announcement Wednesday. Barclays updated their expectations for the next BOE interest rate hike. NZD was a poor performer on Tuesday. Read next: NGAS Prices Rising, Cotton Demand Falling, Gold Prices Rising As Recession Fears Rise  Euro at risk of weakening The market is reflecting bearish signals for this currency pair. The euro is at risk of falling as prospects of a weaker economic outlook and restricted gas flows through the Noord Stream 1 pipeline. The threat of Russian oil exports through the Noord Stream pipeline being reduced to 20% could contribute even further to the energy crisis in Europe and drive gas prices even higher. The market is awaiting the Federal Reserve's interest rate hike announcement which is due tomorrow. EUR/USD Price Chart EUR/GBP bearish The market is reflecting bearish signals for this currency pair. Barclays bank has increased expectations to 50bps hikes from the Bank of England (BOE). A 50bp increase is now anticipated for August 4th, according to the UK economic team at Barclays after evaluating incoming UK data and signals from the Bank of England. EUR/GBP Price Chart GBP/NZD currency pair The Pound to New Zealand Dollar exchange rate may be at risk of another decline below the 1.92 level due to a full calendar of event risks in the next few days, making it difficult for it to rise. On Tuesday, the U.S. Dollar recovered from 10-day lows vs the majority of its G20 counterparts, causing the GBP/NZD to increase for a third day in a row. The New Zealand Dollar performed worse than the other major currencies and Sterling. GBP/NZD Price Chart Sources: dailyfx.com, finance.yahoo.com, poundsterlinglive.com

Summary: Fed chooses a 75 basis point rate hike. Central Banks all around the world are raising interest rates. Federal Reserves On Wednesday the Federal Reserve made their interest rate decision to raise interest rates on Wednesday, they chose to raise interest rates by 75 basis points. The market expectations were elevated to 100 basis points in the wake of June CPI inflation data that reflected that, despite the Fed’s efforts to reign in and control the soaring inflation, inflation was stubborn in its moves upward. The Feds move is likely to cause the US dollar to rally and strengthen against all its major currency pairs and hopefully will aid in bringing down the already soaring inflation rate. Over the past couple weeks the European Central Bank (ECB), Bank of Canada (BoC) and the Bank of England (BoE) amongst others, have all rasied their interest rates in an attempt tio reign in the soaring inflation rates around the world. The Fed has been periodically raising interest rates at every meeting since May, the first rate hike in may was 50 basis points, which shocked the markets and caused the US Dollar to rally and strengthen across the board. The second interest rate hike by the fed was in June of 75 basis points and was one which shocked the market, thereafter the 75 basis point hike decision today, a further 75 basis points. The market had priced in a 75 basis point hike but experts raised their expectations to a 100 basis point rate hike, as the Fed continued to reiterate to the market their commitment to reigning in the sky high inflation rates, rates that have not been seen since the 1980s. In a unanimous vote, the Federal Open Market Committee raised the policy rate to a range between 2.25 percent and 2.50 percent, noting that "inflation remained elevated, reflecting supply and demand imbalances connected to the pandemic, increased food and energy prices, and broader pricing pressures." The FOMC continued by stating that it is "very sensitive" to inflation risks. Officials observed in the new policy statement that "recent measures of spending and production have weakened," despite the fact that job growth has remained "strong," a pointer to the reality that the substantial rate hikes they have implemented since March are starting to take effect. The Fed has increased its policy rate by 225 basis points in total this year, on top of a 75-basis-point increase last month and smaller increases in May and March, as it fights an inflation breakout on a par with the 1980s with monetary policy modeled after the 1980s. As a result, the epidemic era attempts to promote household and corporate spending with cheap money have effectively come to an end. The policy rate is currently at the level that the majority of Fed officials believe has a neutral economic impact. The rate was also achieved in just four months, matching the peak of the central bank's previous tightening cycle, which lasted from late 2015 to late 2018. Little concrete information about the next actions the Fed might take was provided in its most recent policy statement. The Fed's decision will be greatly influenced by whether or not incoming data indicates that inflation is starting to decline. Investors anticipate the U.S. central bank to increase the policy rate by at least half a percentage point at its September meeting in light of the most recent data showing consumer prices rising at a rate of more than 9% annually. Sources: investing.com, reuters

Summary: The US Dollar made intraday gains on Wednesday. Markets awaiting BOE policy decision. GBP/AUD attempting recovery. Read next: Palladium Prices Touching Two-Week Highs, OPEC+ Increasing Crude Supply Of WTI Crude Oil, Coffee Supply Outlook Seemingly Poor  USD supported by US ISM data The market is reflecting bearish signals for this currency pair. After the Institute for Supply Management (ISM) Services PMI defied market expectations by increasing for the month of July in contrast to the alternative barometer compiled by S&P Global, the U.S. Dollar recovered earlier losses to make intraday gains over various other major currencies. The sharp increases in new orders and overall business activity within the biggest and most significant sector of the U.S. economy's largest and most important sector led to Wednesday's release of the ISM services sector index rising from 55.3 to 56.7 for last month, surprising the currency and bond markets. The Fed will decide in September whether to lower the size of the increments in which it is raising U.S. interest rates. Chairman Jerome Powell indicated last Wednesday that they would take a range of economic indicators into account, causing a significant decline in the value of the dollar. EUR/USD Price Chart BoE Policy rate decision due The market is reflecting mixed signals for this currency pair. The Pound sterling has strengthened ahead of the Bank of England (BoE) interest rate decision. Following the Bank of England report on Thursday, Barclays' foreign exchange analysts predict that the British Pound would likely decline; however, Goldman Sachs is more optimistic about the UK currency's prospects, particularly when compared to the Euro. Before announcing its most recent inflation and economic growth projections, the Monetary Policy Committee of the Bank of England is anticipated to announce another interest rate increase.Through the later part of July and the beginning of August, the Pound strengthened against both the Euro and the U.S. Dollar. The main test for the currency will be the size of the hike announced and the nature of those expectations. EUR/GBP Price Chart GBP/AUD attempting recovery The GBP/AUD currency pair is attempting recovery of the declines experienced in July. In the first few days of August, the Pound to Australian Dollar exchange rate further reversed its July decline, but it may find it difficult to move much further than the nearby 1.76 level in the absence of further support from the Bank of England (BoE) this Thursday. Following the latest Reserve Bank of Australia (RBA) monetary policy announcement on Tuesday, which helped push GBP/AUD to one-month highs, the Australian Dollar was one of the major currencies that underperformed for the week ending on Wednesday. GBP/AUD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundtserlinglive.com

Summary: The euro is battling to mount significant gains against the USD. BoE’s economic downgrades. Market expectations for a hawkish BoC. Read next: Meme Stocks Amongst Monday’s Top Performers  EUR/USD suffered defeats this week The market is reflecting mixed signals for this currency pair. The Euro to Dollar exchange rate suffered defeats this week from both near and distant, but if this Wednesday's U.S. inflation data further incenses a still-hawkish Federal Reserve (Fed), it might send the rate back into its laws from July. In the first session of last week, the Euro got dangerously close to the 1.03 handle versus a declining Dollar, but an attempt at a rebound was again thwarted by what appear to be escalating concerns to energy supplies in Germany and several other European nations. The euro has stabilized versus the U.S. dollar in recent weeks following a large sell-off earlier this year, but has been unable to mount a significant comeback due to a dearth of supportive fundamentals. In this aspect, the common currency has faced challenges that have limited its upward performance versus the dollar, including the oil crisis in Europe, regional economic instability, and the ECB's unwillingness to raise rates fast. EUR/USD Price Chart BoE shocked the market with sharp economic downgrades The market is reflecting bullish signals for this currency pair. The Bank of England (BoE) shocked the market last week with sharp downgrades to its economic forecasts, which put Sterling on the back foot and put it at risk of slipping into a cluster of technical support levels around 1.18 in the coming days. As a result, the Pound to Euro exchange rate was muted. The pound sterling was a little firmer this morning against the U.S. dollar and the euro, respectively. The new leader of the British Conservative Party and the British Prime Minister, both named Sunak and Truss, have been the subject of much discussion (tax cuts). Tax cuts may increase already high inflationary pressures, which could lead to additional interest rate increases from the Bank of England. Tax cuts are intended to promote economic growth inside the UK (BoE). EUR/GBP Price Chart GBP/CAD currency pair Last week, U.S. economic data, the U.S. Dollar, and a strong Loonie combined to drag the Pound to Canadian Dollar rate down toward 1.55 and a level that may continue to exert a gravitational pull in the days to come. This prevented the rate from rising above near 10-year lows. Although the unemployment rate in Canada remained at 4.9 percent and wages continued to grow at an annualized rate of 5.2 percent in July, the economy still lost jobs for a second consecutive month. This may have led the market to believe that the Bank of Canada (BoC) will likely maintain the more aggressive monetary tightening and interest rate policy implemented in recent months. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Market awaits US inflation reports on Wednesday. Fed and ECB will continue to hike interest rates. The Bank of Canada may decide to scale down its plans to raise interest rates. Read next: Will Tesla’s (TSLA) Stock-Split Boost Interest In Company Shares?  USD is expected to remain supported The market is reflecting bullish signals for this currency pair. As the market awaits the US inflation report on Wednesday, the Euro has remained stable on Tuesday. So far today, the EUR/USD has fluctuated only slightly, around 1.0190. In the North American session, Treasury rates decreased; today in Asia, they were flat throughout the curve. At about 106.36, the US Dollar (DXY) index is unchanged. However, Analysts at Rabobank, a Dutch-based worldwide lender and investment bank, predict that the Euro to Dollar exchange rate (EUR/USD) will decline down below the 1.0 level during the upcoming weeks. In contrast to some analysts' predictions that the Dollar's multi-month surge is coming to an end, new analysis reveals the currency will likely continue to be well supported long into 2023. EUR/USD Price Chart EUR/GBP Bullish The market is reflecting bullish signals for this currency pair. On August 4, the Bank of England increased interest rates by 50 basis points as it stepped up its campaign against inflation. "Having stepped up the pace of rate hikes, it would look odd to throttle back straight away. The Fed and ECB are likely to continue to hike at a rapid pace, and a desire to support sterling will likely drag the BoE along with them," says Goodwin. "Given the fragile backdrop, this makes rate cuts in 2023 more likely," says Goodwin. They anticipate 75 basis points of rate reductions in 2023 when it becomes apparent that the BoE overreacted. Forecasts for a weaker Pound relative to the Euro reflect this anticipation; Oxford Economics predicts that the Pound to Euro exchange rate will be at 1.16 from the end of the third quarter of 2022 through the end of the first quarter of 2023. EUR/GBP Price Chart Canadian dollar “skewed to the downside” According to foreign exchange strategists at Barclays, the forecast for the Canadian Dollar in the near term is "skewed to the downside." The Bank of Canada may decide to scale down its plans to raise interest rates, according to Barclays in its normal weekly currency strategy briefing paper. The bank also notes that the prolonged decrease in oil prices may have an impact. With a reading of -30.6k in July, according to official figures released last week, Canada experienced its second straight loss in employment, falling short of the average estimate of +15k new positions. Despite this, the unemployment rate stayed close to long-term lows at 4.9 percent, while pay growth held steady at 5.4 percent annually. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: US Inflation data is expected to be released on Wednesday. EUR/USD & GBP/USD currency pairs. Volatility in the markets. 8.5% consumer inflation. Later today, high volatility is likely to be caused by US inflation data, which is anticipated to show a modest decline in the headline measure (8.7 percent exp vs 9.1 percent prior). The US PPI data is due out on Thursday, but it is unlikely to have a significant impact on the markets given that the Fed would need to observe a significant decline in prices in order to alter its present course of temporary tightening. The US CPI Inflation data for July came in at 8.5%, declining from the 9.1% June high and beating the markets expectations of 8.7%. The fall in inflation was likely aided by a reduction in both food and gasoline prices. The result could indicate to the markets that the Federal Reserve Bank has been successful so far in their interest rate hikes to fight inflation. A stronger result would have likely increased the chances of another interest rate hike of 75 bps in the following months and would have boosted the USD, whilst a weaker result could cause the Fed to drop to a 50 bps interest rate hike next month. EUR/USD The market is reflecting mixed sentiment for this currency pair. The markets have been in a lethargic state recently with a 7-week slide in the VIX volatility index. The current state of lethargy is most likely a result of the medium-term decline in market activity. The seven-week decline in the VIX was mentioned, but there are many other noteworthy episodes from recent history where important events, some with high surprise quotients, failed to significantly move the markets. The PCE deflator, which uses the same data used to calculate the quarterly GDP statistics, is really the Federal Reserve's preferred inflation indicator. Despite this, the markets have consistently shown a strong preference for the CPI, presumably because it is released earlier and has a full week to be incorporated into market views because it is released on a Wednesday. The headline basket's annual inflation growth rate had increased to an astounding 9.1 percent pace at the time of the previous release. That is the highest reading in forty years, and it is not just due to the biggest economy in the world. This reading might meet, miss, or beat the consensus expectation (8.7%), but it is thought that a "beat" would carry the most weight. EUR/USD Price Chart GBP/USD An expert at Société Générale claims that the Pound is "in peril" and that a new decrease in the value of the Dollar is imminent. In the very near future, GBP/USD has a risk of declining below 1.20 once more "Olivier Korber, a Soc Gen strategist, states in a memo dated August 2009. The underlying rationale for the trade, according to Korber, is compelling given the unsettling predictions made by the Bank of England last week, which indicated that UK inflation was expected to peak at "an incredible 13 percent. In addition, according to economists at the Bank of England, a four-quarter recession will begin in this year's fourth quarter. According to Korber, the difference with the forecast for the U.S. economy is currently striking. Last Friday's unexpectedly upbeat US job report stands in stark contrast to the pessimistic UK economic forecast. The likelihood of a second consecutive 75bp Fed rate hike is being discussed as recession fears in the US are gradually subsiding. GBP/USD might retest 1.20 in the very near future if there is potential for more sterling short positions, warns Korber. More than doubling the 250K jobs that the market had anticipated, the U.S. economy added 528K jobs in July, which helped the U.S. dollar recover. GBP/USD Price Chart Sources: poundsterlinglive.com, finance.yahoo.com, dailyfx.com

Summary: EUR/USD recently hit 6-week highs. CAD proves its sensitivity to risk appetite. Could UK inflation hit double figures? EUR/USD recently reached 6 week highs. The market is reflecting bearish signals for this currency pair. A stagnant U.S. Dollar and more accommodating Chinese monetary policy may continue to boost the single euro currency in the days ahead. The Euro to Dollar exchange rate recently hit six-week highs. However, its recovery was halted by resistance on the charts. Last week, when a slew of data from the Bureau of Labor Statistics suggested that a significant slowing of U.S. inflation pressures may have started to move through the pipeline last month, the euro rose to its highest level since the first days of July. Furthermore, The unexpected decision to cut interest rates, announced by the People's Bank of China (PBoC), on Monday could help the euro this week if the PBoC permits the managed-floating Renminbi to weaken in order to boost the regional economy. EUR/USD Price Chart UK major economic data to be released this week The market is reflecting bullish signals for this currency pair. The market is unconvinced that the current trading week will aid the pound sterling in recovering against major currencies with major economic data such as the latest jobs, wages, inflation and retail sales all set to be released. Although the labor market is currently strong, there is a good likelihood that headline UK inflation will reach double digits this week. The Bank of England has already issued a warning that this year's inflation could reach 13% while the economy experiences a five-quarter slump. The UK is experiencing drought-inducing heatwaves, sky-high energy prices, and a political void in No. 10, so any more bad economic news will enrage the already irate populace. EUR/GBP Price Chart CAD fell in the wake of PBoC announcement to cut interest rates. The Pound sterling to the Canadian Dollar rallied from August lows, but could climb further if the Loonie is able to build on Monday declines, which is a busy period for both the U.S and Canada regarding economic data. After the People's Bank of China (PBoC) unexpectedly lowered interest rates in reaction to alarming local economic statistics, the Canadian Dollar fell on Monday along with other currencies that are highly sensitive to risk appetite, commodity prices, and changes in the outlook for global growth. But in light of the aforementioned, it's possible, if not likely, that the directional risk for GBP/CAD is now tilting a little more to the upside than it is to the downside. The Loonie and Sterling must now each navigate a series of domestic economic event risks that are lurking along the path ahead. GBP/CAD Price Chart

Summary: Eurozone's common currency depreciated. Euro currency is threatened by economic growth concerns. RBNZ midweek policy update. Euro under pressure amidst rising gas prices The market is reflecting bearish signals for this currency pair. According to economists, recent developments in the energy markets of the Eurozone support the argument for additional euro weakness. Due to events in the energy market, which revealed that European benchmark power costs had risen above €500 for the first time, the Eurozone's common currency depreciated further in comparison to recent highs against the Dollar and the Pound. Over the next months, the developments pose a potential of piling on further pressure on the businesses in the area. According to Ole S. Hansen, Head of Commodity Strategy at Saxo Bank, the gas and power situation in the EU is getting worse, which is hurting the euro. In spite of persisting supply constraints from Russia, European countries kept up the pressure on demand to fill their storage tanks before the winter, driving up gas prices. EUR/USD Price Chart Euro is threatened by economic growth concerns. The market is reflecting bullish signals for this currency pair. The European Central Bank has succeeded so far in preventing further significant downside in the EUR-crosses by maintaining its difficult balancing act of raising interest rates to combat multi-decade highs in price pressures while preventing fragmentation of sovereign bond markets (preventing peripheral debt yields from widening out relative to their core counterparts). But because energy inventories in the Eurozone are still low before the winter months, fears about growth are growing. The likelihood that the ECB will only be able to raise rates a few more times before the emphasis shifts to preventing a serious economic downturn is growing. Although the Euro's flaws have been contained, they nevertheless exist and pose a threat to the single currency. EUR/GBP Price Chart RBNZ midweek policy update Following the Reserve Bank of New Zealand's (RBNZ) midweek policy update, analysts at investment banks Goldman Sachs and HSBC are watching for NZD depreciation. Markets anticipate that the RBNZ will increase interest rates by another 50 basis points to 3.0%, but any significant changes in the currency are more likely to be caused by the RBNZ's tone in its guidance. The meeting, according to Goldman Sachs, is expected to be one of the major developments for the foreign exchange markets this week, and the results are most likely to support their bearish NZ Dollar thesis. GBP/NZD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: NZD Sell-off. July FOMC minutes gave no hawkish surprises. Euro under pressure. FOMC meeting minutes for July The market is reflecting bearish signals for this currency pair. The much awaited release of the minutes from the July FOMC meeting turned out to be somewhat disappointing, at least for the US Dollar (via the DXY Index). The minutes contained no hawkish surprises, with one sentence standing out in particular: “Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.” Recent data indications, like the US economy's growth trajectory and the July US inflation report's reading of 0% m/m, indicating that recent Federal Reserve policy tweaks are certainly having the desired impact on aggregate demand and inflation. Rate expectations for the September Fed meeting were slightly lowered as a result of the July FOMC minutes. The likelihood of a rate increase of 75 basis points decreased from 51% yesterday to 46% today, indicating that market players are seeing the Fed's most recent statement as a confirmation of what was already known: the rate of rate increases is expected to decelerate over the upcoming months. EUR/USD Price Chart EUR/GBP currency pair The market is reflecting mixed signals for this currency pair. The European Central Bank has succeeded so far in preventing further significant downside in the EUR-crosses by maintaining its difficult balancing act of raising interest rates to combat multi-decade highs in price pressures while preventing fragmentation of sovereign bond markets (preventing peripheral debt yields from widening out relative to their core counterparts). But because energy inventories in the Eurozone are still low before the winter months, fears about growth are growing. The likelihood that the ECB will only be able to raise rates a few more times before the emphasis shifts to preventing a serious economic downturn is growing. Although the Euro's flaws have been contained, they nevertheless exist and pose a threat to the single currency. EUR/GBP Price Chart NZD sell-off in the wake of RBNZ policy update The market's reaction to the Reserve Bank of New Zealand's (RBNZ) August policy update and guidance led to a sell-off of the New Zealand Dollar. The Reserve Bank of New Zealand (RBNZ) signaled it will raise interest rates to levels higher than they had previously been expecting. On paper, the RBNZ did everything it could to back NZD bulls: it said that the economy was in good shape, that inflationary pressures were widespread, and that it would continue to raise interest rates. As the RBNZ suggested they will need to raise rates higher than they had previously thought, short-term New Zealand bond yields increased. Two additional rises of 50 basis points are now likely to occur throughout the course of 2022, and a smaller hike may occur in early 2023. The Pound to New Zealand Dollar fell by two thirds of a percent in the 15 minutes following the decision. GBP/NZD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Euro fundamentals appear to be unchanged. Positive US economic data. Poor U.K economic data. Markets Focused of Fed officials - EUR/USD The market is reflecting bearish signals for this currency pair. Markets focused on a variety of Fed officials as they remain unanimous in the direction of future rate hikes but divided on the terminal rate because the fundamentals of the euro appear to be unaltered for the time being. Isabel Schnabel, a member of the ECB's board, was also questioned by Reuters yesterday. In the interview, she expressed concern over the continued threats to the forecast for long-term inflation and the euro's depreciation. The ECB typically doesn't comment on currency exchange rates, but there are times when a broad trend of appreciation or depreciation can influence monetary policy goals. EUR/USD Price Chart Poor economic news putting pressure on GBP - EUR/GBP The market is reflecting bullish signals for this currency pair. After a run of dismal economic news, the British pound is in trouble: growth is lower, the labor market is slowing down, and inflation is still raging. Rates of GBP/USD have reversed their recent upward trend, while rates of GBP/JPY are sliding below multi-month trendline support and rates of EUR/GBP are rising from multi-month trendline support. Retail trader stance has recently changed, indicating a bullish bias for the EUR/GBP and GBP/JPY rates and a bearish bias for the GBP/USD rates. EUR/GBP Price Chart Positive economic data supporting USD - GBP/USD The market is reflecting bearish signals for this currency pair. Prior to the weekend, the Pound to Dollar exchange rate retreated under the 1.20 handle and was close to its yearly lows after positive U.S. economic data and hawkish remarks from Federal Reserve (Fed) officials were followed by a Dollar rally that sent Sterling and a number of other currencies into freefall. While the U.S. dollar got the better of the Pound late on Thursday and had left it trading as an underperformer by Friday even after July's UK retail sales figures came in stronger than expected by the market, Sterling had better resisted the clutches of a strengthening Dollar throughout much of the week, resulting in a resilient performance against other currencies. EUR/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: EUR/USD could be moving toward a potential further fall. EUR/GBP. GBP/USD may see further losses this week. EUR/USD falls below parity The market is reflecting bearish signals for this currency pair. Testing below the parity handle, the EUR/USD is moving toward a potential further fall. Sellers have pushed hard to allow for another move-below since this level came back into play just after the Euro start this morning. Whether it can go on is the key question. Euro bears have returned for another battle at the parity handle of EUR/USD, drawing like moths to a flame. It took almost six months for this price to finally give way when it was last in action, in the second half of 2002. This is a significant psychological level. This really illustrates the influence of psychological factors as well as the significance of emotion in the market. Inflation is rampant in the Eurozone, and the ongoing conflict in Ukraine makes problems of economic policy, notably in the area of energy, more complicated. The question is whether we're approaching an abnormal market climate. EUR/USD Price Chart Pound sterling loses against the Euro The market is reflecting bullish signals for this currency pair. Late last week, despite official data that suggested retail spending held steady in the face of high inflation in the UK and another spike in investor expectations for Bank of England (BoE) interest rates, the pound lost ground against the euro. Friday's losses occurred as a result of the Dollar gaining and investors' declining risk appetite putting significant pressure on Sterling and other currencies. This prevented the Pound from benefiting from a sharp increase in UK government bond yields that was happening in the background. EUR/GBP Price Chart GBP/USD could fall further this week The market is reflecting mixed signals for this currency pair. A busy U.S. economic calendar or comments from Federal Reserve (Fed) officials might cause U.S. bond yields and the Dollar to rise even further on a burgeoning comeback, further damaging the Pound to Dollar exchange rate, which collapsed last week. Better than anticipated UK economic data and a sharp rise in market expectations for interest rates at the Bank of England (BoE) last week did not help the pound sterling, and it frequently appeared to be the most vulnerable among major currencies to rising U.S. bond yields and a rally in the dollar. GBP/USD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: ECB may turn more hawkish. The US economic downturn may have increased in August. EUR/USD still below parity The market is reflecting mixed sentiment for this currency pair. Will the European Central Bank (ECB) adopt a more hawkish stance this week given the pressure the Euro is still under and its recent breach of parity with the dollar? For the meeting on September 8th, the market anticipates a 54 bp rate increase. If the ECB wants to support the EUR/USD, may it start talking about the possibility of more drastic rate increases? Joachim Nagel, the head of the Bundesbank said, “Given high inflation, further interest-rate hikes must follow,the past few months have shown that we have to decide on monetary policy from meeting to meeting.” Investment firm Nomura's strategists have increased their confidence in a wager that the Euro to Dollar exchange rate (EUR/USD) is likely to experience a few "large figure" movements below parity. EUR/USD Price Chart EUR/GBP currency pair The market is reflecting bearish signals for this currency pair. In August, the UK economy grew, according to a closely-followed assessment of activity. Although consumers and businesses were struggling with rising inflation levels, the monthly S&P Global PMI series did reveal a slowdown in activity continued. Looking ahead, the trend is consistent with negative growth. The Euro is under pressure from the Eruozone energy crisis as market participants are expecting further interest rate hikes from the ECB. EUR/GBP Price Chart EUR/USD The release of data on Tuesday that suggested that the U.S. economy's downturn may have increased in August caused the Dollar to revert in value relative to the Euro and the British Pound. The service PMI score for the U.S. economy was 44.1, much below the 49.2 markets had projected and the 47.3 from July, according to S&P Global's PMI survey. According to S&P Global, the output decline was the sharpest since May 2020 and was the fastest since the first pandemic outbreak since the series' start almost 13 years ago. The numbers indicate that despite elevated inflation and rising interest rates at the Federal Reserve, the U.S. economy is slowing down. Another indication of a slowdown may dampen investor expectations for the amount of interest rate increases the Fed is prepared to make in the upcoming months, at least from the standpoint of the currency market. Cooling rate hike expectations can cause bond rates to fall, which is negative for the U.S. dollar. EUR/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: EUR trading below parity against the USD. UK at risk of energy crisis. Kiwi outperforms on Thursday. EUR/USD trading below parity The market is reflecting mixed signals for this currency pair. Policymakers at the European Central Bank have been relatively silent on the lecture circuit lately, but that may soon change as the summer comes to an end. There was disagreement about the 50-bps rate increase even as inflation pressures in the Eurozone had risen, according to the minutes of the ECB meeting in July. The ECB may ultimately disappoint in the upcoming months as fears turn back to weak growth, even as rates markets are discounting a more aggressive course going forward. Powell might exert pressure on the market to raise expectations for the Fed's September rate hike to 75 basis points because the markets now expect the Fed to deliver approximately 65 basis points of increases. This may provide short-term support for the Dollar and maintain pressure on the Euro into the next month. EUR/USD Price Chart Risk of UK Stagflation rises The market is reflecting bearish signals for this currency pair. The energy crisis in the Eurozone is still putting the Euro under pressure. As the economy slows and inflation pressures increase, the risk of stagflation in the UK is continuing to rise. However, given the developing energy crisis that threatens to drive UK inflation rates further higher into double digit territory over the coming few months, traders feel that the Bank of England is currently focusing on the latter of these two crises. In terms of odds on a BOE raise, markets are currently at their most aggressive levels of the year. EUR/GBP Price Chart GBP/NZD - Kiwi outperforms GBP This week saw the start of the short-lived mid-month recovery in the Pound to New Zealand Dollar exchange rate. If the Kiwi continues to excel and Sterling continues to underperform among the major currencies, the exchange rate is likely to unravel even more in the days to come. After profiting from a general easing of the U.S. Dollar ahead of Friday's visit by Federal Reserve Chairman Jerome Powell at the annual Jackson Hole Symposium for central bankers, the New Zealand Dollar outperformed on Thursday in a booming market for Asia Pacific currencies. GBP/NZD Price Chart Sources: finance.yahoo.com, poundtserlinglive.com, dailyfx.com

Summary: EUR/USD back above parity. Risk of UK stagflation increases as inflation pressures rise. Jerome Powell to address on Friday. EUR/USD trading above parity on Friday The market is reflecting mixed signals for this currency. Yesterday, we learned more about the Governing Council of the European Central Bank (ECB), who voted to raise interest rates by 50 basis points last month despite having talked up the increase by 25 bps in the months before the vote. The inclusion of the anti-fragmentation mechanism known as the "transmission protection instrument," which serves as additional firepower in the case of a jump in sovereign yields of the EU's riskier member states, was supported by a unanimous vote of the Council. However, the decision to raise interest rates by 50 basis points was not unanimously supported. In my opinion, this shouldn't be an issue in future meetings because the risk of embedded inflationary expectations over the medium term is increased by the inflation rate's close proximity to double digits. Following the announcement by Russia's national gas monopoly that it would cut off supplies through a crucial pipeline for three days in September, the already constrained market for gas saw substantial double-digit percentage increases during the past week. In the absence of convincing supply-side responses from European capitals to the ongoing Russian gas diplomacy, the economic difficulties these price increases entail may continue to be a barrier for the single currency. EUR/USD Price Chart EUR/GBP The market is reflecting mixed signals for this currency pair. After slipping back below parity with the dollar during the Monday session, the euro enjoyed some reprieve for the majority of the following week, but European gas prices continued to soar after a week-long stretch of astronomical gains. The soaring energy prices in the Eurozone continue to weigh on the Euro single currency. As the economy slows and inflation pressures increase, the risk of stagflation in the UK is continuing to rise. However, given the developing energy crisis that threatens to drive UK inflation rates further higher into double digit territory over the coming few months, traders feel that the Bank of England is currently focusing on the latter of these two crises. In terms of odds on a BOE raise, markets are currently at their most aggressive levels of the year. EUR/GBP Price Chart USD/JPY The market is reflecting mixed signals for this currency pair. When Tokyo CPI came in above forecasts for August, USD/JPY yawned. Instead of the expected 2.5%, the core CPI increased 2.6% year over year. The national CPI statistic that is due in three weeks can be inferred from the Tokyo CPI number. FX markets have been relatively quiet over the last 48 hours. The reason for this is the lack of summer liquidity, which prevents traders from taking large positions before Friday's address by Fed Chair Jerome Powell at the Jackson Hole Economic Policy Symposium. USD/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Fed anticipates that tightening will cause growth to decelerate. ECB indicate a hawkish outlook. Both Fed and ECB holding a hawkish outlook The market is reflecting bullish signals for this currency pair. He made it clear in his speech at the Jackson Hole conference that the Fed anticipates that tightening will cause growth to decelerate and that households would experience some pain as a result. His comments that the present rate is neutral appear to have cleared up any doubt. The Jackson Hole Economic Symposium confirmed what the majority of attendees had anticipated before the event even began: that inflation does not appear to be slowing down, necessitating sustained resolve on the part of the Fed in the form of unrelenting interest rate increases.   Not only the Fed, though; ECB members also contributed to the narrative by speaking about the approaching rate decision with a heightened feeling of urgency and proposing increases of 50 or 75 basis points. After the unexpected 50 bps rate increase in July, the interest rate meeting on September 8th could result in a second rate increase. Villeroy, Schnabel, Kazak, Knot, and Holzmann all agreed that the rate increase in September should have been significant (by ECB criteria). It is action time, according to Oli Rehn, one of the ECB's slightly more dovish members, and the next move will be "important." EUR/USD Price Chart   Euro rallied against the GBP on Monday The market is reflecting bullish signals for this currency pair. Entering the new week, the Euro was supported by the hawkish outlook from the ECB that was indicated at the Jackson Hole Symposium on Friday. Risk of a UK recession still remains high. EUR/GBP Price Chart   Hawkish fed weighs on GBP/USD The market is reflecting mixed signals for this currency pair. The exchange rate between the pound and the dollar initially increased on Friday, but it quickly lost those gains when Federal Reserve Chairman Jerome Powell warned that businesses and individuals would struggle more if the bank raised interest rates in a bid to lower U.S. inflation.    Following last week's hawkish remarks by Fed Chair Powell at the Jackson Hole Economic Symposium, the pound sterling continued to decline this past Monday. Markets had anticipated this outcome in large part, but confirmation revealed the differences between the economies of the US and UK. Goldman Sachs reported the decrease in UK economic data this morning, reiterating the Bank of England (BoEopinion )'s from a few weeks ago that a UK recession is anticipated in the fourth quarter - a significant change from their earlier prediction. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: ECB turns hawkish in the wake of high eurozone inflation. Pound sterling appears poised to test new lows against the euro, the dollar, and other major currencies. Euro supported by hawkish ECB The market is reflecting mixed signals for this currency pair. August saw a new high for inflation in the eurozone, and future months are predicted to see an increase. According to data from Eurostat, the increase in inflation in August was caused by a faster increase in the cost of food, alcohol, and cigarettes, which increased by 10.6% on a yearly basis compared to a 9.8% increase in July. Given the continuing rise in natural gas costs, it is anticipated that inflation in the Eurozone would rise further in the upcoming months, possibly reaching double digits. The reversal of several German subsidies and skyrocketing energy prices even before the start of the heating season indicate that inflation will continue to rise and surpass 10% before peaking around the turn of the year. Since US Federal Reserve Chair Jerome Powell's aggressive address at the Jackson Hole Symposium last Friday, there has been a noticeable change in tone among many European Central Bank (ECB) Members. The figures released today will undoubtedly strengthen arguments in favor of raising jumbo interest rates at the European Central Bank meeting next week. The central bank meeting next week is crucial since markets are heavily pricing in hawkishness; now, 70 bps are put in for September and 160 bps by year's end. EUR/USD Price Chart GBP is quickly becoming the worst performing currency of 2022 The market is reflecting bullish signals for this currency pair. Despite the fact that the money markets have upped their interest rate bets for the September meeting by about 4 basis points since Monday, the Bank of England (BoE) still confronts a difficult struggle as Q4 recession fears build. Since I don't see the BoE acting aggressively over the winter, front-loading now might be essential, thus a 75bps hike is still an option. The hawkish attitude from the ECB offers the Euro support. EUR/GBP Price Chart GBP testing new lows against USD and Euro The market is reflecting bearish signals for this currency pair. In light of the negative investor sentiment toward the UK and the ongoing weakness in the global equity markets, the pound sterling appears poised to test new lows against the euro, the dollar, and other major currencies. The Pound has already lost 1.33% of its value against the Euro this week, and if these declines continue, it will experience its biggest weekly decline against the euro since May. The UK pound is still losing ground versus the US dollar, having dropped another 0.83% since the week's beginning. The current loss for 2022 is 14%. As August draws to a close, it is clear that the British pound had the worst month of any major currency, losing value relative to all of its G10 competitors. Further losses are likely since the drop of the pound indicates a pervasive and unshakeable unfavorable attitude among investors worldwide. The UK currency is on track to become the worst performing major currency of 2022 within a matter of weeks given its present performance and tendencies. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The USD strengthened by a hawkish Fed. GBP struggled in August. Euro value declined against USD on Thursday The market is reflecting mixed signals for this currency pair. Thursday sees a decline in the value of the Euro as markets are swept by a steadfast US Dollar following additional hawkish remarks from Fed speakers. Despite the market leaning toward a 75 basis-point increase at the European Central Bank (ECB) meeting next week as a result of yesterday's higher than expected CPI, the EUR/USD was unable to gain traction. The US dollar's ascent is unabated, and it appears that it will soon reach highs last seen in 2002 as the preferred safety play. This week, a new wave of risk-off trading sent USD pairings higher and equity markets lower across a number of markets. US Treasury yields have reached multi-year highs as US interest rate expectations continue to rise. EUR/USD Price Chart EUR/GBP touching June lows The market is reflecting bullish signals for this currency pair. One analyst said there is little reason to expect an improvement over the upcoming weeks or months as the value of the pound relative to the euro has dropped substantially over the past few days and is currently at levels last seen in June. The Pound suffered in August, with analysts attributing its poor performance to worries that the UK's debt load will rise as the next administration tries to mitigate the effects of the cost of living problem. This occurs as the Bank of England raises interest rates, driving up the yield paid on gilts, the name for UK government debt. The Bank of England gave historically low interest rates during the Covid crisis and actively purchased government debt as part of its quantitative easing program. As a result, the government was able to increase borrowing without any problems. However, the Bank will now actively sell government debt and may raise rates by an additional 50 basis points in September, significantly restricting the government's ability to borrow money as the nation grapples with yet another crisis. EUR/GBP Price Chart GBP/AUD Despite a great August making the Australian Dollar one of the better performing currencies of 2022, experts at investment bank Goldman Sachs said they remain concerned on the currency on a "tactical basis." The announcement that one of China's major cities has been placed on lockdown as the government of the nation pursues a "zero covid" strategy to combat the coronavirus raises doubts about the near-term prospects for Australia's top export market. GBP/AUD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Thursday's European Central Bank (ECB) meeting during this crucial week for the euro. Russia cuts off Nord Stream gas supply. A crucial week for the Euro. But is still at risk as energy issues become more apparent. Euro Index suffers in the wake of Russia Turning off the gas taps Monday saw a new 20-year low for the euro as concerns about a worsening energy crisis in the area increased as Russia cut off gas supplies to Europe through its main pipeline. In recent months, there has been an increase in the correlation between the euro and natural gas prices, with the latter declining as energy prices rise. Before the chilly winter months, Europe is frantically trying to wean itself off Russian supply and build up reserves, but many predict a significant economic damage. Invoking an oil leak in a turbine, Russia postponed a Saturday deadline for the Nord Stream pipeline to begin carrying oil. It happened at the same time that the Group of Seven finance ministers announced a limit on Russian oil prices. Early in European trading, the euro fell to $0.9876, its lowest level since 2002, before bouncing back to $0.9939, but down 0.2% on the day. "Gas flows have been curtailed even more than expected and we have already seen evidence of demand destruction weighing on activity," said Michael Cahill, a strategist at Goldman Sachs. "We now expect the Euro to fall further below parity ($0.97) and remain around that level for the next six months," he added. Investors are gearing up for Thursday's European Central Bank (ECB) meeting during this crucial week for the euro, as markets have priced in a nearly 80% possibility of a massive 75 basis point (bp) interest rate hike. The stabilization of the euro, which has lost over 8% of its value over the last three months, will be welcomed by ECB policymakers. That will fuel the desire to tighten policy in an effort to control inflation. EUR/USD Price Chart Sources: finance.yahoo.com, reuters.com

Summary: U.S. economy is doing well despite tighter monetary policy. Truss - The new UK prime minister as of Tuesday. RBA interest rate decision. EUR/USD hits multi-year lows on Tuesday The market is reflecting mixed signals for this currency pair. On Tuesday due to negative sentiment, the EUR/USD dropped to new multi-year lows, briefly touching 0.9865 in choppy trading after U.S. markets resumed trading after the Labor Day holiday on Monday. Even while the euro was able to somewhat recoup some of its losses during the day, broad U.S. dollar rise in the early afternoon hampered the currency's sentiment. As a result of a rise in U.S. Treasury rates, which drove both short-term and particularly long-dated yields considerably higher, DXY rose as much as 0.85% at one point. Bond prices rose in part as a result of better-than-expected statistics from the U.S. services sector. The non-manufacturing PMI for August rose to 56.9 versus 55.1 predicted, according to the Institute for Supply Management, which indicates that the economy is still very robust. The fact that the U.S. economy is doing well despite tighter monetary policy suggests that the central bank will likely move forward with its plans to raise interest rates a few more times in the upcoming months, keeping them there for longer than initially anticipated to reduce inflation, which would be bullish for the dollar. However, for the time being, a dovish pivot will not materialize. EUR/USD Price Chart GBP supported by Truss’ policies The market is reflecting mixed signals for this currency pair. The British pound has had a terrible year, but if the incoming prime minister can present a convincing package of policies to address the cost of living crisis, the pound may recover in the remaining months of the year. According to a number of media publications, Truss, who became prime minister on Tuesday, may implement a plan to cap energy costs at £130 billion. She's also expected to make a major tax cut announcement as part of one of her major campaign promises. According to sources, the UK's incoming Prime Minister is thinking about freezing energy prices for millions of homes this winter, a move that may reduce the country's inflation rates by as much as four percentage points. According to Capital Economics, an independent research firm, core inflation would nevertheless continue to be stubbornly high and attract additional Bank of England interest rate increases. EUR/GBP Price Chart RBA decided on 50bps interest rate hike The Reserve Bank of Australia (RBA), which raised interest rates by another 50 basis points, together with indications that the central bank is reaching the conclusion of its tightening cycle, left the Australian Dollar floundering. By raising rates by 50 basis points, the RBA satisfied market expectations and promised additional rate increases in its outlook. Sterling pounds According to Live's RBA preview, the currency would be more affected by the direction of future raises than by a 50 basis point increase, which would provide little support to the Australian dollar. We warned that the Australian dollar might suffer from a "dovish" hike, in which the Bank sought to curb expectations for additional assertive action. The RBA brings Australia's basic lending rate into a range of 2-3% that it views as the "neutral" position by raising the Cash Rate to 2.35%. As a result, it holds that interest rates are neither restrictive nor stimulatory, which lends support to the idea that the RBA may start to contemplate easing back. GBP/AUD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Bank of Canada interest rate decision. BoC met market expectations. Bank of Canada meets market expectations The Bank of Canada (BoC) met the market expectations on Wednesday by hiking their interest rates by 75bps up to 3.25% from 2.5%. Their Ivey PMI beat market expectations which were set at 48.3, but came in at an actual value of 60.9. Bank of Canada increases policy interest rate by 75 basis points, continues quantitative tighteninghttps://t.co/YXW4npzhVA#economy #cdnecon — Bank of Canada (@bankofcanada) September 7, 2022 Bank of Canada In order to safeguard the economy by limiting the amount that interest rates might need to increase over the medium term, the BoC increased its cash rate from 1.75% to 2.5% in July. This was done as part of a strategy to move monetary policy to an economically restrictive level sooner rather than later. Despite the fact that interest rate derivative market pricing implies that investors already expect the benchmark to climb further and as far as 3.75% by year's end, the BoC considers that restrictive threshold to involve a cash rate that is a place above the 3% level. “The Bank's commitment to front-loading rate hikes in the face of red-hot inflation means an even bigger 100 bps increase (matching July's hike) can't be ruled out. Canadian employment (Friday) is expected to rise 5K in August following two consecutive monthly declines. The unemployment rate is expected to increase to 5.0%, which is still very low,” says Alvin Tan, head of Asia FX strategy at RBC Capital Markets. With the approaching Bank of Canada rate decision expected today and the European Central Bank meeting on Thursday, we will undoubtedly use expectations to our advantage. Expectations play a significant part in the market impact of major event risk. In this meeting, both are expected to raise their respective benchmark rates by 75 basis points, but the former is doing so based on a 100-basis-point increase at its last meeting and the discount of a hawkish central bank. Sources: dailyfx.com, poundsterlinglive.com, investing.com

Summary USD/JPY hitting lowest levels in 24 years. USD still strong. Expectations of the next interest rate hike from BoE fell. EUR/USD currency pair The market is reflecting bearish signals for this currency pair. Since the US Dollar continues to rise and shows little sign of slowing, it has been a wrecking ball for the foreign exchange markets. I would exercise caution in pursuing this upside, though, given that the most recent US CPI is right around the horizon. The inclination would be to downplay US dollar declines. The 0.99 handle serves as support for the euro, and although there has been a breach below it, there hasn't yet been a close below it. The language used, such as expressing a willingness to enter restrictive territory as opposed to merely front-loading policy to play catch-up, will be crucial in determining whether the Euro can find a floor, even though the ECB is preparing to raise interest rates by 75 basis points at its meeting tomorrow. EUR/USD Price Chart GBP declines The market is reflecting mixed signals for this currency pair. The Bank of England enters the scene and hits the already weak pound just as the market was concentrating on the new prime minister, Liz Truss. Following comments made by members of the Bank's Monetary Policy Committee (MPC), markets quickly reduced their expectations for a 75 basis point interest rate hike at next week's policy decision, causing a steep decline in the value of the pound. The panel's comments show that the Bank is still hesitant to hike interest rates in order to combat inflation and instead is betting that prices would decline as the economy weakens. EUR/GBP Price Chart USD continues to strengthen Today, the Japanese Yen's value against the US Dollar fell to its lowest level since 1998. In order to keep bond yields low, the Bank of Japan (BoJ) reaffirmed its yield curve control (YCC) program on Wednesday, despite the Fed's unambiguous indication that rates will rise. Today, the 10-year Japanese government bond (JGB) traded close to the 0.25% upper limit set by the central bank. The bank then declared that they would increase their bond buying as part of their planned operations. The 2-year note currently trades at 3.75%, with Treasury rates continuing to fly higher. Everywhere it has increased, the US dollar has. USD/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: ECB policy rate decision. ECB met interest rate expectations. ECB Decision Met Expectations The ECB on Thursday hiked interest rates by 75bps - meeting market expectations. Deposit Facility rate of the ECB exceeded market expectations, by 25bps, coming in at a 75bps rate hike. ECB Interest rate Decision The European Central Bank (ECB) policy announcement on Thursday may have some potential effects on the foreign exchange market, according to a "crib sheet" published by ING Bank. The market is anticipating a 75 basis point increase as the ECB looks to take swift action against inflation before the Eurozone's growth slows and a recession takes hold. However, ING economists believe that the market is mistaken in using 75 basis points, which might be the day's first significant source of volatility for the Euro. "Policymakers in Frankfurt will likely have to choose between a 50bp or 75bp rate hike this week. We think that a 75bp move would be too hard to digest for the dovish front within the Governing Council, and our call is for a 50bp move," says Francesco Pesole, a foreign exchange strategist at ING. According to ING's base case scenario, a 50bp would fall short of market expectations, causing the Euro to Dollar exchange rate (EUR/USD) to decline. In this base scenario, the ECB also projects weaker growth rates for the Eurozone, anticipating a wintertime recession. While high inflation will continue, it will start to decline over the outlook horizon, according to ECB predictions. If the ECB took an even more "dovish" posture, they would raise interest rates by 25 basis points as they assessed the severity of the impending economic slowdown, which would be reflected in their revised GDP projections. Inflation forecasts that indicate prices drop down to the 2.0% target over the forecast horizon would also be part of this dovish scenario. According to this call, the EUR/USD is expected to trade close to 0.96. However, the ECB will be keenly aware of the effects their decisions will have on the Euro because a weak Euro itself is an inflationary phenomenon because it drives up the price of importing commodities. This is especially detrimental during a crisis brought on by high gas and oil import prices. Sources: investing.com, poundtserlinglive.com

Summary: ECB raised all 3 major interest rates by 75bps. UK Government capping gas prices for next 2 years. RBA nearing the end of its interest rate hiking cycle. ECB interest rate hikes The market is reflecting bullish signals for this currency pair. To combat record-high inflation in the Euro Area, the ECB increased each of the three major interest rates by 75 basis points. Markets and experts had generally anticipated the decision to raise interest rates by 75 basis points, thus the first impact on the Euro has been muted so far. The ECB also noted that the governing council anticipates raising rates during the coming sessions, which is consistent with money market pricing, which projects a further 92 basis points of tightening by year's end. Looking ahead, attention will primarily be on ECB President Lagarde's news conference, where she is expected to discuss the necessity to raise interest rates into restrictive territory (above neutral rates) in order to support the euro in the short term. The energy crisis, which continues to put pressure on the Euro through parity, is the major story, though. EUR/USD Price Chart UK Government to cap gas prices The market is reflecting mixed signals for this currency pair. Following the announcement that the UK government would cap annual UK gas prices at £2500 for the next two years, the likelihood of a stronger finish to 2022 for the British Pound moved closer. An influential economist claims that the action effectively keeps UK inflation at current levels and averts the possibility of a recession. Investors have dumped sterling in recent months due to concerns that the UK would be among the nations worst affected by a confluence of rising inflation and slowing economic growth. Therefore, Truss' intervention refutes this claim, stating that the changes will probably reduce inflation's predicted peak by 5 percentage points. EUR/GBP Price Chart RBA nearing the end of their interest rate hiking cycle The Reserve Bank of Australia (RBA) is reaching the conclusion of its interest rate hike cycle, according to Governor Philip Lowe, which will cause the Australian Dollar to weaken. In the meantime, data indicating the nation's outstanding trade surplus shrank in July put additional pressure on the Australian dollar. According to Lowe, disparities between Australian and American pay setting practices allow the RBA to afford to slow pace. GBP/AUD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Ukrainian resistance in the country's east boosted the Euro. EUR/GBP may struggle in the wake of UK inflation data release. USD had a rough start to the week against the euro. Euro strengthened during Monday’s session The market is reflecting bullish signals for this currency pair. The news of Ukrainian resistance in the country's east as Ukrainian soldiers launched a counteroffensive caused the euro to rally by a significant 1.4% this morning. Bringing our attention back to the ECB, there was evident unhappiness among the board members after the significant 75 basis point increase was fully anticipated by the markets and had little to no impact on them. The infamous ECB "sources" said shortly after President Lagarde's address that rate increases could reach 2% (restrictive territory) to fight inflation and hinted in some way that the 2023 growth prediction was a bit on the "rosy" side. Finally, sources claimed that QT was imminent, with negotiations set to begin in October and a likely announcement to be made at the October ECB meeting. EUR/USD Price Chart EUR/GBP risk could increase The market is reflecting mixed signals for this currency pair. In the days ahead, when the market will likely be most interested in UK inflation data that could further increase the already elevated risk of aggressive interest rate action from the Bank of England (BoE) next week, the Pound to Euro exchange rate may struggle to get off the ground after falling last week. When the Bank of England (BoE) announces its interest rate decision for September on September 22 after delaying it to accommodate the nation's day of mourning for Her Majesty Queen Elizabeth II, the new fiscal package might have a substantial impact on the BoE's monetary policy. EUR/GBP Price Chart USD/JPY currency pair The market is reflecting bearish signals for this currency pair. The US Dollar had a mixed week to start, falling versus the Euro but rising once more against the Japanese Yen. The EUR/JPY moved closer to Friday's 8-year high as a result. Other currency combinations were generally quiet. Despite further browbeating from Japanese officials—this time from Deputy Chief Cabinet Secretary Seiji Kihara—the Yen weakened. He mentioned that excessively one-sided currency movements are being watched. In order to take advantage of the depreciating Yen and stimulate the economy, Japan recently announced a relaxation of travel regulations for visitors traveling domestically. USD/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com  

Summary: U.S. inflation is running hotter than markets anticipated. Core inflation reading is the one that concerns the Fed the most. Core CPI increased by 0.6% in Augus US CPI Inflation Missed Market Expectations Data that showed U.S. inflation is running hotter than markets anticipated caused the Dollar to rise dramatically, giving the Federal Reserve more confidence to hike interest rates. After U.S. headline CPI inflation rose 8.3% year-over-year in August, defying expectations for a reading of 8.1%, stocks dropped and the safe-haven high-yielding Dollar surged, though it was still lower than July's 8.5%. But contrary to forecasts for a decline, the month-over-month metric increased by 0.1%, the BLS reported, up from July's reading of 0%. The core inflation reading will be the one that concerns the Fed the most. Core CPI increased by 0.6% in August, exceeding both the 0.3% market expectation and the 0.3% result in July. Core CPI inflation is the form of inflation that the Fed may be able to control through higher interest rates because it is domestically based and therefore excludes external factors like energy prices. Core CPI inflation increased by 6.3% on an annual basis, exceeding both July's 5.9% and the market's expectations of 6.1%. LISTEN NOW: Inflation rose 8.3% year-over-year — we discuss the hotter-than-expected CPI number. Listen and follow the @SquawkStreet podcast here or on your favorite podcast platform: https://t.co/BoklbeW3jy pic.twitter.com/v2SxAuQfsh — CNBC (@CNBC) September 13, 2022 With a 1.40% increase against the New Zealand Dollar and a 0.84% increase against the Euro, the dollar advanced versus all the major currencies. "In response to the data, all G10 currencies weakened against the US dollar, with the largest losses seen in currencies that had recently benefited from the improvement in risk conditions. The pound, euro, yen, Kiwi dollar, Aussie dollar, and Swedish krona have now recorded losses in excess of one percent against the greenback, while the Norwegian krone posted the largest decline as it is down 2% on the day," says Jay Zhao-Murray, Market Analyst at Monex Canada. Even though gasoline prices were down significantly, the U.S. inflation surprise still occurred, suggesting that the energy shock is still having an impact. However, everyone is still surprised by the lag. In the event that workers seek greater wage agreements and businesses increase their prices, the Fed will be eager to boost rates. Sources: poundsterlinglive.com

Summary: UK CPI inflation beat market expectations. UK CPI Inflation fell from its 40-year high reached in July. UK CPI Inflation Data Beat Market Expectations In August, the Bank of England and households experienced an unexpected - and presumably transitory - decrease in consumer price inflation for the first time in almost a year. Following a 40-year high of 10.1% in July, annual consumer price rise fell to 9.9% on Wednesday, according to the Office for National Statistics. This was the first decline since September 2021 and fell short of the 10.2% increase predicted by a Reuters poll. However, experts cautioned that inflation was anticipated to peak at approximately 11% in October, when a new home energy tariff cap begins, and that it might be difficult to decline because of underlying pressures and a new fiscal stimulus from the government. ⚠️BREAKING:*UK CPI INFLATION RISES 9.9% IN AUGUST, DOWN FROM 40-YEAR HIGH OF 10.1% 🇬🇧🇬🇧 pic.twitter.com/Lc5in4fnrW — Investing.com (@Investingcom) September 14, 2022 Following the passing of Queen Elizabeth, the British central bank decided to postpone raising interest rates until next Thursday. On September 22, the BoE is expected to increase rates by 0.75 percentage points to 2.5%, according to financial markets. With the exception of a temporary attempt to support sterling during a 1992 exchange rate crisis, this would be its largest rate increase since 1989. Despite a slowing economy at risk of recession, the majority of economists surveyed by Reuters believe a half-point increase is more plausible, and they also anticipate the BoE to keep raising rates into next year. A severe pressure on living standards has been brought about in Britain by the rise in European natural gas prices brought on by Russia's invasion of Ukraine, which has been compounded by post-COVID labor shortages and supply-chain bottlenecks. Inflation is lowest in several European nations, notably Spain and the Netherlands, but it is the highest among the G7's major advanced economies in the UK. Prime Minister Liz Truss's capping household energy costs The incoming Prime Minister Liz Truss's decision to cap household energy costs, which will increase by 25% rather than 80% in October, has made it marginally easier for the BoE to achieve its goal of returning inflation to its 2% objective, at least in the short term. Before the cap, analysts predicted that inflation may reach 15% or higher early the following year. In addition to promising other help and tax cuts, the government is anticipated to employ public borrowing to make up for the lower rates charged by energy providers. This is anticipated to cost approximately 100 billion pounds ($116 billion). According to experts, this additional stimulus for an economy that is nearly at full employment and experiencing the lowest unemployment rate since 1974 would prolong domestic inflation pressures and force the BoE to raise rates further in order to bring inflation back to its 2% objective. Sources: Reuters.com

Summary: Money market pricing indicates that the Fed will raise rates by 75 basis points. UK CPI inflation rate was lower in August than it was in July. According to economists, the Australian Dollar will fare better than any other major currency in 2022. USD rose, gold futures fell & stocks dropped sharply The market is reflecting mixed signals for this currency pair. The US Dollar rose, gold prices fell, and US stocks dropped sharply on Tuesday as a result of the August US CPI report's substantial effect on the financial markets. Headline Inflation in the US gained +0.1% m/m and +8.3% y/y, above expectations of no gain m/m and an increase of +8.1% y/y. Also hotter than anticipated, the core reading came in at +0.6% m/m versus a projection of +0.3%, while the y/y stood at +6.3% versus +6.1% anticipated. Money market pricing indicates that the Fed will raise rates by 75 basis points, but the tail-risk surprise has changed from a 50 to a 100 basis point increase. This reveals where the momentum is: more rate increases will result in the Fed Funds rate peak being higher than anticipated before the inflation report. EUR/USD Price Chart Has UK Inflation hit its peak? The market is reflecting mixed signals for this currency pair. Pound Sterling increased the day after the news broke. The UK CPI inflation rate was lower in August than it was in July, indicating that the price increase's peak may have already passed. This would be a favorable development for the outlook of the UK economy and, consequently, the Pound. However, the Bank of England's decision on September 22 looms large, and the final position of Sterling at the end of September may depend on whether they choose to raise interest rates by 75 or 50 basis points. According to analysts at certain large investment institutions, the market is expecting a 75 basis point increase from the Bank, which it must provide to maintain stable Pound exchange rates. The pound would decline if the Bank of England disappointed markets with a modest increase. EUR/GBP Price Chart GBP/AUD currency pair According to recent research from BMO Capital Markets, the Australian Dollar is a "quality" currency that is expected to increase in value against the U.S. Dollar and all other major currencies in the upcoming months. According to a BMO analysis of the Aussie Dollar, it is one of the best-performing currencies in 2022 because of a strong set of underlying reasons that support it. According to economists, the Australian Dollar will fare better than any other major currency in 2022 thanks to the nation's strong export market and sound domestic fundamentals. Australia's foreign exchange revenues have increased due to rising commodity prices, which has supported its currency. GBP/AUD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Early trading saw the EUR/USD falling below parity once more. The British Pound dropped to its lowest level against the Dollar on Friday and hit lows against the Euro that haven't been seen since February 2021. Strong US Dollar index driving USD/JPY down. EUR/USD falls below parity once more The market is reflecting bearish signals for this currency pair. Early trading saw the EUR/USD falling below parity once more while failing to surpass Friday's peak. While markets look apprehensive after US President Joe Biden said the US military would defend Taiwan in the case of an invasion by China, we witnessed the USD index open higher and push on, supporting a +/-60 pip loss on EUR/USD and other currency pairs. The downward movement in the EUR/USD rate this morning appears to be driven by the dollar index. Despite numerous investment banks and the World Bank reducing their growth projections for the US economy and issuing a global recession warning, the index kept moving higher. EUR/USD Price Chart Economists predict that the Pound will continue to decline. The market is reflecting mixed signals for this currency pair. Although there is a remote chance the currency would recover by the end of the upcoming week when a Bank of England rate hike and the "mini budget" are announced, economists predict that the Pound will continue to decline. The British Pound dropped to its lowest level against the Dollar on Friday and hit lows against the Euro that haven't been seen since February 2021 before the monetary and fiscal double-header. Following the publication of poor UK retail sales statistics that led economists to warn that the country is already in recession, the pound's losses for 2022 increased. Contrary to estimates, retail sales declined 1.6% in the month of August instead of a somewhat smaller -0.5%. EUR/GBP Price Chart USD/JPY The market is reflecting bearish signals for this currency pair. After failing to break over 145, USD/JPY is still in an ascending trend channel. 144.95 may continue to act as resistance because it is the 161.8% Fibonacci Extension of the late-July decline from 139.39 to 130.39. It has recently been tested, reaching peaks of 144.97 and 144.99, the latter of which is a 24-year high. This region might be crucial for the next significant USD/JPY movement. The Bank of Japan called banks in Tokyo last week as 145 approached, requesting a rate review. The market has interpreted this to mean that the central bank may be considering intervening should the price rise above 145. Of course, if the price trades over that level and they do not act, an aggressive move might be observed. The following potential resistance level to watch could be the ascending trend line that now splits around 145.90. USD/JPY Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: EUR/USD exposed to risks related to the Fed interest rate decision on Wednesday. The BoE interest rate decision on Thursday will be crucial. GBP/CAD may now be on the verge of lurching toward all-time lows. Euro is still stronger than some other currencies The market is reflecting mixed market signals for this currency pair. The EUR/USD has been able to maintain its stability recently by simply remaining stable, which isn't really saying much for it. The Euro to Dollar exchange rate began the new week near parity and exposed to risks related to the Federal Reserve's (Fed) interest rate decision on Wednesday, however there is an admittedly remote chance that the latter could spark a firecracker surge by the single currency later this week. The Euro is still stronger than some of the other currencies, but it is expected to keep falling against the Dollar and reach new cycle lows. EUR/USD Price Chart BoE interest rate on Thursday The market is reflecting bullish signals for this currency pair. The exchange rate between the pound and the euro has fallen for seven straight weeks, but it might go considerably further this week and possibly to record lows if the market panics about a probable Bank of England (BoE) decision to sharply raise Bank Rate on Thursday. With the scale of the most recent Bank Rate increase and any hints or guidance regarding the outlook for the benchmark, the BoE interest rate decision on Thursday will be crucial, yet there is a risk that the bank will feel pressured to literally knock the Bank Rate ball out of the park. EUR/GBP Price Chart GBP/CAD How the market could be likely to react to any particularly substantial interest rate rise from the Bank of England (BoE) this Thursday, the Pound to Canadian Dollar exchange rate may now be on the verge of lurching toward all-time lows. Although there is a chance it might fall further if the BoE smashes the Bank Rate ball out of the park on Thursday, sterling crept higher versus the Canadian Dollar to start a holiday-shortened week and remained safely above the 12-year lows reached over a fortnight earlier. A recent increase in core inflation, the BoE's most recent Inflation Attitudes Survey, and the new UK Prime Minister's proposal to freeze or cap household energy costs through public subsidy are reasons to believe it might as well. These factors could influence policymakers to view this as a medium-term inflation risk. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

On Wednesday the Fed is due to make their interest rate decision. A US portfolio that is split 60/40 between stocks and bonds is headed for its worst year since 1937. ECB is determined to deliver price stability through rising interest rates.   In this article: The Fed’s Interest rate hike tomorrow. US Stock/Bond portfolio down. The ECB is determined to fight inflation through rising interest rates. The Fed due to make their interest rate decision on Wednesday The SwissQuote tweeted about the expectations the market has ahead of the Fed’s interest rate hike decision on Wednesday. Fed will likely hike by 75bp ; SNB will likely follow! ▶️ Discover today's market highlights on our #MarketTalk with @IpekOzkardeskay: https://t.co/Lzfate1wod pic.twitter.com/ZnOfnyHVvM — Swissquote (in English) (@Swissquote) September 20, 2022 On Wednesday the Fed is due to make their interest rate decision, this interest rate decision came in the wake of the US CPI inflation results which were released during last weeks trading week. US Stock/Bond portfolio is suffering According to Charlie Bilello a US Stock/Bond portfolio is likely to experience its worse financial performance in 86 years. A 60/40 Portfolio of US Stocks/Bonds is down 16.2% in 2022, on pace for its worst calendar year since 1937. pic.twitter.com/d6gnbohRLw — Charlie Bilello (@charliebilello) September 20, 2022   A US portfolio that is split 60/40 between stocks and bonds is headed for its worst year since 1937. European central bank (ecb) determined to fight inflation The president of the ECB Christine Lagarde makes it clear that the ECB is determined to fight inflation through rising interest rates. We are determined to deliver price stability, and expect to raise interest rates further to achieve 2% inflation, says President @Lagarde. We must settle at a rate that ensures inflation returns durably to our target, as the economic environment evolves https://t.co/d5HvwVEiR0 pic.twitter.com/mCXxS1yk1f — European Central Bank (@ecb) September 20, 2022   The ECB is determined to deliver price stability through rising interest rates. The ECB is willing to settle the rate of inflation at its target.    Sources: twitter.com

On Wednesday the Fed is due to make their interest rate decision. A US portfolio that is split 60/40 between stocks and bonds is headed for its worst year since 1937. ECB is determined to deliver price stability through rising interest rates. In this article: The Fed’s Interest rate hike tomorrow. US Stock/Bond portfolio down. The ECB is determined to fight inflation through rising interest rates. The Fed due to make their interest rate decision on Wednesday The SwissQuote tweeted about the expectations the market has ahead of the Fed’s interest rate hike decision on Wednesday. Fed will likely hike by 75bp ; SNB will likely follow! â–¶ï¸Â Discover today's market highlights on our #MarketTalk with @IpekOzkardeskay: https://t.co/Lzfate1wod pic.twitter.com/ZnOfnyHVvM — Swissquote (in English) (@Swissquote) September 20, 2022   On Wednesday the Fed is due to make their interest rate decision, this interest rate decision came in the wake of the US CPI inflation results which were released during last weeks trading week. US Stock/Bond portfolio is suffering According to Charlie Bilello a US Stock/Bond portfolio is likely to experience its worse financial performance in 86 years. A 60/40 Portfolio of US Stocks/Bonds is down 16.2% in 2022, on pace for its worst calendar year since 1937. pic.twitter.com/d6gnbohRLw — Charlie Bilello (@charliebilello) September 20, 2022   A US portfolio that is split 60/40 between stocks and bonds is headed for its worst year since 1937. European central bank (ecb) determined to fight inflation The president of the ECB Christine Lagarde makes it clear that the ECB is determined to fight inflation through rising interest rates. We are determined to deliver price stability, and expect to raise interest rates further to achieve 2% inflation, says President @Lagarde. We must settle at a rate that ensures inflation returns durably to our target, as the economic environment evolves https://t.co/d5HvwVEiR0 pic.twitter.com/mCXxS1yk1f — European Central Bank (@ecb) September 20, 2022   The ECB is determined to deliver price stability through rising interest rates. The ECB is willing to settle the rate of inflation at its target. Sources: twitter.com

Summary: Euro fell back to its lows from early September below parity with the US Dollar. ECB hawkish tone. Thursday may cause the GBP/NZD to drop to some of its lowest points since the months immediately following the Brexit referendum. Euro weakens as Putin dashed hope for an end to the Russia/Ukraine conflict The market is reflecting bearish signals for this currency pair. On Wednesday, the Euro fell back to its lows from early September below parity with the US Dollar as Russian President Vladimir Putin appeared to dash any remaining hope for a quick resolution to the war in Ukraine. Markets anticipate additional rate increases even if there is optimism that, at least in the US, inflation may finally be under control. The Fed is projected to increase rates by a full percentage point. The war in Ukraine is continuing to drive up the cost of energy and raw materials on a continent that is still recovering economically from the Covid epidemic, so the European Union cannot resort to such solace. EUR/USD Price Chart BoE interest rate decision due on Wednesday The market is reflecting mixed signals for this currency pair. Although the European Central Bank has recently adopted a more hawkish tone, the Fed continues to have significantly more monetary firepower and flexibility to use it, according to the market. This opinion can only be strengthened by indications that the Ukrainian conflict will continue to rage. Great hopes: The markets are anticipating the Bank of England to raise interest rates twice in a row by 75 basis points, which might lead to a massive letdown for the British pound. As of right now, money markets are pricing in 200 basis point increases over the next three decisions, which means the Bank will need to raise rates by 75 basis points at two of those sessions. This is more than any other developed market central bank has requested. EUR/GBP Price Chart GBP/NZD currency pair During the midweek session, the New Zealand Dollar extended a 15-month downtrend against the U.S. Dollar and appeared to be headed for March 2020 lows. However, it may have better chances against Sterling, which could experience significant losses in the wake of Thursday's Bank of England (BoE) policy decision. If the author is correct in believing the BoE will actually raise rates much farther than all forecasts anticipate on Thursday, sterling's historically unfavorable reaction to Bank Rate rises could be doubly relevant for GBP/NZD this week. If this obviously improbable prediction comes true, then the BoE's decision on Thursday may cause the GBP/NZD to drop to some of its lowest points since the months immediately following the Brexit referendum. The decision on Thursday will be made just over a week after the Office for National Statistics reported a new increase in core inflation for August, and shortly after the Bank of England's Inflation Attitudes survey indicated that households' expectations for medium-term inflation remained at potentially alarming levels in July. GBP/NZD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The markets expected a 75bps hike from the Fed. Fed met expectations with a 75 bps rate hike. Chances of an economic recession persists. The Federal Reserve chose to hike their interest rates The Fed met market expectations by hiking interest rates by 75bps on Wednesday. In the wake of the August US CPI inflation numbers, the market priced in a 75bps rate hike from the Fed. As the Federal Reserve continues on its rate hiking cycle, the markets become increasingly concerned around the likelihood of a global economic recession. The effect of the interest rate hike on the US Dollar and the economy On the strength of another significant Federal Reserve rate hike this Wednesday, the Dollar is anticipated to remain sustained. The August inflation report reaffirmed expectations for another 75 basis point raise and language indicating the Fed will retain a solid commitment to bringing prices down, convincing investors that the Fed cannot yet wind down its rate-hiking cycle. The next "big moment" for the currency markets, and really all financial assets, will be when the Fed finally changes course and indicates the cycle of rate hikes is about to come to an end. The recent trends of Dollar strength and equity market downturn are anticipated to continue up until that point. When members of the Federal Open Market Committee (FOMC) present their forecasts for where they believe interest rates will go in the future, there won't likely be any indications of a pivot (the infamous Dot Plot chart). However, the idea of general resilience in the US economy should continue to be the baseline scenario. Revisions to other economic estimates are anticipated to indicate some signals of a worsening economic outlook. Investors discounting a drop in future corporate earnings and fearing a deeper global recession through the latter part of 2022 and into 2023 would certainly put pressure on global stock markets. Sources: poundsterlinglive.com, investing.com

Summary: BoE interest rate decision. Any post-decision gains are expected to be sold into and prove fleeting. The BoE missed market expectations on Thursday regarding their interest rate hike decision. The BoE Missed market expectations The Bank of England (BoE) announced they would raise their central bank interest rate 50bps, missing the market's expectation of 75bps. The effect of the BoE interest rate hiking decision It is unclear what the effect of the BoE rising interest rates will have on the pound sterling currency. The exchange rate might increase if the Bank increases interest rates by 75 basis points, which would be the greatest increase since 1989, and shifts its prognosis for the economy. But for a central bank that has a history of falling short of market expectations and emphasizing the downside risks to the economy, this is a huge ask. The most plausible worst-case scenario would involve the Bank raising rates by less than anticipated (say, 50 bps) and cautioning that the economic outlook is still uncertain and subject to downside risks. The odds favor a downside reaction, according to currency market observers, and any post-decision gains are expected to be sold into and prove fleeting. A worldwide energy crisis, deteriorating domestic balance of payments, declining stock markets, an unrelentingly strong dollar, and an uncooperative Bank of England have all contributed to the Pound's bad year. The Bank of England's monetary policy is the one area where decision-makers have the power to provide the Pound with some short-term comfort, despite the fact that many of these challenges are medium- to long-term concerns and global in scope. Some of the pessimism and negative positioning may be challenged if the Bank shocks the markets with a more "hawkish" tone, allowing for a short-term leg upward. A rate increase of 75 basis points plus any improved commentary from the Bank may help the pound that day. Sources: poundsterlinglive.com

Summary: The SNB increased its interest rate for a second time on Thursday. BoE increased interest rates on Thursday by 50 basis points. Fed 75bps interest rate hike. EUR/USD touching 19 year lows The market is reflecting bearish signals for this currency pair. In the wake of the Federal Reserve's 75bps interest rate hike the falling wedge, which was keeping the door open for bullish reversal possibilities, is invalidated as the EUR/USD has dropped to a new 19-year bottom and is currently clinging to the swing-low from earlier in September, which is located between.9862 and.9876. As a result, the bearish side of the coin is once again in focus for the EUR/USD pair. Resistance is possible around the previous support level of.9950 as well as at parity if bulls can produce a stronger pullback. EUR/USD Price Chart GBP plummeted in the minutes after BoE interest rate announcement The market is reflecting bearish signals for this currency pair. The Bank of England increased interest rates on Thursday by 50 basis points, which was less than the 75 basis points the market was anticipating, and the British Pound plummeted in the minutes that followed. The pound had a sell-off in response to the boost that was lower than expected, and economists predict greater losses for the UK currency. The exchange rate between the pound and the euro dropped by 0.5 percent to 1.1434 in the 15 minutes after the decision, but it had recovered to 1.1470 by the time the U.S. stock market opened, bringing bank transfer rates to roughly 1.1240 and payment specialist rates to roughly 1.1440. EUR/GBP Price Chart SNB signals the end of their interest rate hiking cycle The market is reflecting bullish signals for this currency pair. The Swiss National Bank (SNB) increased its interest rate for a second time on Thursday, which caused the Swiss Franc to weaken. However, the SNB also warned against expecting future rate hikes through its inflation projections. After the SNB hiked its cash rate from -0.25% to 0.5% in a monetary policy move that echoed the Federal Reserve's on Wednesday, the Swiss Franc fell against a number of other currencies. Even while the Swiss central bank did not rule out future interest rate hikes, September's updated predictions suggested that, given the two increases in borrowing costs announced to date, the Swiss inflation rate will likely return to, if not fall below, 2% at the end of the forecast horizon. This suggests that Swiss authorities may already have done enough to bring inflation back in line with their concept of price stability. EUR/CHF Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: EUR/USD is close to 20 years lows. The UK and the Eurozone may have already entered recession in the third quarter of the year. Canadian Dollar plunged to its lowest level against the U.S. Dollar since July 2020. US Dollar remains supported The market is reflecting bearish signals for this currency pair. A day after the Federal Reserve approved another sizable hike and promised to keep tightening monetary policy firmly in order to control inflation, the EUR/USD lacked confidence on Thursday, fluctuating between tiny gains and losses. This is probably due to rising U.S. Treasury yields. The exchange rate is very close to one of its lowest points in more than 20 years, having fallen dramatically from the overnight session high of 0.9907 and trading mostly flat on the day at 0.9843. The Fed's hawkish roadmap, which anticipates 150 basis points of additional tightening up to the terminal rate of 4.6% in 2023, as well as its commitment to maintaining a restrictive stance for an extended period of time, should keep U.S. rates biased to the upside and support the dollar's momentum in the FX market. EUR/USD Price Chart Europe & the UK may have already entered recession The market is reflecting bullish signals for this currency pair. According to analyst and economist readings of the data, the latest round of S&P Global PMI Surveys of the manufacturing and services sectors revealed on Friday that the economies of the UK and the Eurozone may have already entered recession in the third quarter of the year. Energy markets and developments in Ukraine, where Russian occupation troops are anticipated to be strengthened following substantial recent setbacks for the invading army at the hands of Ukrainian forces, also attracted attention in Europe. EUR/GBP Price Chart USD/CAD The market is reflecting bullish signals for this currency pair. This week, during another turbulent time for risky assets, the Canadian Dollar plunged to its lowest level against the U.S. Dollar since July 2020; however, updated BMO Capital Markets forecasts suggest that it may be due for one of the most significant recoveries if and when the dollar reaches its peak. The Canadian Dollar lost ground to the Swiss Franc on Friday as it dropped close to 73 cents versus the U.S. Dollar, but it still made significant gains over other currencies, several of which hit new multi-decade lows against the U.S. unit. USD/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Euro remains a weak currency and appears to be headed for additional declines. GBP attempted to stabilize and recover the majority of its losses from the flash crash. BoE current monetary policy will probably lead to escalating inflation pressures. EUR/USD at lowest level in more than 20 years The market is reflecting mixed signals for this currency pair. According to their most recent research, the German Ifo institute is the latest organization to issue a warning that the nation is likely to experience a recession in the upcoming quarters due to businesses' elevated level of pessimism for those months. The figures released today fell short of forecasts and numbers from the previous month. The Ifo report is the first of many German publications scheduled for this week that will provide a clearer picture of the status of the German economy. Earlier in the session, the US dollar's strength led to the Euro falling to its lowest level versus the US dollar in more than 20 years. The Euro remains a weak currency and appears to be headed for additional declines, while market movements are being dictated by the dollar across the board. EUR/USD Price Chart EUR/GBP bearish The market is reflecting bearish signals for this currency pair. According to a top economic research agency, the Bank of England must take the initiative and raise UK interest rates significantly if the collapse of the British Pound is to be stopped. The Pound has declined in value relative to every other currency in the globe, with the Pound to Euro exchange rate falling below 1.10. The British pound is currently stabilizing and recovering the majority of its losses from the flash crash. The projections for the British pound have been drastically cut by investment firm Goldman Sachs, indicating that additional losses against the Euro and a revisit of recent lows against the Dollar are possible. EUR/GBP Price Chart GBP lost 4.8% The market is reflecting bullish signals for this currency pair. This morning's Asian trading, which is often characterized by low transaction volume and little price volatility, saw an unusually steep decline in the British pound of over 4.8%. The big price change may have been influenced by the low transaction volume (reduced liquidity), but the main driver was the UK's new Chancellor Kwasi Kwarteng's announcement of more tax cuts, the largest in 50 years! Looking at the Bank of England's (BoE) current monetary policy, it is clear that the institution wants to raise interest rates to combat the inflation issue; however, a lax fiscal policy, such as energy price caps, which may benefit consumers in the short term, will probably lead to escalating inflation pressures in the medium and long terms once the fiscal support is removed. The local currency's decline, which makes inflation prone to increases, is a further contributor to the issue. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Euro is looking down at a 20-year low against the US Dollar. A BoE statement said that it would interfere in the bond markets. Federal Reserve could be obliged to speed up the rate at which it raises interest rates. US Treasury 10-year note exceeds 4% The market is reflecting mixed signals for this currency pair. As a result of a mix of Fed and White House rhetoric that puts the brakes on a shift in market conditions, the Euro is looking down a 20-year low against the US Dollar. Overnight, St. Louis Federal Reserve President James Bullard reiterated the determination of the Fed to stare down price pressures when he said, “There’s a lot of tightening in the pipeline,” and “we have a serious inflation problem in the US.” Evans and Kashkari, two additional Fed board members, backed up his aggressive remarks. Treasury rates in some areas of the curve have increased to levels unseen in decades as a result of all this talk. For the first time since 2008, the yield on the 10-year note exceeded 4%. Government bond yields in developed markets around the world are escalating. The probable disruption of three Russian gas pipelines has made the situation in the Euro worse and driven up prices. EUR/USD Price Chart British pound to dropped quickly on Wednesday The market is reflecting mixed signals for this currency pair. The UK government's fiscal stimulus program, which was revealed last Friday and over the weekend, has received harsh criticism from the International Monetary Fund. Huw Pill, the chief economist at the Bank of England, said that the monetary policy should react appropriately to the fiscal policy. The Bank of England's statement that it would interfere in the bond markets caused the British pound to drop quickly, but a recovery later in the day indicated that markets are generally supportive of the central bank's decision to settle the bond markets. The Bank said unexpectedly that it would purchase long-dated UK assets in order to limit their yields. EUR/GBP Price Chart Pound has a strong inverse relationship with risk The market is reflecting mixed signals for this currency pair. The publication of better-than-expected statistics out of the U.S. overnight caused a decline in global markets, which in turn led investors to wager that the Federal Reserve could be obliged to speed up the rate at which it raises interest rates. Stock markets were affected by expectations of rising rates, which also helped the dollar and put pressure on other weaker currencies like the pound. The Pound has a strong inverse relationship with risk and tends to decline as the world markets decline. The announcement of new orders for durable goods data, which showed a dip of 0.2% in August but was better than the average expectation for a decline of 0.3%, was what first caused the decline in Sterling and other risk-sensitive assets. GBP/USD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Consumer confidence figures from the Eurozone decreased by 3.8 points. GBP seeks to continue strengthening against the Euro. Eurozone forecast looks dismal The market is reflecting bullish signals for this currency pair. The final consumer confidence figures from the Eurozone decreased by 3.8 points to -28.8 in September 2022, which was in line with initial projections and the lowest reading since the series' inception in 1985. The majority of factors, such as householders' appraisals of their past financial situations, outlooks on their future financial situations, plans to make significant purchases, and expectations regarding the state of the economy as a whole, all had a role in the sharp fall. A minor improvement in industrial mood could be fleeting given the future energy issues. The eurozone's forecast for the remaining months of the year is still dismal. The geopolitical tension surrounding the alleged sabotage of Nord Stream has made matters worse, and the eurozone is currently debating its ninth round of penalties as a result. However, restrictions on Russian gas continue to be a divisive matter inside the EU, with the commission advising countries that a combination of measures is needed rather than merely market intervention. The eurozone would have wanted to avoid this additional anxiety as it gets ready for an uncertain winter. EUR/USD Price Chart Markets awaiting German inflation release The market is reflecting bearish signals for this currency pair. In spite of easing pressures on UK bond markets and ongoing weakness in the Euro-Dollar exchange rate, the British Pound seeks to continue strengthening against the Euro. The inflation rate in North Rhine Westphalia, the most populated state in Germany, increased by 10.1% year over year in September, marking the highest increase since the early 1950s. This caused a decline in the value of the euro. The information raised concerns that German inflation data, which would be released later in the day, would confirm that the UK's stagflationary crisis is gripping Europe's largest economy as well. Separately, Germany’s network authority said gas use was well above average last week and urged homes and companies to make greater savings to avert a shortage this winter. EUR/GBP Price Chart US PCE update due The market is reflecting bullish signals for this currency pair. As the Relative Strength Index (RSI) retreats from an extreme reading, the recent rally in USD/CAD appears to be coming to an end after clearing the high of July 2020 (1.3646). The core reading, the Fed's preferred measure of inflation, is forecast to increase to 4.7% in August from 4.6% per year in July, and signs of persistent price growth may force the Federal Open Market Committee (FOMC) to maintain its approach to combating inflation as the central bank pursues a restrictive policy. This could cause the US dollar to strengthen as a result of the US PCE update. As a result, the US Dollar may continue to perform better than its Canadian counterpart because the Summary of Economic Projections (SEP) show a steeper path for the Fed Funds rate, and USD/CAD may show a bullish trend for the rest of the year because the Bank of Canada (BoC) appears to be on track to implement smaller rate hikes in the upcoming months. USD/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: AUD declines in the wake of the RBA interest rate decision. 25bps interest rate hike from the RBA. AUD weaker. RBA 25bps interest rate decision The Australian Dollar fell when the Reserve Bank of Australia (RBA) announced a 25 basis point increase in interest rates, indicating that the peak in Australian interest rates was approaching. Markets anticipated another 50bp increase, but the action caught them off guard. The RBA stated in a statement that additional interest rate hikes were still necessary to reduce inflation, although economists now believe only one more increase is now expected. The 'dovish' outcome resulted in a weaker Australian Dollar relative to the bulk of G10 currencies. The Pound to Australian Dollar rose by a third of a percent to 1.7480, its highest level since early August. "AUD is a significant underperformer after the RBA hiked 25bp against a consensus for a 50bp move," says Adam Cole, Chief Currency Strategist at RBC Capital Markets. Effect of interest rate hiking on the AUD The cash rate has now increased six times in a row by the RBA, reaching 2.60%, which Governor Philip Lowe described as a "substantial" rate of tightening. The Australian Dollar may no longer receive rate support as a result of the RBA's rate hike cycle, but one expert claims that the prognosis for the currency is actually positive. According to ANZ, in order to guarantee that inflation does reach its goal level, the cash rate will need to increase to obviously restrictive territory above 3%. "The slower pace of rate hikes now points to the tightening cycle extending into 2023," says Plank. Plank observes that the 25bp decision and overall tone of the statement have significantly reduced market expectations for future interest rate increases. In the wake of the decision, three-year ACGB futures are trading at an implied yield of 3.3%, which is over 40 bps lower than Monday's closing. Sources: investing.com, poundsterlinglive.com

Summary: The US dollar has fallen by as much as 3.3%. GBP supported in the wake of Kwarteng plans to move up the publishing of his fiscal plan. RBA interest rate announcement. Investors wonder if the USD has peaked The market is reflecting bullish signals for this currency pair. Since the high of last Wednesday, the US dollar has fallen by as much as 3.3%, and many are wondering if the USD has peaked. Given how severely overbought the dollar had been, this retreat appears to be a trend correction without any indication of anything bigger. Price is getting close to some important support, though, and how it performs around those levels will be crucial for deciding on a short-term course of action. EUR/USD Price Chart GBP supported on Tuesday In an effort to restore market confidence, Chancellor of the Exchequer Kwasi Kwarteng announced he was moving up the publishing of his fiscal plan, which gave the British Pound another lift. Originally slated for distribution on November 23, the plan will instead be given later this month, according to a story published late Monday. Importantly, a complete set of estimates from the Office for Budget Responsibility will be included with the proposal (OBR). The developments ensured a late-session rise in the pound sterling on Monday, resulting in a 1.15% increase in the pound's value relative to the euro. The improvements coincide with the pound's larger resurgence as markets restore their faith in UK assets after a turbulent time. EUR/GBP Price Chart RBA weaker in the wake of interest rate announcement The Australian Dollar fell when the Reserve Bank of Australia (RBA) announced a 25 basis point increase in interest rates, indicating that the peak in Australian interest rates was approaching. Markets anticipated another 50bp increase, but the action caught them off guard. The RBA stated in a statement that additional interest rate hikes were still necessary to reduce inflation, although economists now believe only one more increase is now expected. GBP/AUD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Ongoing devaluation of other currencies by the U.S. Dollar. Decreased predictions for UK economic growth. Australia's trade surplus decreased in August despite an increase in imports. U.S Dollar remains in high demand The market is reflecting mixed signals for this currency pair. According to International Monetary Fund (IMF) data, the ongoing devaluation of other currencies by the U.S. Dollar consumed more than $500BN of official reserves in the second quarter, and it can be inferred reasonably from this that the reserve cost of the Dollar rally exceeded $1 trillion in September. The dollar was again in demand throughout the trading afternoon on Wednesday, but noticeably more so after the Institute for Supply Management (ISM) Services PMI for September tended to portray the key sector of the American economy as being more resilient than forecasts had predicted. EUR/USD Price Chart Predictions for UK economy looks poor The market is reflecting mixed signals for this currency pair. According to economists, a worse recession would result in larger losses for the pound. They are also decreasing their predictions for UK economic growth. Economic experts predict that high inflation will cause the UK economy to enter a recession, but rising interest rates due to external reasons and the market's response to the "mini budget" will widen the extent of the slump. "The cost of living crisis will be exacerbated by a cost of borrowing crisis," explains Capital Economics in a new note in which they say they now expect a deeper recession than previously forecast. EUR/GBP Price Chart Australian Trade Surplus decreased Another data release confirming Australia's continued trade surplus helped the Australian dollar gain strength, but analysts warn that a peak in commodity prices and challenges to the global economy raise the possibility of underperformance. According to the ABS, Australia's trade surplus decreased in August despite an increase in imports. A positive trade surplus suggests that a nation is generating more foreign currency than it is spending, which provides a fundamental source of support for a currency. Australia's trade surplus has increased over the past few months as the value of its commodities exports has soared and amid a fall in demand for imports brought on by the Covid-induced economic slowdown. However, the trade surplus is shrinking due to indications that commodity prices have peaked, a continued post-covid recovery, the increase in the price of other significant imports, and these factors together. AUD/GBP Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Euro continues its battle with the US Dollar. UK's trillion-pound debt markets are buckling under the weight of further Bank of England interventions. Sterling found support early in the new week against the CAD. Euro on the decline as recession fears persist The market is reflecting bearish signals for this currency pair. The Euro's battle with the dollar continued into the new week as a risk-off mindset and increasing yields put the dollar in the lead. We witnessed a spike in geopolitical tensions between Russia and Ukraine as a result of a number of missile attacks that Russian President Vladimir Putin said were in response for the bombing of a bridge that connects Russia to the Crimean Peninsula. As recession fears persist, confidence in the Eurozone keeps declining. Another 75bp increase from the European Central Bank (ECB) is still anticipated later this month, which is necessary given the most recent double-digit inflation reading. Regarding the rate hike path required to control inflation, US Fed policymakers last week seemed to be singing from the same hymn book. Lael Brainard and Charles Evans, two well-known doves, yesterday broke with the rhetoric and used a tad more dovish language. EUR/USD Price Chart GBP is under pressure The market is reflecting mixed signals for this currency pair. The British pound is under pressure amid indications that the UK's trillion-pound debt markets are buckling under the weight of further Bank of England interventions. The Bank of England said on Tuesday that index-linked gilts will now be a part of its expanded gilt purchasing program. Given that UK RPI inflation was 12.3% in August, these gilts (UK government bonds) are understandably becoming more expensive for the government. But considering that the new administration decided to spend a lot of money on subsidizing family energy costs while simultaneously lowering taxes, the UK's bond market has suffered more than others. EUR/GBP Price Chart GBP supported against the CAD The rise in the Pound to Canadian Dollar exchange rate that began in the month of October has since experienced a corrective decline, but Sterling found support early in the new week just above the 1.51 handle and may now be expected to temporarily consolidate its recovery. If Sterling continues to accept the most recent developments in the UK government bond market, where the Bank of England (BoE) has been providing emergency liquidity to address issues related with some pension funds, it may find more support this week around the latter level. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: US CPI inflation beat market expectations. US Core CPI inflation beat market expectations. Initial market reaction. US CPI & Core CPI Inflation beat market expectations After breaking out last week, the US dollar is maintaining its recent highs. The primary US catalyst for this week is the release of CPI data today. According to economists surveyed by Reuters, the CPI is anticipated to have risen by 8.1% in September compared to the same month a year prior, which is only slightly less than the 8.3% annual increase seen in August. The actual US CPI inflation (YoY) came in at 8.2%, beating market expectations. For the White House and legislative Democrats, the continued high inflation has been a major political concern, overshadowing the coronavirus pandemic's quick recovery and the creation of millions of jobs since Joe Biden took office. The Core CPI is anticipated to rise for a second consecutive month, with the rate rising to 6.5% in September from 6.3% in August. Additionally, the Summary of Economic Projections (SEP) shows a higher path for US interest rates, which could fuel anticipation for another 75bp Fed rate hike. The actual US Core CPI inflation (MoM) came in at 6.6%, also beating market expectations. Effect on the markets The market will probably jerk in either direction after the September CPI report is released. The bar remains very high to change the perception surrounding a 75 basis point rate hike from the FOMC in November, despite the possibility of volatility across asset classes. The Federal Reserve may face pressure to maintain its approach to battling inflation if the core CPI increases once again, according to the minutes from the September meeting that revealed “many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.” The initial reaction from the EUR/USD was bearish, USD/JPY was bullish as the dollar strengthened in the wake of the news, the S&P500 also jumped and Bitcoin remained on a downward trend. Sources: investing.com, financialtimes.com, finance.yahoo.com, dailyfx.com

Summary: Fedspeak is back in the spotlight this week. EUR/GBP reached one-month highs last week. Fedspeak is back in the spotlight after strong CPI inflation The market is reflecting bearish signals for this currency pair. As markets process the strong CPI number from last week, Fedspeak is back in the spotlight this week. Given the lack of significant new data this week, market players will probably give Fed speech and corporate earnings more weight. Recent Federal Reserve speakers have kept up the "hawkish drum," with the majority seeing the lack of inflation progress as justification for continuing with aggressive rate hikes. Since recent remarks suggest the Fed is seeking some pain in both housing and employment in order to reduce inflation, the persistent tightness in the domestic labor market continues to be a talking topic for Federal Reserve officials. Chair Jerome Powell's hawkish comments at Jackson Hole, when Powell threw a warning shot across the financial markets' bow, abruptly shifted the atmosphere surrounding a soft landing. Market investors are still firm in their desire to price in a Fed policy reversal, but with inflation where it is, such a turnabout for the central bank is all but unthinkable. EUR/USD Price Chart EUR/GBP reached one month highs The market is reflecting bearish signals for this currency pair. The exchange rate between the pound and the euro reached one-month highs last week, but it may now find it difficult to rise much further in the days to come and even be at risk of new selling as the Westminster Circus once again devolves into the type of farce most typical of one of those vintage Carry On movies. With political instability and uncertainty once again at the top of the agenda, the pound surged strongly last week amid rumors that HM Treasury would withdraw some of the spending commitments made in the late-September budget. EUR/GBP Price Chart GBP/USD recovered slightly The market is reflecting bullish signals for this currency pair. The Pound to Dollar exchange rate has recently recovered significantly, but it may take a setback for the Dollar to advance further this week, in part because Sterling faces dangers related to the possibility of another Prime Minister in the Banana Republic of Westminster being booted from power. The news that HM Treasury would be able to postpone some of the spending promises made public in the late-September budget statement helped the value of the pound last week. However, political instability and uncertainty are once again at the forefront of this week's events. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Markets are betting on a 90% chance that ECB will enforce another 75bp hike. GBP's impressive run came to an abrupt end. JPY dropped to lows last seen in August 1990. ECB seems limited in their options The market is reflecting bullish signals for this currency pair. The European Central Bank (ECB)'s are limited in their options in light of the most recent CPI reading. The ECB's case for continuing to raise rates in pursuit of its 2% target may be strengthened by today's stronger ZEW statistics. The concern is that by doing this, the central bank could risk sending the economy back into a recession, which would be indicated by the dropping ZEW current conditions print. On the other hand, if the central bank does nothing, the euro may lose further ground to the dollar. The final CPI report on Wednesday and today's data print will be crucial as the ECB begins its pre-meeting blackout period on Thursday. As the central bank works to achieve its 2% target, markets are putting in a 90% chance that there will be another 75bp increase at the meeting next week. We will hear from ECB policymaker Isabel Schnabel later in the day. She is anticipated to maintain the rhetoric of rate increases despite the fragility of the Eurozone economies. EUR/USD Price Chart Concerns in UK bond markets The market is reflecting mixed sentiment for this currency pair. Following some fresh concern in the UK bond markets on Tuesday, the British Pound's impressive run came to an abrupt end. Following the Bank of England's forced denial that it would further delay its program of quantitative tightening, UK gilts declined and the yield they offered increased. After the recent instability in the bond market, The Financial Times reported on Tuesday that the Bank was prepared to postpone the program. After reaching a high of 1.1576 earlier in the day, the exchange rate between the British pound and the euro dropped to 1.1490. This brings the rates for bank transfers to around 1.1260 and the prices provided by payment specialists to around 1.1450. EUR/GBP Price Chart JPY continues to lose against the USD The market is reflecting bullish signals for this currency pair. Earlier in the session, the Japanese Yen dropped to lows last seen in August 1990 as it continues to lose value against the US dollar. Little has changed for the Yen as Japanese authorities appear ready to allow the currency to continue to decline by controlling bond yields. The yield on 10-year JGBs is restricted to 0.25%. In contrast, as the Fed keeps raising interest rates, US Treasury yields continue to trade at or close to multi-year highs. The benchmark 10-year UST is quoted with a yield of 4.00%, which is approximately 375 basis points higher than the comparable JGB. The rate-sensitive 2-year UST trades with a yield of about 4.45%. USD/JPY Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: GBP September 2022 YoY inflation, beat market expectations. Affect on the GBP. GBP CPI Inflation The market has predicted a CPI YoY inflation figure of 10%, the actual data came in at 10.1%, which was hotter than expected by the market. The inflation reading is likely to set off expectations on the future interest rate hiking path of the Bank of England (BoE). The higher than expected inflation reading is likely to set investor confidence in the direction of a continuing hawkish BoE interest rate hiking cycle, causing investor confidence in the GBP to increase and therefore strengthening the pound sterling currency. Following some fresh concern in the UK bond markets on Tuesday, the British Pound's impressive run came to an abrupt end. Following the Bank of England's forced denial that it would further delay its program of quantitative tightening, UK gilts declined and the yield they offered increased.  This is the procedure through which it sells the gilts it acquired as part of its quantitative easing strategy back to the market. A crucial element of the Bank's strategy for normalizing monetary policy as it battles inflation is quantitative tightening. After the recent instability in the bond market, The Financial Times reported on Tuesday that the Bank was prepared to postpone the program. Effect of the CPI reading on the GBP It is no secret that the pound sterling has had a tough year on the forex markets. The near-term outlook for the pound has significantly improved, according to foreign exchange strategists at BMO Capital, and more gains are possible if the UK leadership is changed in the next two weeks. The Kwarteng catastrophic "mini-budget" in September, which offered the largest tax cuts in 50 years at a time when the U.K. economy is already experiencing significant inflation, is blamed by the government for the turmoil the pound sterling is currently experiencing. The Bank of England had to step in to prevent the collapse of a significant portion of the U.K. pension system after Kwarteng's actions drove the pound to an all-time low against the dollar and set off a sell-off in government bonds. The initial market reaction showed a weakening in the GBP/USD currency pair, and a strengthening in the EUR/GBP currency pair as investors weigh GBP prospects. Sources: poundsterlinglive.com, investing.com

Summary: Dow Jones futures all increased overnight as investors focused on Netflix (NFLX). The near-term outlook for the pound has significantly improved. Dow Jones Index Rally The S&P 500, Nasdaq, and Dow Jones futures all increased overnight as investors focused on Netflix (NFLX) subscriber growth and anticipated Tesla earnings. The effort at a stock market rally extended advances on Tuesday, but the session ended well below highs. Although the market rise is still going strong, nothing yet has been proven. Investors should exercise caution and pay great attention. In Q3, Netflix's subscriber growth was substantially stronger than anticipated, and the leader in streaming TV is optimistic about Q4 subscribers. Earnings also exceeded expectations. The rise in Netflix's shares suggested a breakout. Overnight, Roku (ROKU) and Disney (DIS) both increased. In comparison to fair value, Dow Jones futures gained 0.6%, with DIS stock contributing a slight gain. Futures for the S&P 500 rose 0.7%. Futures for the Nasdaq 100 rose 1.4%. United Airlines and NFLX stock both make up the S&P 500 and Nasdaq 100. DJI Price Chart GBP could rally in the wake of UK leadership change The near-term outlook for the pound has significantly improved, according to foreign exchange strategists at BMO Capital, and more gains are possible if the UK leadership is changed in the next two weeks. They claim that such a development is very plausible. The call follows the dramatic about-face in UK fiscal policy that newly-installed Chancellor Jeremy Hunt revealed. In order to fully restore market confidence in the UK government and finances, Hunt undid all of his predecessor's tax cuts. This was followed by a decline in UK gilt yields and a rise in the value of the pound. The reversal was unavoidable given that the world markets recoiled at the generosity of the new prime minister Liz Truss' economic plans, which called for large tax cuts that would be paid for by borrowing.

Summary: Eurozone CPI inflation missed double digits. UK inflation increased from 9.9% to 10.1%. USD/JPY has positive carry. Eurozone inflation beat market expectations The market is reflecting mixed signals for this currency pair. The data, which narrowly avoided the 10% inflation mark as compared to September of last year, would undoubtedly support the recent hawkish stance taken by senior ECB members. Centeno and Visco, two ECB members, will get the chance to comment on the most recent inflation data later today as ECB talk is expected to slow down before the required blackout period prior to Thursday's rate decision. There is a new significant market driver in town as the US is currently in earnings season. This will highlight a variety of subjective factors because what US company executives say can start to shape expectations for future quarters' results. The key question at this time is how the sudden and sharp spike in rates has affected businesses. EUR/USD Price Chart EUR/GBP limped temporarily The market is reflecting bullish signals for this currency pair. After Office for National Statistics data indicated that inflation increased more than anticipated in September, the Pound Sterling temporarily limped against the Dollar and the Euro. However, this outcome does little to deter the Bank of England (BoE) from raising interest rates aggressively in November. In September, UK inflation increased from 9.9% to 10.1%, defying the expectation of economists who had expected the annual rate of price growth to exceed 10% for the previous month. EUR/GBP Price Chart USD/JPY remains positive The market is reflecting mixed signals for this currency pair. The carry is still positive for the USD/JPY currency pair, and it will continue to be so as long as US interest rates are still rising and Japanese monetary policy is as it is. A weak Yen isn't all that awful for Japan, and it doesn't seem to be causing much concern at the central bank, according to BoJ Governor Kuroda. However, since the intervention was requested by the Ministry of Finance late last month, the same cannot be stated there. There is a new significant market driver in town as the US is currently in earnings season. This will highlight a variety of subjective factors because what US company executives say can start to shape expectations for future quarters' results. USD/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Rising Fed funds rate estimates have benefited the dollar. U.K retail sales data. JPY rallied on Friday. USD supported by hawkish fed The market is reflecting bullish signals for this currency pair. Throughout the past week, the EUR/USD pair has struggled to find any definitive direction, and this morning was no exception. As bulls and bears continue their conflict, the pair has stayed largely range bound because next week will bring a number of important data events. Since last week's US CPI reading, the pair had experienced a rally, but this week's return of the dollar bulls has stopped any effort at an upward rise. Rising Fed funds rate estimates have benefited the dollar, with markets now projecting a peak rate of roughly 5%, up from 4.75% last week. As a result of this as well as rising Treasury yields, investors have continued to view the dollar as their favorite haven, keeping it strong. EUR/USD Price Chart GBP struggles as UK Retail Data misses market expectations The market is reflecting bullish signals for this currency pair. After Office for National Statistics (ONS) statistics revealed that UK retail sales collapsed in September, the pound fell into the week's final session, effectively wiping out more than two years of gains made since the first coronavirus-inspired closure of the economy in 2020. When measured by the number of products purchased, retail expenditure declined by 1.4% in September. This was a far worse decline than the -0.5% consensus estimate and came along with a downward revision to the ONS estimate for August sales growth, which was restated as -1.7%. EUR/GBP Price Chart JPY rally supporting GBP The market is reflecting bullish signals for this currency pair. A stunning Japanese Yen surge that seemed to be the catalyst for a market-wide decline in Dollar exchange rates, which was then followed by rumors of direct involvement from the Tokyo government and Bank of Japan (BoJ). The Yen appreciated by over five huge figures versus the dollar, which had previously run roughshod over all other currencies, while the Pound Sterling, which had been mired in the red, saw a notable rally against it late on Friday. GBP/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The ECB interest rate decision is unlikely to have much impact on the Euro. The markets Reaction to the ECB interest rate decision on Thursday, could be positive for the GBP. Sterling increased significantly from the market's opening. Global Eurozone PMI Composite Output Index decreased The market is reflecting bullish signals for this currency pair. According to the 'flash' figure, the seasonally adjusted S&P Global Eurozone PMI Composite Output Index decreased from 48.1 in September to 47.1 in October. The indicator indicated that business activity in the eurozone has fallen for a fourth time in a row. The most recent result was the lowest since April 2013 when pandemic numbers were excluded. A 75bp increase is already anticipated by the market for the meeting on Thursday, although it is unlikely to have much of an impact on the euro. The Eurozone's generally dismal outlook is unlikely to change as today's data strengthen recessionary fears. It is highly challenging to argue for a halt in rate increases as long as inflation stays high, with ECB Chief Economist Phillip Lane saying the bank views the neutral rate as being just above the 1-2% range. If Lane is right, more rate increases would be coming for the zone, which theoretically might hasten a recession. EUR/USD Price Chart GBP supported by Boris Johnson being turned away from PM The market is reflecting bullish signals for this currency pair. The Pound to Euro exchange rate started the new week on a positive note, but it might find it difficult to maintain Monday's gains far beyond the 1.15 level unless this Thursday's European Central Bank (ECB) decision causes the market to turn even further away from the euro. On Monday, the pound gained significantly from the opening price after a faction of the ruling Conservative Party was successful in preventing former Prime Minister Boris Johnson from taking part in the most recent process for choosing a new Prime Minister. The market's reaction to the European Central Bank's interest rate decision on Thursday, which is widely anticipated to increase its benchmark interest rate by three quarters of a percentage point for a second consecutive time, will likely have a significant impact on the Pound's performance this week. EUR/GBP Price Chart UK & US contrasting economic outlook The market is reflecting bearish signals for this currency pair. The pound to dollar exchange rate has experienced a recent surge and may increase further in the near future, but it runs the risk of falling as the week progresses and attention shifts back to the increasingly contrasting economic outlooks of the UK and the US. After some members of the governing Conservative Party were successful in preventing former Prime Minister Boris Johnson from taking part in the most recent selection process for the position of Prime Minister, sterling increased significantly from the market's opening, including versus the dollar. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The European Central Bank is predicted to boost rates by 75 basis points. Rishi Sunak warns of a difficult economic outlook ahead. USD retreated on Tuesday The market is reflecting bullish signals for this currency pair. In order to control the high inflation that was shown to be 9.9% year-over-year last week, the European Central Bank is predicted to boost rates by 75 basis points. A channel that dates back to February is putting a major barrier in the way of the EUR/USD. Since its creation, it has proven to be a very trustworthy structure, and until it is no longer useful, it will be the major reference. After the dollar reached its peak, equities appear to have bottomed out on the basis of CPI, and now bonds appear to have reached the end of their capitulation phase. This should temporarily deflate the dollar and place some of its energy into other assets. Since it is just being used as a recovery trade, there is a chance that it could collapse suddenly. EUR/USD Price Chart GBP lost early gains in wake of new prime minster The market is reflecting bearish signals for this currency pair. This week saw a solid start for the pound, but it was unable to continue its upward trend when former chancellor Rishi Sunak was named the next prime minister-designate after the Conservative Party leadership contest, which will have a major impact on the pound and the UK economy going forward. After former Prime Minister Boris Johnson withdrew from the race for the position of Prime Minister, leaving former Chancellor Rishi Sunak on course for a coronation that is expected to produce the UK's fifth Prime Minister in the past six years on Tuesday, sterling increased against most major currencies to start the new week. The Pound, however, quickly lost its early gains as newly-elected Prime Minister Rishi Sunak warned of impending economic hardship and difficult choices involving the public finances in a speech to parliament. The S&P Global PMI surveys that indicated a deepening recession in the UK's manufacturing and services sectors in October followed closely behind all of this. EUR/GBP Price Chart Tuesdays market was favorable for riskier assets A thicket of technical resistances that could keep Sterling contained below roughly the 1.8000 level in the coming days has slowed the recovery from the post-referendum lows plumbed in late September, despite the Pound to Australian Dollar exchange rate remaining close to six-month highs in recent trade. Tuesday's market was favorable for riskier assets, as sterling outperformed all other major currencies. However, the Pound to Australian Dollar rate was unable to move through a Fibonacci retracement level at 1.7962 on the charts and its 100-week moving average at 1.8047. GBP/AUD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: The euro has been steadily strengthening against the dollar over the past few weeks. The Pound has recovered from all of its post-budget losses. Pound to Canadian Dollar exchange rate rose to a four-month high. EUR/USD back above parity The market is reflecting bullish signals for this currency pair. The euro has been steadily strengthening against the dollar over the past few weeks as dovish wagers against the Fed have increased, supported by weaker natural gas prices and U.S. economic statistics. The ECB meeting tomorrow, when they will release their interest rate, will be the main event for the EUR this week. Although a 75 bps rate hike is presently priced in by the financial markets with about 93% certainty, the post-announcement press conference will be crucial for determining the short-term directional bias. Any hawkish slant that may be there in the ruling could put parity to another test. The euro increased by more than 5.3% from its yearly low, and a breach of the 2022 downtrend now raises the possibility of a greater rise in the coming days. However, the advance is now getting close to the first significant resistance barrier, which will be the first true test of the bulls' tenacity in this rebound from multi-decade lows. Prior to the European Central Bank's (ECB) interest rate announcement, these updated objectives and invalidation levels are what matter on the technical price charts for the EUR/USD. EUR/USD Price Chart Pound sterling slightly recovered The market is reflecting mixed market signals for this currency pair. The Pound has recovered from all of its post-budget losses, but some strategists believe it could still fall apart before the year is out. They have advised clients to sell Sterling against the Dollar after it rises back above 1.15 because there is potential for it to drop as low as 1.08 in the coming months. Following the parliamentary installation of former chancellor Rishi Sunak as prime minister, which ended the Conservative Party's leadership election, and as risk appetite seemed to increase on global markets, the pound gained versus a number of other currencies throughout the first half of the week. The problem for the pound is that none of this does anything to change the bleak picture for the UK economy, and risk appetite would quickly decline if the Fed confirmed next Wednesday that its hawkish policy position will not change. EUR/GBP Price Chart BoC boosted cash rate The Bank of Canada (BoC) boosted its cash rate less than economists and markets had anticipated for October, but it nonetheless issued a warning that additional interest rate hikes are likely in the months ahead. As a result, the Pound to Canadian Dollar exchange rate rose to a four-month high. In light of downgrades from prior expectations of 3.5% and 1.75%, respectively, the BoC revised its forecasts for Canadian GDP growth, which is now estimated to come in around 3.25% this year before slipping below 1% next year. The projection for 2024 remained at 2%. The annual consumer price index inflation rate is anticipated to decline back to 3% by the end of next year before reverting to the 2% objective by the end of 2024, according to the BoC's inflation estimates, which have remained virtually unaltered. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Markets expected a 75bps increase from the ECB. ECB continues to follow hawkish rhetoric. Initial effect of the decision on the market. ECB interest rate decision re-instils market confidence The ECB decision was released today, and another 75bps increase was anticipated. The widely anticipated increase in the ECB's once-negative deposit rate to 1.25% on Thursday may favor the Euro at the expense of the Pound, the Dollar, and other currencies, according to some analysts. Although these statements and the ECB's other recent interest rate increases have not directly benefited the Euro, policymakers have emphasized in recent appearances that interest rates will need to rise further in the months ahead as double-digit inflation rates become more prevalent in the Eurozone. The ECB met market expectations by rising their interest rates by 75 basis points to 2.00% on Thursday. The ECB have reiterated their intentions to gain control over the soaring inflation rate. Effect of the decision on the market In recent trade, the Pound to Euro exchange rate defied gravity and reached levels close to one month highs. However, this week's recovery will be difficult unless the European Central Bank (ECB) interest rate decision on Thursday convinces the market to abandon its recently increased appetite for the single currency. They cited the UK economy's worsening outlook and risks related to Bank of England (BoE) interest rate policy, despite the fact that ECB policy is also relevant and the bank's interest rate guidance, balance sheet, and prospects for the Eurozone's economy will be more crucial for the pound sterling ahead of the weekend. The EUR/USD pair has already risen over parity and the downtrend from 2022, doing so with a respectable rally. The initial market reaction in the wake of the release of the ECB interest rate decision showed the EUR/USD strengthening and continuing the bullish market sentiment, the EUR/GBP weakened slightly followed by signs of strengthening, The FTSE 100 showed signs of declining. Sources: poundsterlinglive.com, dailyfx.com

Summary: Markets expected a 2.4% US Q3 GDP. Will the Fed continue its hawkish rhetoric? Market reactions in the wake of the GDP figure. US GDP hit its first positive figure in two quarters The market is expecting US GDP in the third quarter to rise from -0.6% (September release) to 2.4% in the October release. This is the first positive number in two quarters. The actual US Q3 GDP data came in at 2.6%, beating market expectations by 0.2%. The US GDP has beaten the 2.4% GDP value that was forecasted, thus the USD should be supported by this figure. With GDP being the broadest indicator of the economy and the primary indicator of the economy’s health, the US Dollar would benefit from beating the forecasted figure. The market will learn how recent rate hikes have affected the US economy in the third quarter from today's advanced look at US Q3 GDP. Any miss or beat of estimates will change the Fed's narrative regarding future rate hikes. A dismal Meta Platforms forecast is expected to weigh heavily on the tech-heavy Nasdaq as U.S. equities began in a mixed manner on Thursday, ahead of earnings from Apple (AAPL) and Amazon (AMZN) and the first estimate of third-quarter GDP domestic product. Effect on the markets The figures on weekly unemployment claims are also due at the same time and are anticipated to increase slightly from last week as the labor market begins to experience pressure. Hence, the initial market reaction in the wake of the release of the US GDP data is likely to be as a result of the combination of information being released by the United States on Thursday. A GDP figure that beats market expectations is bullish for the currency in question.The initial market reaction showed the movement of the EUR/USD decline, the NASDAQ rose slightly and GBP/USD currency pair weakened as the USD showed signs of strengthening. Sources: investing.com, dailyfx.com,

Summary: Fed representative speaks regarding the hazards of potential overtightening. EUR/GBP rose in the wake of ECB interest rate decision. On Thursday, the Canadian Dollar was still the second-best performing currency. European economy likely to experience pressure The market is reflecting mixed signals for this currency pair. The European economy will experience extra pressure from the ECB's interest rate decisions once they rise above this point because firms and families are already feeling the effects of the excessive increases in energy prices. The dollar index (DXY) also formed a double top as a result of comments made by Mary Daly of the Fed regarding the hazards of potential overtightening and the likely transition from 75 bps raises to 50 or 25 boosts in the future. As a result, the index is currently trading approximately 3.5% lower. EUR/USD Price Chart EUR/GBP rose in the wake of ECB interest rate decision The market is reflecting mixed signals for this currency pair. Thursday saw a rise in the exchange rate between the pound and the euro as the European Central Bank (ECB) announced another unusually substantial increase in interest rates and warned that the changing monetary policy settings could soon start to hurt the Eurozone economy. After the ECB increased all of its key interest rates by three quarters of a percentage point for the second time in a row and issued a warning that additional hikes would still be required in the months to come, the euro moved lower against other major peers, notably the pound. EUR/USD Price Chart CAD suffered significant losses Following the Bank of Canada (BoC) decision to decrease the rate at which it raises interest rates in October, which stunned the market and caused many forecasters to reevaluate their prognosis for the Loonie, the Canadian Dollar fell behind other major currencies during the following week. On Thursday, the Canadian Dollar was still the second-best performing currency in the G10 group for the year, but it had suffered significant losses this week against all other currencies save the U.S. Dollar as a result of Wednesday's interest rate decision. GBP/CAD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: USD's decline has been substantially exaggerated. Weak UK economic fundamentals once again take center stage. The Pound to Dollar exchange rate stayed robust near the week's highs. EUR left weak against USD The market is reflecting mixed signals for this currency pair. Italian inflation for October topped forecasts, while Spanish GDP underperformed on all YoY and QoQ indicators, leaving the euro weak against the USD. Italy and France started the morning. German GDP came in at 1.2% and 0.3%, respectively (see economic calendar below), giving the euro a modest boost. The country's strong performance, according to the GDP report, was primarily ascribed to private consumption spending, although I think decreasing energy prices may have had some positive impact on the final result. Following the decision, ECB President Christine Lagarde's comments sparked speculation that future large rate increases from the bank would not be final. According to her, the rate change will be decided "meeting by meeting." This is true even while inflation is quite high. If the past 24 hours give any indication, the US Dollar's decline has been substantially exaggerated. During the Asian session, there has been a minor easing. EUR/USD Price Chart Euro heavily sold in the wake of ECB announcement The market is reflecting bearish signals for this currency pair. Although the Pound to Euro exchange rate has recovered from September's losses, Rabobank estimates indicate that as weak UK economic fundamentals once again take center stage in the months to come, recent gains may be partially reversed. The euro was heavily sold after the European Central Bank's policy announcement on Thursday, but the pound sterling held close to its October high against the euro on Friday. However, the most recent forecast review from Rabobank implies that this rebound may already be on borrowed time. EUR/GBP Price Chart GBP/USD remained near weeks highs The market is reflecting mixed signals for this currency pair. After the Federal Reserve's (Fed) preferred gauge of inflation fell short of expectations and did nothing to convince the market to start bidding again for the greenback ahead of next Wednesday's interest rate decision, the Pound to Dollar exchange rate stayed robust near the week's highs. Since the Fed prefers PCE price indices as an indicator of inflation, it might be significant to Federal Open Market Committee members next week since the Core PCE price index increased at an annualized rate of 5.1% last month rather than the 5.2% experts had predicted. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Eurostat stated that prices rose by a record 10.7% in October. Uncertainty around BoE interest rate decision. RBA raised interest rates by 25 basis points, and the market is expecting a similar action on November 1. ECB under pressure to raise interest rates further The market is reflecting bearish signals for this currency pair. Eurostat stated that prices rose by a record 10.7% in October, setting a new record for inflation in the Eurozone. Separate figures also revealed that the bloc's economy expanded more quickly than anticipated in the third quarter. The European Central Bank (ECB) is under more pressure to raise interest rates as the inflation data was higher than the market's expectation of 10.3%, despite predictions from some economists that the ECB will soon slow the rate at which it does so. With the energy component of fuel costs rising by an alarming 41.9% year-over-year, rising fuel prices continue to be the main source of inflationary pressures. The EUR/USD is still in a significant macrodowntrend, and even while this picture might not change much in the short term, there may yet be some upside before selling resumes. The euro broke out of a channel it had been trapped in since the beginning of the year last week. EUR/USD Price Chart Markets awaiting BoE interest rate decision The market is reflecting mixed market signals for this currency pair. Due to the uncertainty surrounding the Bank of England's decision on Thursday and the possibility that the BoE will raise interest rates less than markets anticipate, the Pound to Euro exchange rate has continued its recovery from September's lows to reach two-month highs in recent trade. However, this week's gains may be vulnerable to profit-taking. The U.S. dollar weakened last week, which benefitted riskier currencies, and financial markets cheered the appointment of former chancellor Rishi Sunak as prime minister. However, market focus soon shifted to Thursday's interest rate decision and the release of October inflation data from the Eurozone on Monday. Economists and the financial markets anticipate that the BoE will increase the Bank Rate by three quarters of a percentage point to 3%. If delivered, this would be the biggest interest rate increase the BoE has ever made, however it may not be as certain or as done as many people think. EUR/GBP Price Chart RBA expected to remain dovish On Tuesday, the Reserve Bank of Australia is expected to increase interest rates once more, but the size of the increase is uncertain, with potential consequences for the Australian Dollar. On October 4, the RBA raised interest rates by 25 basis points, and the market is expecting a similar action on November 1. However, as inflation picks up speed, the central bank may be compelled to make a U-turn According to the ABS, Australian CPI increased 7.3% in the twelve months leading up to the September 2022 quarter. The announcement occurred just a few days after the Reserve Bank of Australia stunned the markets by raising interest rates by 25 basis points; the Australian Dollar fell as a result. GBP/AUD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Fed’s Wednesday's anticipated 75 basis point hike may be the last of its sort. The likelihood of a recession in the Euro Area has grown. The BoE decision on Thursday is the most significant event of the week for the Pound. Markets anticipate the Fed’s policy rate decision The market is reflecting bearish signals for this currency pair. With the Federal Reserve's policy announcement on Wednesday and the crucial U.S. jobs data on Friday, this is a crucial week for global FX. Therefore, the Dollar side of the equation will be the driving force behind the Euro to Dollar exchange rate (EUR/USD), especially now that the European Central Bank's October policy meeting is over. The possibility of a "pivot" by the Federal Reserve, whereby they signal that Wednesday's anticipated 75 basis point hike will be the last of its sort and that hikes will proceed at a slower rate starting in December, is particularly exciting for investors in the financial markets. According to some analysts, this could support the idea that the U.S. Dollar has reached its top, or the "pivot," as it is known in the financial community. EUR/USD Price Chart Likelihood of Eurozone recession has increased The market is reflecting mixed signals for this currency pair. According to a new report, the decline in UK home prices has just started. Capital Economics researchers predict falls of about 12% by 2024 on the same day Nationwide announces the first drop in home values in 15 months. The likelihood of a recession in the Euro Area has grown, according to ECB President Christine Lagarde, who also stated that while uncertainty is still high, "a central bank has to focus on its duty." The destination is clear, but we are not there yet', said President Lagarde. EUR/GBP Price Chart GBP at risk due to UK economy The Pound to Canadian Dollar exchange rate recently hit four-month highs, but numerous technical barriers are standing in the way of its ascent on the charts, and Thursday's Bank of England (BoE) interest rate decision carries risks that could further thwart its recovery in the days and weeks to come. Since hitting record lows near 1.40 in late September, the value of the pound has increased by more than 10% against the Canadian dollar. Last Friday, it reached a high of 1.5811, but it has been unable to hold that level due to a number of technical resistances that are scattered across the chart around the 1.57 handle. The BoE decision on Thursday is the most significant event of the week for the Pound and comes before Friday's release of Canada's September employment report. However, Sterling is at risk due to the UK economy's deteriorating performance and prospects, which are at odds with widely held beliefs about the outlook for bank rates. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Platinum futures are down 1.11% during 2022. Russia declared that, once its requests have been satisfied by Ukrainian counterparts, it is willing to continue the trade agreement that ensures a safe passageway for grain-carrying vessels. EU efforts to lower high energy prices are slowing down the adoption of renewable energy. Platinum Futures According to trading on a contract for difference (CFD) that monitors the benchmark market for this commodity, platinum has dropped 10.67 USD/t oz. or 1.11% since the start of 2022. Platinum Jan ‘23 Futures Price Chart Wheat futures fell 6% on Wednesday Following news that trade for ships transporting grain out of Ukrainian Black Sea ports may resume operations, Chicago wheat futures plunged more than 6% to $8.5 per bushel on Wednesday, dropping considerably from the three-week high of $9 reached the prior session. Russia declared that, once its requests have been satisfied by Ukrainian counterparts, it is willing to continue the trade agreement that ensures a safe passageway for grain-carrying vessels. The action was taken after Moscow abruptly chose to terminate the agreement's participation at the end of October, citing security concerns that Kyiv refuted. The continuance of shipments from Ukraine will boost global supplies in addition to freeing up essential storage space for the upcoming harvest, increasing concerns about a global food crisis that drove wheat prices to a record-high $12.8 in May. Prior to February's Russian invasion of Ukraine, sales from both nations made up about 30% of all exports. Wheat Futures Price Chart RBOB Gasoline futures The CEO of one of the biggest wind turbine manufacturers in the world cautioned that EU efforts to lower high energy prices are slowing down the adoption of renewable energy just as the area wants to boost it up. “Every indication is that the EU and governments have spent more time in finding taxation methods or trying to limit energy prices, which has actually slowed the process and project accruals,” Henrik Andersen, chief executive of Danish wind turbine manufacturer Vestas, told the Financial Times. In an effort to slow the growth in energy costs across Europe brought on by high gas prices, European energy ministers decided in September to set a $180 per megawatt-hour cap on earnings from the production of wind, solar, and nuclear energy. RBOB Gasoline Dec ‘22 Futures Price Chart Sources: finance.yahoo.com, ft.com, tradingeconomics.com

Summary: A big increase in monetary policy is unlikely to assure a rise in the value of the US dollar. Markets already struggling with the UK's long-standing and well-known structural problems. BoE interest rate decision due Thursday. Fed interest rate decision in the spotlight The market is reflecting bearish signals for this currency pair. At 18:00 GMT, the biggest central bank in the world is expected to make a controversial monetary policy announcement, and the markets are certainly focused on it. The market's reaction may be biased because speculation through Fed Fund futures and other channels has made a further 75 basis point rate hike from the group almost certain. It's crucial to remember that no single aspect of this well-publicized incident should be seen as a firm indication for speculation. A big increase in monetary policy, such as a rate hike of 75 basis points, is therefore unlikely to assure a rise in the value of the US dollar and send US indices into a downward spiral. EUR/USD Price Chart GBP appears to be finding some balance The market is reflecting bearish signals for this currency pair. The largest bank in the UK, HSBC, claims that the British pound is close to a long-term base. HSBC analysts state that "after showing signs of vertigo, GBP appears to be finding some balance" in a briefing on foreign exchange research. Declines followed the market's reaction to tax cut proposals made by the former prime minister Liz Truss that were to be paid for by further borrowing, alarmed investors who questioned whether the UK's debt condition would prove to be sustainable. Markets were already struggling with the UK's long-standing and well-known structural problems, especially the budget deficit and the current account deficit, when the "mini budget" fiasco broke out. EUR/GBP Price Chart ZAR almost worst performing currency in G20 The Pound to Rand rate has more than made up for its September losses in a recovery that has most recently plateaued near 2022 highs, but if the Dollar stays weak or if Sterling is hurt by Thursday's Bank of England (BoE) decision, it will be at risk of a corrective setback later this week. The total result was an almost 12% comeback from a late September low, which saw GBP/ZAR erase much of the year's previous losses in the process. South Africa's Rand was nearly the worst performing currency in the G20 grouping for October while the Pound was among the strongest. The Rand's underperformance occurred during yet another strong month for the Dollar and a stretch of unusually marked weakness for China's Renminbi. Local data that showed the manufacturing sector as virtually the only bright spot in an otherwise cooling South African economy may also have contributed to the Rand's underperformance. GBP/ZAR Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The US Dollar continued to strengthen overall on Thursday. Another action by the Bank of England has the Pound taking a beating. Sterling dropped significantly, including against the Australian Dollar. Euro is lacking monetary backing The market is reflecting bearish signals for this currency pair. On Thursday, the US Dollar continued to strengthen overall as a result of the US Federal Reserve's decision to change its monetary policy earlier in the day. This made the Euro continue to struggle against the US Dollar. In terms of interest rates, the markets received the well-predicted three-quarter point hike that was punctually provided. However, there were a lot of people hoping that Fed Chair Jerome Powell would formally reverse his aggressive monetary tightening policy. In the end, he refrained from doing so and instead warned the markets that if inflation is to be contained, borrowing prices may still need to increase significantly. This weakness was forewarned by Christine Lagarde, president of the European Central Bank, that interest rates in the Eurozone must also continue to rise. Well, may she do so, with the currency bloc's consumer price inflation hitting historic highs. The Euro lacks monetary backing in the global market because markets anticipate more of the same. It lacks fundamental support as well, with a cost-of-living issue that is eroding consumer confidence throughout the Eurozone. Of course, Germany is the center of the currency zone. As the conflict in Ukraine drags on, it is now struggling with the necessity to wean itself off of its dependency on Russian gas. As a result, the third quarter of this year saw a significant slowdown in Eurozone growth. EUR/USD Price Chart GBP declines in the wake of BoE interest rate decision The market is reflecting bullish signals for this currency pair. Another action by the Bank of England has the Pound taking a beating. The Bank of England increased the Bank Rate by 75 basis points to 3.0%, but it made it apparent that a jump to 5.0% or above was not likely, sending the Pound into a reflexive sell-off. According to a statement issued by the Bank, the Monetary Policy Committee (MPC) decisively voted 7-2 to raise interest rates by 75 basis points, but this exceptionally significant increase appears to be an outlier. However, significantly for the foreign exchange markets, the Bank won't be delivering as many rate increases as investors anticipate. The Bank's decision and financial calculations are based on market expectations that the Bank Rate will increase to a top of 5.25% in 2023, which is why the Pound has reacted in this way. In such a case, the Bank's economists predict that inflation will return to zero in three years, significantly below the target of two percent. EUR/GBP Price Chart AUD beating the GBP The Bank of England (BoE) appeared to rule out the possibility of indulging in derivative market pricing, hinting that Bank Rate could reach five percent in the months ahead, which hampered the Pound to Australian Dollar rate and put it at risk of further losses in the last session of the week. The Bank of England announced its largest increase in the Bank Rate in decades on Thursday, but said financial markets were barking up the wrong tree when they bet that borrowing costs could still rise significantly further down the road. As a result, sterling dropped significantly, including against the Australian Dollar. GBP/AUD Price Chart Sources: dailyfx.com, poundsterlinglive.com, finance.yahoo.com

Summary: The US Dollar weakens in the wake of the US jobs report. The British Pound may be headed for significant losses this November against the Dollar, the Euro. USD/JPY wedge continues to grow. USD loses ground against the EUR The market is reflecting mixed signals for this currency pair. Following the release of U.S. labor market data that, while still positive, reaffirmed a pattern of decreasing employment gains and pay growth, the Dollar dropped 1% against the Pound and 1.20% against the Euro. In October, the economy added 261K jobs, much exceeding the consensus estimate of 193K, while September's number was impressively raised up to 315K. Overachieving forecasts of 0.3%, average hourly earnings increased by 0.4%, suggesting persistent wage pressures that will support future domestic inflationary pressures. This information supports the Federal Reserve's statement from mid-week that it is too early to think about stopping its rate hike cycle, which raised exchange rates for the Dollar globally. Since the data do not indicate that the themes of previous months are likely to abruptly change, the Dollar's decline could instead be the result of profit-taking after Wednesday's gains. EUR/USD Price Chart BoE predict a UK economic slump The market is reflecting bullish signals for this currency pair. As investors respond to the Bank of England's most recent gloomy economic forecasts, the British Pound may be headed for significant losses this November against the Dollar, the Euro, and a variety of other major currencies. The Bank hinted that the UK economic slump, which it has been anticipating for some time, may now be considerably severe than initially anticipated in its November Monetary Policy Report. EUR/GBP Price Chart The wedge between the USD & JPY The market is reflecting mixed signals for this currency pair. Due to recent currency interventions, USD/JPY has been an interesting pair, with downmoves unable to gather significant organic impetus. However, a dollar bid continues to put the majority of currencies under pressure, making it challenging to dismiss gains as durable given the wider technical context. The rising wedge that had developed over the previous few months indicated that at some point we would either have a breakdown that would lead to an unwinding that would cause USD/JPY to plummet by a significant amount or a shot higher that would conclude the run upward. EUR/GBP Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: The US data released on Friday was mostly encouraging as job growth exceeded expectations. Friday's release of UK GDP statistics, it might go even further and return to lows from early October. EU economy produced 0.2% growth The market is reflecting bullish signals for this currency pair. In Q3, the EU economy demonstrated that it could produce growth of 0.2% Q/Q. The tiny gain in Q3 depicts the same larger picture, which is that growth has slowed and a recession is still in effect, despite the fact that it appears to be rather hopeful. One of the key indications from a nationwide survey demonstrates how manufacturing has been under tremendous strain as a result of the crisis of rising energy prices. The US data released on Friday was mostly encouraging as job growth exceeded expectations. The decrease in the dollar index, which has persisted into today's European session, was not justified by the minor increase in unemployment statistics. The market's forecast of a 50 bp increase from the Federal Reserve's December meeting is the only thing that has changed. EUR/USD Price Chart BoE November interest rate decision resulted in losses for the GBP The market is reflecting mixed signals for this currency pair. The Bank of England (BoE) interest rate decision in November resulted in significant losses for the Pound to Euro exchange rate, but if the market is still wary of Sterling going into Friday's release of UK GDP statistics, it might go even further and return to lows from early October. After the BoE stated, based on its most recent forecasts, that it believes it has likely already done enough with interest rates to ensure that inflation returns to the 2% target in the coming years, sterling suffered significant losses against most major currencies last week and fell almost 2% against the Euro. In an open conflict with market bets that borrowing costs could climb to 4.7% or more in the coming months, the BoE additionally stated that investors would be foolish to anticipate Bank Rate to rise from November's recently boosted level of 3%. EUR/GBP Price Chart AUD is weaker on monday The Australian Dollar is weaker at the beginning of a new week that may focus on events in China, where officials are showing a willingness to fight rumors that they are likely to reevaluate their zero-Covid policy. The National Health Commission (NHC) of China reaffirmed its commitment to eradicating Covid-19 during a news conference on Saturday, cautioning that the situation was likely to worsen and become "more complex" as the nation entered the winter flu season. The Australian lagged behind. The GBP/AUD currency rate experienced its biggest weekly decrease since the week of February 28 as investors bet on a Chinese economic revival, falling 2.83% for the week. GBP/AUD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Many ECB policymakers have reiterated the central bank's stance on interest rates and inflation. The British Pound is weaker on Tuesday after making a good rebound on Monday. ECB remaining hawkish The market is reflecting bullish signals for this currency pair. Many ECB policymakers have reiterated the central bank's stance on interest rates and inflation, contending that higher rates must be maintained for a longer period of time in order to contain double-digit price pressures. The financial wires are awash in hawkish ECB language in what appears to be a coordinated effort to reassert the central bank's authority and will on the rates market. At the end of October, the ECB raised interest rates by 75 basis points to 1.50%, its third straight increase and the highest level since 2009. At its meeting on December 15, the central bank is anticipated to increase rates by an additional 50 basis points. The US dollar is under pressure as speculators start to look past rising US rate predictions and instead focus on when the Fed may pause its tightening cycle, while the Euro has benefited from expectations of higher rates. The fact that the markets are already anticipating a turnaround, even though this may be months away, is putting pressure on the dollar. EUR/USD Price Chart GBP supported by general market uptrend The market is expecting bullish signals for this currency pair. The British Pound is weaker on Tuesday after making a good rebound on Monday, and price movement suggests that the UK currency is following global trends during a week with few domestic events. Analysts note that the UK's domestic situation is still difficult and that any gains are likely to be fleeting. Despite this, the Pound had the best performance among the major currencies on Monday as global markets continued their recent uptrend, helping the UK currency to somewhat recoup its losses following last Thursday's Bank of England report. The Pound's recovery may continue over the next several days if the mood music is generally cheerful. GBP/USD Price Chart US dollar is believed to be nearing the end of its uptrend The market is expecting bullish signals for this currency pair. Capital Economics experts believe that the Dollar may be nearing the end of a multi-month uptrend, but they caution that it is still too early to start preparing for a rollover and trend change. The Federal Reserve is reaching the conclusion of its tightening cycle, according to analysis by the independent financial and economics research source, and as a result, there is little room for a further widening of predicted interest rate differentials in favor of the Dollar. The war in Ukraine, anticipation of Fed interest rate increases, and a post-pandemic decline in equity markets have all worked together to strengthen the Dollar. GBP/USD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Experts foresee more short-term weakness for the Canadian Dollar against the Pound The bullish trend in the USD suffered yet another setback on Tuesday. The UK recession will deteriorate with tighter monetary and fiscal policy. Euro recovery may be strong The market is reflecting bullish signals for this currency pair. After a support bounce failed, the bullish trend in the USD suffered yet another setback yesterday. The currency was driven lower by sellers to make a new monthly bottom, but support quickly appeared around the same level that had been in play a few weeks before and served as a target for a double top formation at 109.62. There are a number of levels close below that swing as well, which may allow for a support bounce before the release of the CPI data tomorrow. From some perspectives, the major question is whether a stronger recovery can be seen in the Euro. Over the past nine months, the euro has been battered and bruised, but as of my initial inspection in October, the pain was beginning to subside and a deeper downturn was beginning. EUR/USD Price Chart GBP down against its peers The market is reflecting bullish signals for this currency pair. The UK recession will deteriorate with tighter monetary and fiscal policy, according to Derek Halpenny, Head of Research Global Markets for EMEA at MUFG. The recent Bank of England policy update has strengthened the foreign exchange strategists' belief in this trade, according to a new note. They are selling pound sterling against the euro. On Thursday, November 3, the Bank of England raised interest rates by 75 basis points, but warned that if it followed market expectations and pushed through even more increases, the UK economy would enter a recession that would last eight quarters. As a result, the Pound dropped against all of its peers. The market interpreted this as a message from the Bank that it would not hike rates as much as anticipated going into the policy update, which caused expectations to be reassessed and caused the Pound to fall on the day. EUR/GBP Price Chart CAD weakness foreseen National Bank of Canada (NBC) experts foresee more short-term weakness for the Canadian Dollar against the Pound, Dollar, and Euro but a robust recovery through 2023. Up until the second half of the year, when oil prices began to decline from their post-invasion levels and the Bank of Canada slowed down its rate-hiking acceleration, the Canadian Dollar was one of the best-performing currencies in 2022. GBP/CAD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Prices in DXY are currently driving down to new monthly lows. The British pound is responding to an overall increase in risk sentiment. The New Zealand Dollar is proving to be an apparent bet for a Chinese economic resurgence. USD feeling the effect of the CPI inflation data release The market is reflecting mixed signals for this currency pair. Prices in DXY are currently driving down to new monthly lows after posing a support rebound yesterday. Along the way, they are passing a significant area of confluent support. Sellers have struck. The daily candle for today will be crucial because it is presently forming a bearish engulfing pattern. And if that holds true, with price closing below those supports, then bearish continuation possibilities will still be possible. The daily bar close today will be crucial because, at this point, we're still feeling the effects of the CPI print, and how market players react today will reveal how they'll assimilate this new information. As market investors altered their expectations for higher policy rates, as shown by increased sovereign debt yields in the euro area, euro assets remained volatile across the review period. Since then, rates have somewhat decreased as the economic implications of aggressive tightening start to accumulate and systemic risk originating in the UK has largely been isolated as a result of the Bank of England's retaliatory actions and UK government policy reversals. EUR/USD Price Chart GBP supported by positive investor sentiment The market is reflecting bearish signals for this currency pair. The British pound is responding to an overall increase in risk sentiment, so Thursday's moves will likely be influenced by how the global equity markets perform, which are now suffering losses after a series of occurrences midweek. After suffering significant losses the day before, market morale has since improved, and the value of the pound is rising at the start of the day. In sync with the upbeat investor sentiment evident in global equities markets on Monday, the pound rose. However, these gains were erased on Wednesday amid a wider market selloff focused on China and disruptions in the cryptocurrency area. EUR/GBP Price Chart Chinese economic resurgence allows NZD to be an apparent bet Markets are adjusting to the possibility that China won't abandon its zero-Covid policy until the spring, which will result in a change in fortunes for the New Zealand Dollar and other like "commodity currencies." Analysts caution that the recent enthusiasm seen over the previous ten days is unwarranted and that the Chinese economy's reopening is likely to be a gradual and rocky process. Nevertheless, the New Zealand Dollar is proving to be an apparent bet for a Chinese economic resurgence. GBP/NZD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Analysts predict that the EUR/USD exchange rate will continue to improve. Eurozone entry into a recession may be delayed. Neither the British pound nor the New Zealand dollar seem to be winning out. Fed still determined to bring down inflation The market is reflecting mixed signals for this currency pair. Analysts predict that the EUR/USD exchange rate will continue to improve over the course of the upcoming week, however many still believe that the market is merely clearing out technical positions rather than the beginning of a long-term recovery. The Federal Reserve Governor Christopher Waller's remarks that the Fed was not yet prepared to cease its cycle of rate hikes helped the Dollar at the beginning of the new week. Investors' reactions to an unexpected drop in U.S. inflation caused the Dollar index, a gauge of the dollar's performance more broadly, to plummet by 4% last week. The statistics indicated that the U.S. inflation peak is near, and the Federal Reserve should therefore think about reducing the rate of raises. Most investors are now expecting a downshift to a 50 basis point boost in December. But Waller said investors risk getting carried away with a belief the end of rate hikes is close. EUR/USD Price Chart Eurozones entry into a recession expected to be delayed The market is reflecting bullish signals for this currency pair. Following a 0.9% month-over-month and 4.9% year-over-year increase in September industrial production for the Eurozone, the currency received a lift on Monday. The numbers are far better than the anticipated +0.1% m/m and 2.8% y/y, indicating that the European Union's entry into recession may be postponed. The current recovery could turn out to be mostly technical in character, which would increase the dollar's strength as investors pay attention to the Fed's warnings that the cycle of interest rate hikes is far from over. This would be a risk for those looking for a stronger Euro. The British pound is a "high beta" currency, which means that it tends to rise along with rising stock markets around the world, as was undoubtedly the case after the inflation figure. EUR/GBP Price Chart GBP/NZD currency pair A busy UK calendar could mean that this pair finally offers up some excitement this week. The Pound to New Zealand Dollar exchange rate (GBP/NZD) has been consolidating around 1.93 for nearly seven days now, and the near-term price activity is beginning to resemble the coiling of a spring. With two "high beta" currencies that are responsive to global conditions, the GBP/NZD pair has seen its price action in November mostly driven by world events. As a result, both currencies have benefited from the U.S. inflation surprise from last week. But when compared with one another, neither the British pound nor the New Zealand dollar seem to be winning out. GBP/NZD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The USD continues its surrender to the Euro. The Pound has risen to a new three-month high versus the Dollar. The figures from today may indicate that the BoJ will keep its monetary policy loose. Euro performs well against the USD The market is reflecting mixed signals for this currency pair. The Euro to Dollar exchange rate (EUR/USD) hit a high of 1.0477 on Tuesday as a result of the continued dollar surrender that was brought on by the publication of weaker-than-anticipated U.S. inflation data last Thursday. The advances have already brought the pair close to the 1.05 level, which was predicted to be a potential objective in the near future by our week ahead projection. Investors' assumption that the Federal Reserve will slow down its interest rate hike cycle as U.S. inflation shows symptoms of peaking has sent the EUR/USD up 3.7% last week and another 1.10% this week. The sudden increase in the Euro's value relative to the Dollar is most likely due to a sizable liquidation of "long" dollar positions taken by investors hoping to profit from the Dollar's multi-month advance. EUR/USD Price Chart US dollars downfall in the wake of economic data The market is reflecting bullish signals for this currency pair. The Pound has risen to a new three-month high versus the Dollar as another inflation report fueled the U.S. currency's significant devaluation that was initially started by last week's U.S. inflation data. At 13:30 GMT, the Dollar's drop increased with the announcement of the U.S. The PPI inflation data was less than anticipated, confirming the CPI inflation from last week that the trend of rising prices has peaked. The strong market response to last week's U.S. inflation reading, which saw CPI come in below market expectations and indicated a turning point for both inflation and the Federal Reserve rate hike cycle might have been reached, is extended by the GBP/three-month USD's high. GBP/USD Price Chart USD/JPY currency pair The market is reflecting mixed signals for this currency pair. The Japanese Yen initially ignored the dismal GDP numbers because the USD/JPY was comfortably over 140.00. After 30 minutes, it surged past 140.50. The Japanese seasonally adjusted 3Q quarter-to-quarter GDP was down 0.3% from the previous quarter's 0.9%, falling short of predictions of 0.3%. In contrast to expectations of 1.2% and 3.5%, seasonally adjusted annualized quarter-to-quarter GDP as of the end of September was -1.2%. Prior to the release of today's data, the USD/JPY had been lagging in the wake of last Thursday's release of the US CPI, which the market had deemed to be rather benign. This sparked suspicion that the Federal Reserve would not need to raise rates as aggressively as previously believed. The graphic below illustrates the connection between Treasury yields, Japan-US bond spreads, and USD/JPY. With the Bank of Japan's yield curve control program, changes in Treasury yield mostly dictate the bond spread. The figures from today may indicate that the central bank will keep its monetary policy loose. USD/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The EUR/USD has displayed remarkable resilience to trade higher. The British Pound plummeted against the Euro. The JPY has clearly benefited from the decline in the value of the USD. Financial markets are on high alert The market is reflecting bullish signals for this currency pair. According to the most recent 30-day Fed Fund futures price information, the Federal Reserve is anticipated to increase interest rates by a further 100 basis points over the upcoming months, to 475–500bps, and then suspend their tightening cycle. Despite yesterday's concern following reports of a missile landing in Poland, the EUR/USD has displayed remarkable resilience to trade higher this morning. According to Joe Biden's remarks, it seems improbable that Russia fired the missile based on its trajectory. Due to the possibility of a wider conflict now that a NATO ally has been negatively impacted by the Russia/Ukraine crisis, the missile has put Europe, NATO, and financial markets on high alert. At 9:00 GMT, NATO has called an emergency meeting to review yesterday's events and the alliance's response. EUR/USD price chart UK inflation figures caused GBP to decline The market is reflecting mixed signals for this currency pair. Following some hotter-than-expected UK inflation figures that suggested the Bank of England could not yet afford to stop its interest rate hike cycle, the British Pound plummeted against the Euro, the Dollar, and other major currencies. However, we cautioned in our week-ahead forecast that the market might now consider stronger-than-expected inflation as a negative, as rising prices and interest rates would snuff out the UK's prospects for economic development. Normally, such a result would help the Pound. EUR/GBP price chart JPY supported by weak USD The market is reflecting mixed signals for this currency pair. The Japanese Yen has clearly benefited from the decline in the value of the US dollar in November, outperforming all other major currencies. However, analysts at MUFG believe the Japanese Yen could rise even more in the future, especially against the British pound. They advise clients to bet against the GBP/JPY pair and look for a fall to 158. After official data revealed that U.S. inflation softened in October, the Yen surged substantially against all equivalents in the G10 group of major currencies, but analysts at Japan's largest banking MUFG claim that this was just the start of a longer-lasting rebound. GBP/JPY price chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Final headline inflation in the Euro Area reached a record high. Tax increases and spending reductions in the UK. CHF becomes the second best performer of 2022. EUR/USD constrained by interest rate disparity The market is reflecting mixed signals for this currency pair. Final headline inflation in the Euro Area reached a record high of 10.6% in October, just under the earlier estimate of 10.7%. Data from Eurostat show that the highest annual rate in October was for energy, which was at 41.5 percent (up from 40.7 percent in September), followed by food, alcohol, and tobacco, which had a rate of 13.1 percent (down from 11.8 percent in September), and non-energy industrial goods, which had a rate of 6.1 percent (compared to 5.5 percent in September). As the post-CPI surge slows, the current gain in the EUR/USD has come to an end. The prices in the ultra-short end of the US bond market are stable even as market forecasts of a reduction in rate increases rise. The yield on a one-year US Treasury bill is approximately 4.66 percent, which is more than 250 basis points higher than the yield on a one-year German bond. Any short-term increase in the EUR/USD currency will continue to be constrained by this interest rate disparity. EUR/USD Price Chart GBP relying on Hunts credibility The market is reflecting bullish signals for this currency pair. The UK's prospects for future economic development will be diminished by the tax increases and spending reductions, but a convincing autumn statement from Chancellor Jeremy Hunt might boost the value of the pound sterling. This is due to the fact that reputation will determine how the market responds to the fiscal event on Thursday. Hunt is expected to present a budget that will hinder development; however, the Pound's response will ultimately depend on how the market reacts to the credibility issue. Some analysts caution that while the Pound might gain from renewed confidence, its value could still drop if Hunt is overly bold and his recommended level of austerity becomes overwhelming. EUR/GBP Price Chart CHF could continue to strengthen According to analysts at Nomura, the Swiss Franc has flipped the major currency league table on its head to become the second best performer of 2022. However, it could rise even further against the Pound and even have the potential to bring the GBP/CHF rate back to 1.0555 in the coming months. In the early months of the year, the Swiss Franc had given the Japanese Yen a tough fight for the bottom spot in the performance rankings of the major currencies, but a hawkish stance by the Swiss National Bank (SNB) and a supportive foreign exchange policy have reversed the previous order of performances. The SNB has become open to buying back its own currency whenever market circumstances cause the Franc to weaken, even though it is still prepared to suppress the Franc if it appreciates too much for its tastes. This is because doing otherwise would raise Switzerland's inflation rate further. GBP/CHF Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: EUR/USD currency pair has risen 4% over the past 2 weeks. GBPs response to investor sentiment globally to determine near term credibility. The CAD was outperforming many other major currencies this year, but recently started to lag behind them. EUR/USD has risen by 4% over the past 2 weeks The market is reflecting bullish signals for this currency pair. The Euro will decline against the Dollar in the coming months, comfortably falling below parity, according to Danske Bank's unwavering forecast. The rate of exchange between the Euro and the Dollar (EUR/USD) has increased by 4.0 percent over the last two weeks as a result of signs that U.S. inflation is slowing down as well as market analysts' conviction that the Federal Reserve will reduce the pace of its rate hikes, giving investors more confidence to price the peak in interest rates. Data released on Wednesday showed that American consumers were still in good shape, with retail sales increasing by 1.3 percent in October, an acceleration from the 0 percent recorded in September and higher than the market's forecast of 1.0 percent growth. Therefore, the Fed may slow down its rate rise cycle but lengthen it, providing a series of 25 basis point rate adjustments over the ensuing months that may still provide support for the Dollar. EUR/USD Price Chart EUR/GBP on track to end the week slightly higher The market is reflecting mixed signals for this currency pair. The UK's Autumn Statement, which promised a return to fiscal credibility, was well received by the financial markets, but the direction of the near term should be determined by how the British Pound responds to investor sentiment globally. As part of his effort to tighten fiscal policy and ensure that the nation's finances remained on a sustainable footing, Chancellor Jeremy Hunt proposed savings totaling £55BN, or roughly 2.0 percent of GDP. The Pound-Euro rate appears to be on track to conclude the week slightly higher, and the Pound-Dollar rate is also slightly higher than it was at this time last week, consolidating the huge gains from the previous week. EUR/GBP Price Chart CAD emerging as a top option for speculative short-selling The Canadian Dollar has outperformed many other major currencies this year, but recently started to lag behind them. As a result, the Canadian Dollar is quickly emerging as a top candidate for speculative short-selling by Spectra Markets in advance of an anticipated economic slowdown caused by rising mortgage rates. By Friday, Canada's Dollar had dropped to third place in the ranking of the G10 currencies for the year after suffering significant losses against all significant rivals other than the US. Over the period of November, the dollar has generally corrected lower. The main thesis is that a large rise in Bank of Canada (BoC) interest rates this year will eventually affect Canadian homeowners' monthly mortgage payments. Higher borrowing costs are anticipated to reduce household earnings and have negative second-round impacts on a number of economic sectors. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Dollar was bid and stocks declined on Monday. The most recent budget from HM Treasury will push up inflation by a percentage point. AUD gave ground to most of its major currency counterparts to start the new week. Investor confidence improved in China The market is reflecting bearish signals for this currency pair. In spite of indications, the Dollar was bid and stocks declined. China is enforcing stricter regulations to combat a Covid-19 outbreak that is spreading. Three Covid deaths were reported by authorities over the weekend in Beijing, the first in more than six months. Just days after the nation said it was loosening some restrictions, there are reportedly early signs that some authorities are returning to a zero-Covid policy. In recent weeks, speculation that China would be willing to abandon its zero-Covid policy has intensified, boosting investor confidence amid speculation that the world's second-largest economy could spark a resurgence in global economic activity. This favorable environment proved to be a barrier for the dollar, which often gains when market anxieties are mounting and forecasts for global growth are weakening. EUR/USD Price Chart UK inflation expected to increase The market is reflecting mixed signals for this currency pair. Without changing the Bank of England (BoE) interest rate policy, own goals in c starting in April and force taxpayers to fork over an additional £5 billion or more to cover the increase in debt interest costs that results. The decision to reduce the household energy price guarantee and increase fuel taxes starting in April 2023 will result in higher inflation as measured by the consumer and retail price indices, which will automatically affect future government spending, particularly costs associated with debt servicing. Sterling pounds Live calculations indicate that these two factors will cause consumer price inflation to increase by an additional 1% in April and retail price index inflation to increase by 1.3%, both of which will raise the cost of servicing borrowings with inflation-linked interest rates by approximately £5BN. EUR/GBP Price Chart AUD gave ground to most of its major currency counterparts The Reserve Bank of Australia (RBA), the Federal Reserve (Fed), and the Bank of England will all be providing monetary policy commentary this week, so the Pound to Australian Dollar exchange rate has benefited from a corrective setback in AUD/USD that may keep Sterling buoyant above 1.7750 this week. The risk of new coronavirus-related economic closures in China weighed on asset prices throughout the Asia Pacific region as well as on the currencies of those countries exporting into the second-largest economy in the world, and Australia's dollar gave ground to most of its major currency counterparts to start the new week. AUD/GBP Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Euro held steady throughout Asian trading. Energy Bills Support Scheme's concurrent expiration, may have a greater negative impact on household earnings. NZD has had the best performance among major currencies over the past month. Euro faces downside risk The market is reflecting mixed signals for this currency pair. Following the turbulent start to the week on Monday, when the EUR/USD fell, the Euro held steady throughout Asian trading. The Fed speakers' continued hawkish posture, which also hurt markets, helped the US dollar increase. Risk assets were also hurt by a rise of Covid-19 cases in China because of concerns that harsh lock downs would continue there. Even while experts at one European bank claim there is "less pain in the pipeline" for the region and its single currency, rising natural gas costs in the Eurozone are recognized by foreign exchange strategists as a downside danger to the Euro. According to analysts, the little increase in gas prices coincides with a drop in temperatures across Europe after an abnormally warm autumn that allowed nations to stockpile gas supplies and use less gas than is customary at this time of year. EUR/USD Price Chart GBP under pressure from poor UK economic outlook The market is reflecting bearish signals for this currency pair. Early in the new week, the Pound to Euro exchange rate continued to rise after last Friday's advance, but after three straight days of gains, Sterling is now rapidly approaching a crowded area of technical resistances near and above the 1.16 level on the charts, suggesting that the rally may soon come to an end. The problem for families, the economy, and the pound is that, as a result of reforms outlined by Chancellor Jeremy Hunt in last Thursday's budget, energy costs are expected to grow dramatically once more starting in April 2023, when the average annual tariff would rise by another 20% to £3,000. Due to the Energy Bills Support Scheme's concurrent expiration, this will have a greater negative impact on household earnings. However, it will also have a positive impact on UK inflation rates and have additional effects on the state finances. EUR/GBP Price Chart NZD supported by improved investor sentiment Although the New Zealand Dollar has had the best performance among major currencies over the past month, one analyst claims that it is beginning to seem "stretched" in front of the Reserve Bank of New Zealand's upcoming interest rate announcement. The Kiwi has risen against all of its G10 counterparts over the past four weeks, helped by a noticeable improvement in investor sentiment worldwide and as investors raised their expectations for the amount of interest rate hiking to come from the RBNZ in response to a series of domestic data releases that exceeded expectations. Following New Zealand's October Q3 CPI inflation announcement, which exceeded estimates and bolstered expectations for a 75bp hike, the market increased its expectations. Data on the labor market and quarterly wages also confirmed these predictions. However, an analyst questions if the RBNZ will want to speed up rate increases given that it was among the first to act and has consistently moved rates by 50 basis points, and has no need to play catch-up given that it is one of the G10 rate leaders. GBP/NZD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The Eurozone PMIs showed that the bloc's economy contracted in November. Despite the UK economy contracting in November, the GBP extended a short-term recovery. CAD fared better than Sterling during the first sessions of the week Eurozone PMI data didn’t beat expectations by enough The market is reflecting mixed signals for this currency pair. The Eurozone PMIs showed that the bloc's economy contracted in November, but the magnitude of the decline was less severe than anticipated by the markets. The S&P Global Purchasing Managers Index (PMI) for manufacturing registered at 47.3, exceeding the consensus estimate of 46.0 and up from the previous month's reading of 46.4. Unfortunately for the euro, the positive data was insufficient to quell the bearish sentiment surrounding the currency, including recessionary risks and the ECB hawks' unwillingness to support a 75 basis point interest rate hike at the upcoming meeting. The day ahead should see increased volatility for the EUR/USD due to the prominence of US data. EUR/USD Price Chart UK economic outlook looks bleak The market is reflecting bearish signals for this currency pair. Following the release of statistics showing that, despite the UK economy contracting in November, corporate forecasts for the coming year increased from a 30-month low, the British pound extended a short-term recovery. The most recent S&P Global PMI readings indicated that economic activity continued to decline for another month, but the data was better than anticipated, so this would be a generally favorable development for markets. However, this downturn was predicted, and as economist at Berenberg Kallum Pickering puts it, "the recession is terrible, but not becoming worse." This remark is critical for the Pound given the dire economic prognosis for the UK. EUR/GBP Price Chart GBP/CAD outlook improved According to technical analysis from Scotiabank, the outlook for the Pound to Canadian Dollar exchange rate has improved further in recent trading. Sterling may now be able to hit some of its best levels since the end of the first quarter after gaining ground over the 1.57 mark last week. Although some believe this is likely merely a temporary setback for the Pound, the Canadian Dollar fared better than Sterling during the first sessions of the week after an over two month surge in GBP/CAD stopped following a run-in with technical support on the charts late last week. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Eurozone flash PMIs remain in the contractionary range. The GBP has just moved higher thanks to demand for UK government bonds. The value of the CAD has fallen as a result of falling oil prices. Eurozone economy still remains in contractionary range The market is reflecting bearish signals for this currency pair. The most recent flash PMIs for the Euro Area outperformed expectations this morning, but they are still firmly in the contractionary range. Although November's numbers were better than anticipated, the data point to the Euro Area's economy contracting by about 0.2% in Q4. A recession appears probable, but, as data provider S&P notes, the latest data provide hope that the severity of the slump may not be as severe as originally feared. The US dollar data and the most recent FOMC minutes will likely drive the pair into the weekend due to holidays in the rest of the day. EUR/USD Price Chart GBP supported by UK government bond demand The market is reflecting bearish signals for this currency pair. The British pound has just moved considerably higher thanks to demand for UK government bonds, and since the rest of the week will be quiet due to the U.S. Thanksgiving holiday, gains may hold. In tandem with a strong increase in the price of UK government debt, the Pound rose sharply versus the Euro, the Dollar, and other major currencies through Wednesday and into Thursday. The cost of funding mortgages and other financial products in the UK has decreased as a result of the increase in bond prices and the associated decline in their yields across different time tenors in the bond market. Bond yields are declining, which indicates a loosening of UK financial conditions and is positive for future economic growth. EUR/GBP Price Chart CAD weighed down by falling oil prices The value of the Canadian Dollar has fallen as a result of falling oil prices, and one industry analyst has predicted that a planned cap on Russian oil could have a disproportionately large effect on Canada. In the last 24 hours, the Canadian Dollar has fallen 1.5% against the British Pound due to a decline in oil prices. Canadian benchmarks are impacted by the decline in global oil prices, which reduces the possibility for the country to generate foreign money. Since the Canadian Dollar and oil market dynamics frequently correlate, the GBP/CAD exchange rate may soon be dependent on changes in the energy market. This linkage previously appeared to have disappeared. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: The EUR/USD exchange rate has benefited from the final quarter's risk asset rally. The GBP made gains this week in a market that was favorable to riskier assets. Euro opened weaker on Monday, weighed down by the Chinese economy The market is reflecting mixed signals for this currency pair. Although technical resistances near 1.04 on the charts have recently held back the recovery of the Euro to Dollar exchange rate, it could succumb to losses this week that push the single currency back toward 1.0303 or lower in the coming days. The Euro to Dollar exchange rate has benefited significantly from the final quarter's risk asset rally. Since financial markets adopted an upbeat perspective on the outlook for China in its ongoing fight against the coronavirus and for the U.S. as the Federal Reserve (Fed) attempts to get the better of inflation, the single currency of Europe has almost completely reversed this year's losses against the Dollar. The world's second-largest economy is currently experiencing restrictions due to the coronavirus, and there have been public demonstrations against these limits in several parts of China. This has put the euro on the back foot on Monday. The Chinese economy is also, in some respects, Europe's second-largest export market, which contributed to the weak start for the Euro on Monday, and the ongoing economic unrest in China further clouds the future for the Eurozone. EUR/USD Price Chart GBP’s future depends on external variables The market is reflecting mixed signals for this currency pair. The technical resistance for the Pound to Euro exchange rate is placed near 1.1667, and it started the new week close to November highs. The pound made some gains this week in a market that was favorable to riskier assets and unfavorable to the dollar, but it was unable to go over 1.1667 versus the euro, which is quite close to the 78.6% Fibonacci retracement of the late-August downturn in GBP/EUR. Technical resistance at that level previously prevented the Pound's October recovery from the lows it reached after the budget event in September, and it may do so again this week as a light UK economic calendar puts external variables in charge of Sterling's direction. EUR/GBP Price Chart GBP may struggle to move forward in the coming days The market is reflecting mixed signals for this currency pair. The GBP/USD exchange rate has more than partially recovered this year's decline, but it now faces the possibility of a corrective setback that could push it back around 1.20 or possibly below it during the next several days. Last week, sterling increased in a market that was favorable for riskier assets and unfavorable for the U.S. dollar, but it was unable to overcome a double-barreled layer of technical resistance and may now find it difficult to move forward in the coming days. This is partially due to events that occurred over the weekend in China, where new discontent over the most recent round of restrictions connected to the coronavirus is likely to keep financial markets focused on the significant financial consequences of the government's ongoing efforts to contain COVID. That might reduce risk appetite on the global markets and put the pound to dollar exchange rate on the defensive from the start of this week. GBP/USD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com

Summary: Signs of an industrial slowdown in the Eurozone emerged. Eurozone inflation could have taken a larger step toward its peak. Renminbi weighing on the CAD Worries of a global recession continue The market is reflecting bullish signals for this currency pair. Consumer confidence in the Eurozone for November came in at the expected level, but after actual data came in below expectations, signs of an industrial slowdown emerged. This may be related to concerns about a global recession as well as the effect of China on demand-side issues. After China is said to have deescalated tensions and given the euro a boost, yesterday's hawkish commentary from Fed officials and China's ongoing COVID crisis did not hold. The Eurozone has strong ties to China, which can expose the euro to weakness in the event of negative Chinese news. Yesterday, Christine Lagarde of the ECB noted that interest rates still have a ways to go. EUR/USD Price Chart German CPI inflation missed market expectations. The market is reflecting bearish signals for this currency pair. The Eurozone has strong ties to China, which can expose the euro to weakness in the event of negative Chinese news. Yesterday's hawkish commentary from Fed officials as well as China's ongoing COVID crisis did not hold true today. Interest rates still have a long way to go, according to Christine Lagarde of the ECB, who said that yesterday. According to Destatis, Germany's annual inflation rate for the year ending in November was 10%, down from 10.4% in October and below the consensus estimate of 10.4%. The information was released ahead of Wednesday's CPI inflation report, which currently appears to be on track to fall short of expectations. GBP/CAD Price Chart CAD lost around 2% on Tuesday Early in the new week, the Canadian Dollar dropped significantly against all major currencies due to a rolling underperformance that increased USD/CAD and GBP/CAD despite widespread declines in U.S. Dollar exchange rates, giving the Loonie the appearance that it might be about to roll over. On Tuesday, the Canadian Dollar experienced losses of over two percent against the rising Chinese Renminbi and Korean Won, but what was considerably more dramatic than this price action was the one percent rise in the USD/CAD, which surged swiftly and even as most other U.S. exchange rates sank. GBP/CAD Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: On Wednesday, the dollar gained support as Bureau of Labor Statistics data. The ECB is expected to pause the pace of interest rate hikes. AUD benefited from the Renminbi's latest rally. U.S labor statistics offer USD support The market is reflecting bearish signals for this currency pair. The annual inflation rate for the Euro Area is 10% in November, down from 10.6% in October and marking the first decrease since July 2021. Energy, food, alcohol, and tobacco are not included in core inflation figures, which remained stable and had a 5% reading that was in line with expectations. The figures, together with weaker readings from Belgium, Germany, and Spain, will undoubtedly give the European Central Bank much to think about before its meeting on December 15. The market's concern is if they are prepared for the Fed to slow the pace down to 50bp after raising interest rates by 75bp at its last two sessions (Markets currently pricing in 54bp). A slowdown may not be in the cards, according to recent remarks from ECB President Christine Lagarde, who claimed that inflation has not yet peaked. On Wednesday, the dollar gained support as Bureau of Labor Statistics data suggested that the U.S. economy's recovery from the depths of a previous technical recession in the third quarter was more robust than previously thought. EUR/USD Price Chart ECB expected to slow interest rate hiking cycle The market is reflecting mixed signals for this currency pair. Following the announcement of Eurozone inflation statistics that arrived at a lower-than-anticipated rate, the European Central Bank (ECB) is expected to pause the pace of interest rate hikes with a 50 basis point move the following month. However, considering that core inflation is set at 5%, substantially over the ECB's preferred level of 2.0%, the ECB cannot afford to relax just yet. With prices still relatively high, the British pound is still in a phase of consolidation. EUR/GBP Price Chart AUD one of the best performing G10 currencies Midweek trading saw a further decline in the Pound to Australian Dollar exchange rate from recent highs around 1.80. Going forward, it is probable that the pair will fluctuate between 1.7660 and 1.8046 as a tug-of-war between the strong U.S. Dollar and the strengthening Chinese Renminbi takes place. Australia's Dollar was one of the best-performing currencies in the G10 on Wednesday as the Asian region's currencies benefited from the Renminbi's latest rally and the antipodean currency itself seemed to benefit from official data that revealed a surprising drop in Australian inflation rates for October. Australian inflation decreased in October from an annual rate of 7.3% to 6.9%, whereas the majority of economists had predicted a rise to 7.6%. This downward surprise was caused by lower price increases for the majority of items included in the consumer price index. GBP/AUD Price Chart Sources: dailyfx.com, poundsterlinglive.com, finance.yahoo.com

It is in the UK that the local swap curve is diverging most from the central bank’s message. Swap currently imply another 100bp of tightening will be implemented before year-end. We do not disagree that core inflation has been disappointingly slow to decline in the UK but betting on another four 25bp hikes this year requires a strong opinion on inflation dynamics which we think few in the market actually have.   This means current pricing is unlikely to be maintained. Markets should also be on alert for a pushback by Bank of England (BoE) officials against market pricing. Only Catherine Mann is due to speak today. As the more hawkish member, she is the least likely to disagree with elevated rates but her pushback would be all the more potent.   Forward EUR rates have been relatively immune to the recent re-pricing higher in USD and GBP rates   Today's events and market view Chinese PMIs released today missed expectations on both manufacturing and services, although the latter remains at a healthy level above the 50 expansion/contraction line.   French, Germany, and Italian CPIs for the month of May will be released today. In addition to yesterday’s Spanish prints, this means over 70% of the eurozone-wide print, which is only published tomorrow, will be available to markets today. As is increasingly the case, focus will be squarely on service inflation.   After the sharp re-pricing in BoE hike expectations Catherine Mann’s speech will be closely watched, although, as the most hawkish member on the MPC, we don’t see her as the most likely member to push back against the nearly 100bp of further hikes priced by the curve.   In the US, the decline in job openings is expected to continue, albeit at a more modest pace than last month. Details of the report, such as a worsening of the quits rate, will be closely watched for hints of a further softening of the labour market into Friday’s non-farm payroll release.

The central bank jury is most certainly still out on whether policymakers have done enough to tame inflation. The implications for FX markets are that the Fed may need to stay hawkish a little longer and our forecast cyclical dollar decline may get delayed. For now, however, we maintain the view that the dollar will be much lower by year-end   Executive Summary: Burden of proof Despite all the talk of economic slowdown and the turn in the inflation cycle, it seems that policymakers still lack sufficient evidence that inflation is under control. Swiss National Bank President Thomas Jordan recently warned of 'second and third round effects' in this inflation cycle. Central bankers as far apart as Australia and Canada have recently had to restart tightening cycles after brief pauses. Investors are now increasingly questioning their own convictions that rates have peaked.   Nowhere is this challenge greater than in the US where tight labour markets and core inflation stubbornly above 4% are keeping the Fed vigilant. And there is a chance that the Fed has to hike one last time this summer. Yet our house view remains that US disinflation becomes much more obvious in the third quarter and that hard will follow soft activity data lower. We still look for substantial Fed cuts in the fourth quarter.   This means we are still looking for the start of a cyclical multi-year dollar bear trend – probably starting in the third quarter. This should carry EUR/USD above 1.15 and USD/JPY well below 130. The tide of a softening dollar should lift most currencies around the world – especially higher-yielding currencies enjoying the benefits of the carry trade.   Within Europe, we forecast most currencies to hold recent gains against the euro – although sterling looks most at risk to Bank of England re-pricing. Modest CEE FX appreciation can continue – despite looming easing cycles. Latin FX looks constructive on the back of high yields and pockets of Asia can appreciate – especially the Korean won.

The central bank jury is most certainly still out on whether policymakers have done enough to tame inflation. The implications for FX markets are that the Fed may need to stay hawkish a little longer and our forecast cyclical dollar decline may get delayed. For now, however, we maintain the view that the dollar will be much lower by year-end   Executive Summary: Burden of proof Despite all the talk of economic slowdown and the turn in the inflation cycle, it seems that policymakers still lack sufficient evidence that inflation is under control. Swiss National Bank President Thomas Jordan recently warned of 'second and third round effects' in this inflation cycle. Central bankers as far apart as Australia and Canada have recently had to restart tightening cycles after brief pauses. Investors are now increasingly questioning their own convictions that rates have peaked.   Nowhere is this challenge greater than in the US where tight labour markets and core inflation stubbornly above 4% are keeping the Fed vigilant. And there is a chance that the Fed has to hike one last time this summer. Yet our house view remains that US disinflation becomes much more obvious in the third quarter and that hard will follow soft activity data lower. We still look for substantial Fed cuts in the fourth quarter.   This means we are still looking for the start of a cyclical multi-year dollar bear trend – probably starting in the third quarter. This should carry EUR/USD above 1.15 and USD/JPY well below 130. The tide of a softening dollar should lift most currencies around the world – especially higher-yielding currencies enjoying the benefits of the carry trade.   Within Europe, we forecast most currencies to hold recent gains against the euro – although sterling looks most at risk to Bank of England re-pricing. Modest CEE FX appreciation can continue – despite looming easing cycles. Latin FX looks constructive on the back of high yields and pockets of Asia can appreciate – especially the Korean won.

US inflation numbers boost chances of a pause in Fed rate hikes While US inflation came in broadly in line with expectations, there are signs of softening in some key categories. While housing costs and vehicle prices continue to run hot, the outlook is improving rapidly. This should cement expectations for the Fed to keep rates unchanged tomorrow but the commentary around the decision is likely to remain hawkish.   Inflation slowdown continues US consumer price inflation for May is broadly in line with expectations. The headline rate rose 0.1%MoM or 4.0%YoY (consensus 0.1 and 4.1, respectively), down from 4.9% and the slowest rate of headline inflation since March 2021. Meanwhile, core CPI (excluding food & energy) rose 0.4%MoM / 5.3% (consensus 0.4% / 5.2%). This is down from 5.5% and is the slowest annual rate for core inflation since November 2021.   Contributions to annual US inflation

Stock markets remain slightly in the red on Tuesday but activity should pick up with the return of Wall Street from the long bank holiday weekend.   The focus this week remains on the central banks and whether we are as close to the end of the tightening cycle as everyone wants to believe. While there is the temptation to take what the Fed and others say with a small pinch of salt given their record over the last couple of years and the fact that any pivot was always likely to come late, they have been proven more accurate recently on their assertion that rates need to keep rising. Markets have been overly optimistic this year and there may be an element of luck on the central bank side – keen to not underestimate inflation again, they were always going to remain hawkish as long as feasibly possible – but the data simply hasn’t justified changing course yet.   That may change over the next couple of months but so far, especially in the UK, the turnaround in inflation has been more akin to a container ship performing a U-turn than a speedboat as many hoped. That may not dramatically increase the terminal rate but it may ensure it remains there much longer. Rate cuts this year look more fantasy than reality now. The BoE will be hoping for some good news from the UK inflation data tomorrow but I’m guessing policymakers are approaching it with a sense of dread rather than hope. We’re not likely to see any significant progress from the May data but avoiding another nasty surprise may be viewed as a win, allowing the MPC to proceed with 25 basis points rather than 50 which markets are pricing in a 30% chance of at this stage.   Bitcoin’s recent trend remains against it despite recovery Bitcoin drifted a little higher at the start of the week and is continuing to do so today. The move back toward $25,000 may have worried some but it’s recovered relatively well since then. The recent trend remains against it and until it breaks the pattern of lower highs – recovery rallies that fall short of recent peaks before falling again – it will continue to look vulnerable. A break below $25,000 could be another blow although gains this year would still remain extremely healthy.  

Dollar drops after 3-day rally Powell remains hawkish; bringing down inflation has a long way to go Fed swaps price in a 69.2% chance of a hike at the July 26th FOMC meeting   US stocks declined as Fed Chair Powell’s testimony to the House affirmed the Fed’s threat of higher rates to combat inflation.  Wall Street should not have been surprised by Fed Chair Powell’s commitment to vanquish inflation, but swap futures are still only pricing in one more rate hike.  Powell reiterated that the economy is strong but that inflation remains elevated.  The Fed is clearly not nearing the end of its tightening cycle and if other central banks seem poised to deliver more than a couple rate hikes, that might make it easier for the Fed to remain aggressive with tightening.  Powell said lowering inflation has a long way to go and that could very well mean that they won’t stop until the fall.    Oil WTI crude prices are finally stabilizing above the $70 level as energy traders anticipate the start of summer should keep demand steady over the next few months. Oil got a boost from a weaker dollar and optimism that the economy will remain strong throughout the summer. Oil was getting near the bottom of its recent trading range and it could continue rebounding if the headlines for China remain upbeat.  The oil market is going to remain tight thanks to OPEC, so that should make trading a little easier for energy traders.  Most energy analysts envision $80 oil at some point this year, so any bullish headline could get us there.  Hurricane season is also here, and we might be getting our first taste of it with Tropical Storm Bret.

Swiss National Bank expected to raise interest rates on Thursday Fed Chair Powell testifies before Congress Wednesday and Thursday The Swiss franc is showing little movement on Wednesday, trading at 0.8984 in the North American session.   Will Swiss National Bank deliver a hawkish surprise? The Swiss National Bank will announce its rate decision on Thursday, and the meeting is live, as the markets have priced a 0.50% hike at 60% and a 0.25% at 40%. The current benchmark rate is 1.50%. SNB Chair Jordan hasn’t missed an opportunity to send out warnings that inflation remains too high. Earlier this month, Jordan stated that inflation “is more persistent than we initially thought” and that with rates at a low 1.5%, it wasn’t a good idea to keep rates low and face higher inflation later. Jordan’s rhetoric has remained hawkish even though inflation is low in Switzerland and fell to 2.2% in May. Other central bankers would be happy to switch roles with Jordan, with inflation around 2%, but the SNB is not happy with the inflation picture. Inflation remains above the Bank’s 0%-2% target and Jordan appears willing and able to continue hiking in order to curb inflation. The SNB, once known for its negative rates, has been aggressive, raising rates by 225 points in the current tightening cycle. It should be remembered that since the SNB meets only four times a year, the SNB may opt for a 0.50% hike at Thursday’s meeting in order to get “a bigger bang for the buck”.

Rates Spark: The battle to keep policy tight At Sintra, hawkish central bankers meet a deteriorating economic outlook, and face their diminished ability to tighten financing conditions. Inverted curves and lower real rates may be the counterproductive product of their single-minded focus.   Hawkish messaging is only credible if the economy holds up As the European Central Bank’s (ECB) Sintra conference get underway, central bankers will have their eyes firmly on two important checks on their recent hawkish charge. Firstly, a deterioration in economic outlooks, illustrated by the plunge in Germany’s Ifo index published yesterday, limits the credibility of any aggressive hawkish tone with markets fearing a recession. Secondly, it is not altogether certain that, in isolation, a more hawkish central bank results in materially tighter financial conditions.   The first concern can in theory be addressed by a single-minded focus on backward-looking inflation. This is the strategy adopted by most central banks, also justified by their poor track record in forecasting inflation. By and large, this strategy has been successful in delaying rate cut expectations, but the central banks’ sphere of influence typically doesn’t reach very far up the curve, so the economic outlook still matters. Dhingra and Tenreyro have an easier job communicating the Bank of England’s stance when they speak today, given the UK’s entrenched inflation problem. Things are more challenging for Lagarde given the deterioration of European economic data.   Long-end EUR real rates have declined since May, hardly a tightening of financial conditions    

June trade balance turns positive in Korea on strong transportation exports Falling commodity prices are the main contributor to the improvement in the trade balance while the contraction in exports also eased gradually. Transportation exports – motors and vessels – are particularly strong while chip and petroleum exports continue to be a drag on the overall export performance.   Exports dropped -6.0% YoY in June (vs -15.2% in May, -3.6% market consensus) Exports fell for the ninth month in June on the back of weak chip (-28%) and petroleum (-41%) exports. However, the decline in exports seems like it is bottoming out from the recent low of -16.4% in January, thanks to strong gains in vehicles (58.3%) and vessels (98.6%). In the second half of the year, we expect solid transportation exports to continue. For vehicles, there will be robust global demand for EVs and batteries. In the case of ship exports, ships ordered during the pandemic time are expected to be completed and delivered from this year. Meanwhile, chip exports are expected to remain sluggish at least until the next quarter, however, there is solid demand for high-end chips.  Despite expectations of only a modest recovery in exports, the trade balance is expected to remain in surplus from now on as the impact of import declines will accelerate with rapidly falling global commodity prices.    Korea posts the first trade surplus in sixteen months in June   Global demand conditions vary by region By destination, exports to the US shed 1.8%, for the third monthly decline. We still see strong demand for vehicles with a 59.5% gain but semiconductors and petroleum exports are down by 64.1% and 35.1%, respectively, mainly due to unfavourable price effects. We cautiously predict a slowdown in demand from the US in the second half of the year. Meanwhile, Korean exporters benefitted from the strong infrastructure investment in the Middle East. Exports to the Middle East rose 14.0% with rising vehicles (28.1%), steels (160.0%), and machinery (57.9%) exports. In the second half of 2023, we think exports to developed markets are expected to turn weak but exports to the Middle East and Asia should improve.     Exports to the US shed for three months in a row   BoK watch With better-than-expected industrial production data from yesterday, today's trade outcomes also support the view that second quarter GDP should accelerate from the first quarter. With the recovery continued, the Bank of Korea is likely to remain hawkish for the time being. However, we still think that additional hikes are not foreseable until the end of this year as inflation is expected to reach the 2% range soon and to stay there throughout this year. 

Order a steeper curve, get wider spreads Her main point however, if correct, doesn’t necessarily scream curve flattening. In a nutshell, the new central banker pointed to the risk of a higher R* post-Covid, suggesting the assumption that inflation and rates will eventually fall to their pre-pandemic range may be misguided. Two interpretations ensue. In the short term, the comments suggest the BoE will err on the hawkish side rather than rely on mean-reverting models to forecast a fall in inflation. The longer-term implication is that a deeply inverted curve, premised on a relatively quick reversal of the current hikes, isn’t justified.   Given central banks’ track record in forecasting inflation, we do not blame markets for focusing on the near-term implications. We’ll hear from Joachim Nagel and Yannis Stournaras today, respectively ECB hawk and dove. It is fair to say, also in relation to the inverted curve, that hawks have won the argument. Recent comments suggest hawks are now succumbing to the temptation to accelerate Quantitative Tightening (QT) in order, perhaps, to transmit higher rates to the back end of the curve. The US and UK experience with QT, albeit different in some respects, suggest this is a tall order. Our view is that such comments would more likely affect risk premia across markets, from currently moderate levels.   Today's events and market view US markets are closed for Independence Day today so the responsibility of feeding market-moving developments will fall squarely on Europe’s shoulders. Unfortunately, the only data scheduled after the European open is Spanish employment. Bond supply will be lively on the other hand. The UK will sell £2bn of 30Y green gilt via auction. Austria will also be active in long-end primary markets, with 10Y and 30Y auctions.  Germany is scheduled to sell 10Y inflation-linked debt. Joachim Nagel and Yannis Stournaras, sitting at opposite ends of the ECB’s hawk-dove spectrum, are the two central bankers listed for today. Markets have been more sympathetic to the hawkish argument of late but the Reserve Bank of Australia's decision to keep rates unchanged overnight shows tighter policy could also be achieved through a much slower hiking pace.

Swiss inflation lower than expected US markets closed on Tuesday Fed minutes will be released on Wednesday The Swiss franc is showing little movement on Tuesday, trading at 0.8959 in the European session. US markets are closed for the July Fourth holiday and we can expect a quiet day for USD/CHF.   Swiss inflation falls to 1.7% Switzerland’s inflation rate dipped in June to 1.7% y/y, down from 2.2% in May and just below the consensus of 1.8%. On a monthly basis, inflation rose 0.1%, down from 0.3% and below the consensus of 0.2%. Core inflation eased to 1.8% y/y, down from 1.9%. Swiss National Bank President Jordan has often complained that inflation remains too high, although other central bankers, who are grappling with much higher inflation, would be happy to change places. Both the headline and core rates have now dropped into the Bank’s target range of 0%-2%, which should lend support to the SNB taking a pause at the September meeting. However, Jordan has been quite hawkish and one positive inflation report may not be enough to convince the SNB that the decline in inflation is temporary. The markets have priced in a 66% probability of a 0.25% in September, which would bring the cash rate to an even 2.0%. US markets are closed today, but Wednesday should be a busy session as the Fed releases the minutes from the June meeting. The markets are widely expecting a rate hike in July, and there are growing concerns that if the Fed continues to hike, the economy will tip into a recession.  The spread between 2-year and 10-year Treasury note yields deepened to a 42-year high on Wednesday, raising fears of a recession. A yield curve inversion is considered a reliable indication of a recession and the current inversion has been in place since July, raising fears about the direction of the US economy.   USD/CHF Technical USD/CHF is testing support at 0.8961. Below, there is support at 0.8904 0.9009 and 0.9081 are the next resistance lines  

US crude jumps above 50-DMA  Minutes from the Federal Reserve's (Fed) latest policy meeting were more hawkish than expected. The minutes revealed that some officials preferred another 25bp hike right away instead of a pause. Almost all of them said that additional hiking would likely be appropriate, and the forecasts showed that they also expect mild recession.     The minutes came to confirm how serious the Fed is in further tightening monetary conditions, and boosted the Fed hike expectations. The US 2-year yield came very close to 5%, the stocks fell, but very slightly. The S&P500 closed the session just 0.20% lower, while Nasdaq 100 gave back only 0.03%. The US dollar gained however, the EURUSD slipped below its 50-DMA, as the Eurozone services PMI fell short of expectations. The June number still hinted at expansion, but the composite PMI slipped into the contraction zone for the first time since January, hinting that activity in Eurozone is slowing because of tightening monetary conditions in the Eurozone as well. On the inflation front, the producer prices fell 1.5% y-o-y in May, the first ever deflation since February 2021. The expectation for the 12-month inflation in EZ fell to 3.9% in May. It's still twice the ECB's 2% policy target, but it's coming down slowly. And the trajectory is certainly more important than the number itself.     Moving forward, further opinion divergence will likely appear along with softening data, but the ECB will continue hiking the rates because officials will be too afraid to stop hiking too early. And as the economic picture worsens, the credit conditions become tighter, the cheap loans dry up and the post-pandemic positivity on peripheral countries fade, we will likely see the yield spread between the core and periphery widen. And the latter could have a negative impact on the single currency's positive trajectory against the US dollar.     Due today, the ADP report is expected to reveal that the US economy added around 228K new private jobs in June, while the JOLTS is expected to have slipped below 10 mio job openings in May.      By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  

AUD/USD slips after a four-day rally China’s Services PMI eases in June Australia’s retail sales jump 0.7% in May FOMC minutes will be released later on Wednesday The Australian dollar is in negative territory on Wednesday, after a four-day rally that saw the Aussie climb 100 pips. In the North American session, the Australian dollar is trading at 0.6663, down 0.42%.   China’s Services PMI eases but indicates expansion China is Australia’s largest trading partner, making the Aussie sensitive to Chinese data. China released the Caixin Services PMI on Wednesday, and the June report showed a deceleration to 53.9, down from 57.1 in May. This still points to expansion in business activity, but the reading was the lowest in five months, which is cause for concern as China experiences a bump recovery. The soft reading sent the Australian dollar considerably lower on Wednesday.   Australian retail sales jumps 0.7% If Australia is close to a recession, it looks like someone forgot to tell the consumer, who opened up the purse strings in May. Australia’s retail sales impressed with a 0.7% gain in May, unrevised from the flash estimate. This follows a flat reading in April and matched the consensus. This was the strongest showing since January. The Reserve Bank of Australia may have preferred a weaker retail sales release, as it needs the economy to continue to slow in order to push inflation lower. The RBA would love to continue pausing rate hikes and bring some relief to households, but inflation remains far too high – the 5.6% reading in May was still almost three times above the 2% target. The RBA announced a pause at the rate meeting this week but warned that inflation risks were tilted upwards and further rate hikes might be required. The central bank delivered a “hawkish pause”, signalling that the pause did not indicate an end to the current rate-hike campaign. Money markets have priced in a 45% chance of a rate hike in August, as investors are having a tough time figuring out the RBA’s rate path, which has wavered between hikes and pauses this year. All eyes are on the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate in a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but haven’t bought into Fed Chair Powell’s stance that another hike is coming in the fall. If the minutes are hawkish, the market could fall in line with Powell which would likely give the US dollar a boost.   AUD/USD Technical AUD/USD tested 0.6659 earlier on Wednesday. Below, there is support at 0.6597 0.6722 and 0.6784 are providing support

AUD/USD slips after a four-day rally China’s Services PMI eases in June Australia’s retail sales jump 0.7% in May FOMC minutes will be released later on Wednesday The Australian dollar is in negative territory on Wednesday, after a four-day rally that saw the Aussie climb 100 pips. In the North American session, the Australian dollar is trading at 0.6663, down 0.42%.   China’s Services PMI eases but indicates expansion China is Australia’s largest trading partner, making the Aussie sensitive to Chinese data. China released the Caixin Services PMI on Wednesday, and the June report showed a deceleration to 53.9, down from 57.1 in May. This still points to expansion in business activity, but the reading was the lowest in five months, which is cause for concern as China experiences a bump recovery. The soft reading sent the Australian dollar considerably lower on Wednesday.   Australian retail sales jumps 0.7% If Australia is close to a recession, it looks like someone forgot to tell the consumer, who opened up the purse strings in May. Australia’s retail sales impressed with a 0.7% gain in May, unrevised from the flash estimate. This follows a flat reading in April and matched the consensus. This was the strongest showing since January. The Reserve Bank of Australia may have preferred a weaker retail sales release, as it needs the economy to continue to slow in order to push inflation lower. The RBA would love to continue pausing rate hikes and bring some relief to households, but inflation remains far too high – the 5.6% reading in May was still almost three times above the 2% target. The RBA announced a pause at the rate meeting this week but warned that inflation risks were tilted upwards and further rate hikes might be required. The central bank delivered a “hawkish pause”, signalling that the pause did not indicate an end to the current rate-hike campaign. Money markets have priced in a 45% chance of a rate hike in August, as investors are having a tough time figuring out the RBA’s rate path, which has wavered between hikes and pauses this year. All eyes are on the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate in a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but haven’t bought into Fed Chair Powell’s stance that another hike is coming in the fall. If the minutes are hawkish, the market could fall in line with Powell which would likely give the US dollar a boost.   AUD/USD Technical AUD/USD tested 0.6659 earlier on Wednesday. Below, there is support at 0.6597 0.6722 and 0.6784 are providing support

GBP: Watch for data outliers Today’s focus will be on the Bank of England’s Decision Maker survey, which has pointed to easing pay and price expectations over the coming months. Hard data has pointed in the opposite direction, and this might emerge again as an outlier in a very “hawkish” set of data for the BoE and markets today. Markets remain highly sensitive to any incoming developments on the price side and the still quite aggressive BoE tightening expectations (140bp by January 2024) do point to some risk of recalibration (and GBP downside risks) around any release. EUR/GBP has been weakening in the past two sessions, but may find some support around current levels and even converge back to 0.8600 as the overbought pound faces some BoE repricing threat.  

BoK likely to extend pause but stay hawkish The Bank of Korea will hold a policy meeting next Thursday. As inflation is slowing to the 2% range, the BoK is expected to keep its policy rate at the current 3.50% level. We think the central bank will continue to remain hawkish so as not to give market participants an easing signal too early.   Singapore GDP growth to see slight bounce Singapore is set to release second-quarter GDP figures next week. First quarter GDP showed that the economy contracted from the previous quarter but still managed to eke out a 0.4% YoY gain. Singapore faces the twin challenge of contracting exports and industrial production as global trade slows. One bright spot is retail sales, which have provided some support amid the resurgence of visitor arrivals. This has helped to offset softer demand caused by still-high inflation.  We expect second-quarter GDP to bounce back, with a shallow expansion of 1.4% YoY. Growth will likely be stuck in this range until global trade prospects improve.  

EUR: Looking at 1.1100 As discussed above, equity flows may be partially explaining why EUR/USD is drifting higher even though some key inputs are barely moving. The default view will be that EUR/USD is unlikely to break above 1.1100 since the Fed is still hawkish and risk assets have yet to adjust to the much more restrictive monetary policy settings around the world. It is probably dangerous to expect a range break-out, but if it were to occur this week, tomorrow's US June CPI figure would probably be the catalyst. The eurozone calendar is quite light today – just the July ZEW investor expectations survey at 11CET – and we have the lone ECB speaker of Francois Villeroy de Galhau at 10CET who is unlikely to move the needle much on current market pricing of two more 25bp ECB rate hikes by October. We have been here before and should not get over-eager on a possible range break-out, but we could see EUR/USD drifting closer to the year's highs near 1.1100.  

GBP: Pay data can keep the Bank of England hawkish for longer GBP/USD has risen to the highest levels since last April on the back of some strong UK wage data for May. As our UK economist James Smith notes, the upward surprise to UK wage growth is partly down to backward revisions. But that is not a huge comfort because looking at the private sector, which is what the Bank of England focuses on, we have seen another big month-on-month increase in pay. Whether that is partly because of the ongoing passthrough of the new National Living Wage (+10% in April), is not clear. But certainly, these are not figures the BoE will want to see and will maintain the market's exceptionally aggressive pricing of the Bank Rate up near 6.40% early next year. GBP/USD looks set to extend to 1.30 in this soft dollar environment, while EUR/GBP can retest the lows near 0.8520. 

Rates Spark: The differing US and UK strategies to fight inflation  The Bank of England looks increasingly likely to repeat its 50bp June panic hike. This should invert the GBP curve further. Contrast that to the Federal Reserve pushing a higher-for-longer message that may well result in a re-steepening of the front end.   Central banks aren't ready to see the glass half full There are plenty of indications that inflation pressure in developed markets is easing… if you’re willing to believe in survey data and leading indicators. Germany’s Zew saw another decline in July although, as a survey of investors’ sentiment, we’re never quite sure if it leads economic data or the other way around. More telling perhaps were the details of the National Federation of Independent Businesses (NFIB) index showing a slowdown in selling prices and compensation. Even the UK labour indicators showed easing supply constraints, although private sector wages are likely to give the Bank of England (BoE) sleepless nights. All is heading in the right direction then if you’re willing the see the glass half full.   But that’s not how central banks see it. Past forecast mistakes and too slow a pace of disinflation (we’re not even sure we can yet talk of disinflation in the UK) mean they are likely to err on the side of remaining too hawkish for too long. The Bank of Canada (BoC) meeting today should deliver the second 25bp hike since it restarted its hiking cycle last month. Rightly or wrongly, it is seen as a bellwether for other central bank decisions later this month, and in early August in the case of the BoE. The Fed’s decision is seen as more momentous for other central banks, given how a strong dollar could complicate their own fight against inflation. This makes today’s US CPI a very important data input into central banks’ July decisions.

GBP/USD GBP/USD (4-hour chat) has been in a general rally for the past two days, but that could be coming to an end if a bearish butterfly pattern forms. The headlines have been mostly bullish for the pound, but that could be reaching an inflection point. Inflation is forcing the BOE to be extremely hawkish and that could soon lead to a significant economic downturn.  Many traders are focusing on today’s UK wage growth, as it posted the biggest rise outside the pandemic period, but jumps in jobless claims suggest the labor market is cooling. If the pound-dollar bullish trend respects the psychological 1.3000 resistance, some bullish bets might get taken down.  The four-hour GBP/USD is displaying a potential bearish butterfly pattern.  If this technical reversal pattern holds, a moderate decline could see downward momentum target the 1.2800 region. If a dramatic move triggers a rally above the 1.3000 level, the bearish reversal pattern could be invalidated.  Further upside targets include the 1.3250 region.  

The euro is showing little movement on Monday. In the North American session, EUR/USD is unchanged at 1.1226. The US dollar was broadly lower against the majors last week and on Friday the euro hit its highest level since February 28th.   Will ECB continue hiking after July? The ECB holds its next meeting on July 27th, a day after the Federal Reserve meeting. Similar to the Fed, a rate hike is widely expected in July but there is uncertainty about what happens after that. Eurozone inflation is not expected to fall as quickly as expected, which would support the ECB continuing to deliver more rate hikes. The ECB has signalled that it will hike in July but hasn’t said much about September, other than the decision will be data-dependent. ECB Governing Council member Boris Vujcic, head of the Croatian central bank, said that the September decision remains “very open”, a nod towards a divergence of opinion at the Bank. The hawkish members want to see a rate hike in September while the doves are worried about the damage to the fragile eurozone economy, which tipped into recession in the winter. The US dollar’s downturn last week against the major currencies was intensified by the US inflation report, which was softer than expected. The headline and core rates both eased in June, raising market speculation that the Fed may finally wrap up its rate-tightening cycle after the July 26th meeting. The markets have priced in a July hike at 98% and a pause in September at 85%, according to the CME tool. Once again, the money markets are marching to their own tune. Fed members have sounded hawkish, saying that inflation remains too high and Fed Chair Powell has hinted at further tightening after the July meeting.   EUR/USD Technical EUR/USD tested support at 1.1210 earlier. The next support level is 1.1139 1.1289 and 1.1335 are the next resistance line  

CZK: Lost in translation Today's calendar in the CEE region doesn't have much to offer. In the Czech Republic, PPI numbers will be released as the last interesting print before the August Czech National Bank (CNB) meeting. PPI has been in deflationary territory for some time, and the more interesting part of the print may be agricultural producer prices. These have been indicating a significant drop in food prices for some time, which should show up in the CPI in the near term as well. Next week, Thursday starts the blackout period and we can expect more active board members in the media these days. While the market is pricing in roughly 120bp of cuts in CNB rates this year, we believe the central bank wants to see much more before the first cut and will wait until November with the risk of delaying until the first quarter of next year to be sure inflation hits the 2% target. We therefore expect the governor to try to fight market expectations again at the August meeting. In the meantime, yesterday's comments for the budget committee in parliament on expectations of a weaker koruna pushed EUR/CZK from 23.750 to 23.850, with the end of the CNB's FX quasi-commitment in sight. We believe the meaning was lost in translation, but this is not good news for the koruna. Given favourable global conditions, we believe the weakening of the CZK was just yesterday's story, however further weakness could push the CNB to be more hawkish and delay rate cuts even further.

A week packed with earnings and central bank decisions Last week ended on a caution note after the first earnings from Big Tech companies were not bad, but not good enough to further boost an already impressive rally so far this year. The S&P500 closed the week just 0.7% higher, Nasdaq slipped 0.6%, while Dow Jones recorded its 10th straight week of gains, the longest in six years, hinting that the tech rally could be rotating toward other and more cyclical parts of the economy as well.   This week, the earnings season continues in full swing. 150 S&P500 companies are due to announce their second quarter earnings throughout this week. Among them we have Microsoft, which is pretty much the main responsible of this year's tech rally thanks to its ChatGPT, Meta, Alphabet, Visa, GM, Ford, Intel, Coca-Cola and some energy giants including Exxon Mobil and Chevron.   On the economic calendar, we have a busy agenda this week as well. Today, we will be watching a series of flash PMI figures to get a sense of how economies around the world felt so far in July, then important central bank meetings will hit the fan from tomorrow. The early data shows that both manufacturing and services in Australia remained in the contraction zone, as Japan's manufacturing PMI dropped to a 4-month low in July. German figures could also disappoint those watching the EZ numbers.   On the central banks front, the Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of Japan (BoJ) will meet this week, and the first two are expected to announce 25bp hike each to further tighten monetary conditions on both sides of the Atlantic.     Zooming into the Fed, activity on Fed funds futures gives almost 100% chance for this week's 25bp hike. But many think that this week's rate hike could be the last of this tightening cycle, as inflation is cooling. But the resilience of the US labour market, and household consumption will likely keep the Fed cautiously hawkish, and not announce the end of the tightening cycle this Wednesday. There is, on the contrary, a greater chance that we will hear Fed Chair Jerome Powell rectify the market expectations and talk about another rate hike in September or in November. Therefore, the risks tied to this week's FOMC meeting are tilted to the hawkish side, and we have more chance of hearing a hawkish surprise rather than a dovish one. Regarding the market reaction, as this week's Fed meetings falls in the middle of a jungle of earnings, stock investors will have a lot to price on their plate, so a hawkish statement from the Fed may not directly impact stock prices if earnings are good enough. Bond markets, however, will clearly be more vulnerable to another delay of the end of the tightening cycle. The US 2-year yield consolidates near the 4.85% level this morning, and risks are tilted to the upside. For the dollar, there is room for further recovery as the bearish dollar bets stand at the highest levels on record and a sufficiently hawkish Fed announcement could lead to correction and repositioning.  Elsewhere, another 25bp hike from the ECB is also seen as a done deal by most investors. What investors want to know is what will happen beyond this week's meeting. So far, at least 2 more 25bp hikes were seen as almost certain by investors. Then last week, some ECB officials cast doubt on that expectation. Now, a September rate hike in the EZ is all but certain. The EURUSD remains under selling pressure near the 1.1120 this morning, the inconclusive Spanish election is adding an extra pressure to the downside.   Finally, the BoJ is expected to do nothing, again, this week. Japanese policymakers will likely keep the policy rate steady in the negative territory and the YCC policy unchanged. The recent U-turn in BoJ expectations, and the broad-based rebound in the US dollar pushed the USDJPY above the 140 again last Friday, and there is nothing to prevent the pair from re-testing the 145 resistance if the Fed is sufficiently hawkish and the BoJ is sufficiently dovish.     By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  

Asia Morning Bites Politburo pledges support for China's economy - we await detailed plans.   Global Macro and Markets Global markets:  US equity markets made small gains yesterday, though the price action was far from conclusive. The S&P settled 0.4% higher than the previous day while the NASDAQ rose just 0.19%. Chinese stocks fell. The Hang Seng was down 2.13% and the CSI 300 fell 0.44%. That might change today after a Chinese Politburo meeting yesterday vowed to provide more aid for the property sector as well as boost consumption and tackle local government debt issues. Equity futures are positive, but we will reserve judgement until we hear some details. We have had plenty of vague promises already, which don’t amount to a great deal so far. US Treasury yields seem to have decided that this week’s FOMC meeting will be hawkish, and 2Y yields jumped up 8.2bp to 4.919% yesterday. The yield on 10Y bonds rose just 3.8bp to 3.872%. EURUSD fell again yesterday, dropping to 1.1063. The AUD was flat at 0.6734, Cable dipped to 1.2816, and the JPY remained stable at 141.59. Asian FX didn’t move much yesterday. The TWD fell 0.39% after industrial production fell slightly more than expected. At the other end of the spectrum, the KRW made gains of 0.28%. The CNY was unchanged. G-7 macro:  PMI data yesterday was weaker across much of the Eurozone, and the aggregate composite PMI dropped a full point to 48.9, with very weak manufacturing (42.7 from 43.4) and a slowdown in service sector growth (51.5 from 53.7). The equivalent US series showed a smaller manufacturing contraction (49.0) but also showed service sector growth slowing (52.4 from 54.4). Today, Germany’s Ifo survey will add more detail on the German situation. The US releases house price data (S&P CoreLogic numbers as well as FHFA data). And the US Conference Board releases its July confidence data. South Korea: Korea’s real GDP rose 0.6% QoQ sa in 2Q23 (vs 0.3% in 1Q23, 0.5% market consensus). 2QGDP was up from the previous quarter and slightly higher than the market consensus, but the details were quite disappointing. Net exports contributed to the growth (+1.3pt) but it was mainly because the contraction of imports (-4.2%) was deeper than that of exports (-1.8%). Looking ahead, we think that GDP in 2H23 will slow down again, as forward-looking data for domestic demand indicates a further deterioration. Please see our 2H23 outlook details here.  We think today’s data should be a concern for the Bank of Korea as exports remain sluggish amid expectations of a further worsening of domestic growth. Also, this year’s fiscal support is likely to remain weak, considering the tax revenue deficit and normalization of covid related fiscal spending. Thus, the BoK’s policy focus will gradually shift from inflation to growth over the next few months as we expect inflation to stay in the 2% range most of the time in 2H23. Indonesia:  Bank Indonesia meets today to decide on policy.  BI is widely expected to keep rates untouched at 5.75% to help shore up the IDR and ensure FX stability.  Previous dovish comments from BI Governor Warjiyo suggesting rate cuts could be considered have been set aside for now and we could see an extended pause from BI with any rate cut only considered later on.     What to look out for: Central bank decisions Bank Indonesia policy meeting (25 July) Hong Kong trade (25 July) US Conference board consumer confidence (25 July) Australia CPI (26 July) Singapore industrial production (26 July) US new home sales (26 July) US FOMC decision (27 July) China industrial profits (27 July) ECB policy decision (27 July) US personal consumption, durable goods orders initial jobless claims (27 July) South Korea industrial production (28 July) Japan Tokyo CPI and BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)

Korea: 2Q23 GDP improved but with disappointing details South Korea’s real GDP accelerated to 0.6% QoQ (sa) in 2Q23 from 0.3% in 1Q23, which was slightly higher than the market consensus of 0.5%. However, the details were quite disappointing with exports, consumption, and investment all shrinking. We expect growth to slow in 2H23.   Net exports contributed positively to overall growth The upside surprise mainly came from a positive contribution from net exports (+1.3pt). However, we do not interpret this in a positive light, because it was not driven by an improvement in exports, but rather by a contraction of imports (-4.2%), which was deeper than that of exports (-1.8%). By major item, exports of vehicles and semiconductors rose as global supply conditions improved and global demand remained solid. But, exports of petroleum/chemicals and shipping services declined further with unfavourable price effects weighing. Falling commodity prices have had a positive impact on Korea's overall terms of trade, having a greater impact on imports, but "processed" exports such as petroleum/chemicals and shipping took more of a hit.   Net exports led growth but due to sharper decline of imports than exports   Meanwhile, domestic demand dragged down overall growth by -0.6pt As monthly activity and sentiment data already suggested, private consumption was down -0.1% with declining service consumption, while investment – both construction (-0.3%) and facilities (-0.2%) – contracted. Also, government expenditure dropped quite sharply (-1.9%) as spending on social security declined. We believe that the reopening boost effects on consumption have finally faded away, while tight credit conditions have also dampened investment. R&D investment (0.4%) was an exception, rising for the second consecutive quarter on the back of continued investment in new technologies.   GDP in 2H23 will likely decelerate again Forward-looking data on domestic demand indicates a further deterioration in domestic growth. Construction orders, permits, and starts have been declining for several months, while capital goods imports and machinery orders have also trended down recently. With continued market noise surrounding project financing and growing uncertainty over global demand conditions, business sentiment for new investment is very weak. This year’s fiscal spending will also not support the economy meaningfully, considering the tax revenue deficit and normalization of covid related spending. However, we think trade will take the lead in a modest recovery. We believe that exports will rebound by the end of the third quarter with support from improved vehicle demand, semiconductors, and machinery (despite the global headwinds). Please see our 2H23 outlook details here.   Korea's GDP is expected to slow down in 2H23     Although 2Q23 GDP was higher than expected, the details suggest a weaker-than-expected recovery in 2H23, together with weak forward-looking data, thus we keep our current annual GDP forecast for 2023 unchanged at 0.9% YoY.   The Bank of Korea watch We think today’s data should be a concern for the Bank of Korea (BoK). The BoK forecast growth to accelerate in 2H23 on the back of better exports. We agree that export conditions will improve, but we don't think they will be strong enough to dominate weak domestic growth, and today’s data also suggests that growth will slow down in the near future. Thus, the BoK’s policy focus will probably gradually shift from inflation to growth in 4Q23. In 3Q23, we believe that the BoK will continue to keep its hawkish stance while keeping a close eye on other major central banks’ monetary policies. Also, inflation may fluctuate a bit over the Summer season due to soaring fresh food prices amid continued severe weather conditions. However, if inflation stays in the 2% range for most of 2H23, then the BoK’s tone should shift to neutral and eventually revert to an easing cycle.

FX Daily: Dollar to stay supported into the Fed Fed day has arrived. A 25bp hike is widely expected and it looks far too early for the central bank to soften up its FOMC statement by embracing recent disinflationary trends. This should see the dollar holding onto some of its modest gains made over the last week. Elsewhere, the EM and commodity complex will want to be fed more news on China stimulus.   USD: Dollar to hold gains A look at FX performance over the last five trading sessions provides a good insight into the market's mindset and echoes the themes we highlighted yesterday of European pessimism and Chinese optimism. In the G10 space, the dollar has been the strongest currency but able to withstand that modest dollar strength the best has been the commodity complex of the Australian and Canadian dollars, plus the Norwegian krone. Underperforming has been the euro, with EUR/USD down 1.3% over the week. Indeed, we have seen independent euro weakness on the back of the soft PMI data and European Central Bank (ECB) lending survey. In the EM space, a similar story is playing out. Outperforming is the renminbi and its two most correlated currencies in the EM space, the South African rand and the Brazilian real. Underperforming on the back of the weak European story are the Hungarian forint and the Czech koruna. Also underperforming is the Chilean peso, where the central bank has recently announced a programme to replenish sorely depleted FX reserves. Important drivers of the FX story near term will therefore be whether the Federal Reserve stays hawkish, whether the ECB stays hawkish in the face of softening data and whether Chinese authorities follow through with detailed and sufficiently powerful stimulus to see the commodity currencies hold onto recent gains. Regarding the Fed, we think it is too early to remove key language from its statement that further tightening may be appropriate after today's 25bp hike. And we wonder whether it wants to push back against the 100bp of easing priced in for 2024. We see the Fed event risk as a mildly positive one for the dollar. DXY to trade 101.00-101.50 into the Fed, with risks of a breakout to 102.00 today.

EUR: Soggy The ECB's euro trade-weighted index has fallen 1.3% so far this week. That is quite a sharp move. It seems investors have been unnerved by both the soft July PMI data and the ECB bank lending survey. The latter showed much tighter lending standards and a sharp decline in loans, particularly among businesses. There is not much European data today and instead, it looks as though EUR/USD will continue to trade on the soggy side through the session – especially since some of the China stimulus-powered rally in related asset classes (e.g., China mainland equities) looks to be petering out.  In our Fed preview published last week, we had targeted EUR/USD at 1.1050 on a slightly hawkish Fed meeting today. Softer European data has already brought us to that level. That suggests risk in EUR/USD towards 1.1000 on the back of the Fed at 20CET today – assuming the FX options market is correctly pricing a 60 pip range for EUR/USD over the next 24 hours. Elsewhere, the softer euro has seen EUR/CHF dip to 0.9550. Swiss National Bank (SNB) sight deposit data released on Monday suggested the SNB was still selling FX reserves last week to get the trade-weighted Swiss franc stronger to fight inflation. The SNB does seem to like complete control over this currency pair and while the direction of travel may be 0.9500 or even last September's low near 0.9415, expect the moves to be very gradual.

EUR: Hawkish ECB, but will we hear more about QT? Here is our full European Central Bank (ECB) preview and also a look at some of the key variables that could drive a reaction in eurozone FX and rates markets. The challenge now for the ECB is to deliver a hawkish message – a 25bp hike and the promise of more still to come – while balancing the risks that its growth forecasts are too high. One common pushback from customers against our bullish EUR/USD view is that ECB hawkishness will crumble early and not allow US and eurozone rate differentials to narrow as we expect. Assuming the ECB does maintain market expectations that the deposit rate (now 3.50%) will be close to 4.00% by the end of the year, what else could we see? One intriguing idea is that the hawks, in exchange for backing off from subsequent rate hikes, will be given something on quantitative tightening. Currently, re-investments of the APP scheme ended last month. PEPP reinvestments are targeted to continue until the end of 2024. Could PEPP reinvestments be cut shorter, or could the discussion move onto outright asset sales – moves that might upset both peripheral government bond markets and European credit markets? The market reaction might be tricky, but presumably, EUR/CHF could stay under pressure should this be the case. We do not have a strong conviction call on EUR/USD today but would say 1.1150 looks good intra-day resistance and 1.1000/1020 is now the lower end of the near-term trading range.

Fed and ECB will have a big role to play in EURUSD moves over the next 24 hours Will both offer a final dovish hike and emphasize data dependency? EURUSD faces a big test around 1.10 after breaking out earlier this month EURUSD is trading a little choppy over the last couple of days with traders clearly heavily focused on the outcome of the Fed and ECB meetings. In both cases, a 25 basis point rate hike is heavily backed in the markets, but at the same time, the language that accompanies the decision and what comes next is less obvious. I think there’s every chance that in both cases, policymakers opt to accept that a pause at the next meeting may be appropriate while in no way closing the door on further hikes in the months ahead. In other words, data dependency will be heavily emphasized with the overall tone perhaps being a dovish hike with a slight hawkish twist. The last thing policymakers want is for investors to perceive this to be the end of the tightening process but that will be a very tough message to get across, particularly in the absence of fresh forecasts. The economic data has undoubtedly improved as far as inflation prospects are concerned while the economy is clearly weakening, furthering the case for a pause in September. Both of these factors will likely be emphasized when signaling that further hikes will depend on the data.   The pair has pulled back over the last week or so after finally breaking above 1.10 earlier this month. EURUSD Daily   Source – OANDA on Trading View A weaker dollar has stemmed from data in the US becoming more Fed-friendly – weaker inflation, softer economy – but this week the ECB will be equally as influential in determining whether the pair stays above 1.10 or slips back below. Of course, the Fed is up first so it will set the tone to begin with. A hawkish Fed could strengthen the dollar and put pressure on support around 1.10, the lower bound of the range – 1.10-1.11 – that provided so much resistance over the course of 2023. Anything deemed dovish could see the pair rally once more, in effect confirming the breakout earlier this month and potentially putting pressure on last week’s highs, maybe even beyond.  

CZK: Koruna is only one in the region to resist global influences The Czech koruna is the only currency in the CEE region that has surprisingly resisted losses. The widely expected depreciation after the end of the Czech National Bank's intervention regime two weeks ago did not come and, moreover, the strong US dollar does not seem to be weighing on the koruna. The balance sheet data also refutes any suspicions that the central bank would be active in the market again and prevent the CZK from weakening. IRS rates are following US rates in a rapid pace upwards, which was probably helped by the very stretched dovish expectations earlier. Plus, it appears the CNB hawkish story may have one more mini episode thanks to the spike in fuel prices following the August excise tax hike. This, by our calculations, could lead headline inflation above the CNB's forecast, whereas so far inflation has basically only surprised to the downside in recent months. Thus, the market may later find the current upward correction in rates to be justified. But it is too early to tell. For now, however, the interest rate differential in the Czech Republic seems to be the only one on a significant upswing, supporting FX. Based purely on yesterday's rate move, our model indicates that this could be enough for the koruna to move below 24.0 EUR/CZK for the first time since the last CNB meeting. Of course, the Czech Republic is not in a vacuum and a stronger US dollar or higher gas prices could also have an impact here, but for now it seems to be an island of safety in the region.

CZK: Koruna is only one in the region to resist global influences The Czech koruna is the only currency in the CEE region that has surprisingly resisted losses. The widely expected depreciation after the end of the Czech National Bank's intervention regime two weeks ago did not come and, moreover, the strong US dollar does not seem to be weighing on the koruna. The balance sheet data also refutes any suspicions that the central bank would be active in the market again and prevent the CZK from weakening. IRS rates are following US rates in a rapid pace upwards, which was probably helped by the very stretched dovish expectations earlier. Plus, it appears the CNB hawkish story may have one more mini episode thanks to the spike in fuel prices following the August excise tax hike. This, by our calculations, could lead headline inflation above the CNB's forecast, whereas so far inflation has basically only surprised to the downside in recent months. Thus, the market may later find the current upward correction in rates to be justified. But it is too early to tell. For now, however, the interest rate differential in the Czech Republic seems to be the only one on a significant upswing, supporting FX. Based purely on yesterday's rate move, our model indicates that this could be enough for the koruna to move below 24.0 EUR/CZK for the first time since the last CNB meeting. Of course, the Czech Republic is not in a vacuum and a stronger US dollar or higher gas prices could also have an impact here, but for now it seems to be an island of safety in the region.

National Bank of Hungary preview: The moment of truth With the expected merger of the base and effective rates next month seemingly a done deal, the time has come to think ahead. We see the National Bank of Hungary (NBH) using its meeting next week to manage market expectations for monetary policy in the fourth quarter. Plus, we expect an effective rate cut of 100bp.   The story hasn't changed We see no reason for the National Bank of Hungary (NBH) to change its recent monetary strategy. Even though the Hungarian forint has shown a lot of sensitivity to global factors, it has managed to remain in a roughly acceptable range since the central bank's July rate-setting meeting. The recent gravity line of 382 in EUR/HUF, combined with the settled rate cut expectations of the market, make the upcoming choice of the Monetary Council an easy one.   CEE currencies vs EUR (end 2022 = 100%)   Since we are still in phase one of monetary policy normalisation, where the effective rate is closing in on the base rate, the focus is mainly on market stability. Price stability issues will come to the fore when we enter the next phase of normalisation, after the merger of the effective rate and the base rate at 13% in September. This call is also telling in terms of our expectations for the rate decision next Tuesday. We think the National Bank of Hungary will cut the effective rate by 100bp to 14%, and we expect the O/N repo rate (the top end of the interest rate corridor) to be lowered by the same amount, reaching 16.5%. The central bank will replicate the 100bp rate cut in the FX swap tenders as well.   The main interest rate (%)   As this combination looks to be the market consensus by a wide margin, this outcome is unlikely to cause any surprises. What could be the wild card of the August meeting is the possible revelation of future monetary policy strategies. As a reminder, the Monetary Council’s pledge when it started the easing cycle was four-fold: Cautiousness. Graduality. Constant monitoring of market reactions and forward-looking rate expectations. Clear and forward-looking communication. If the central bank would like to live up to its pledges – which it has done so far – the August rate-setting meeting could be the perfect time to guide markets on what to expect after the September merger.   Moreover, as recent market history has shown that markets can be very volatile at the end of quarters and even more so at the end of the year, the National Bank of Hungary may use this rate-setting meeting to try to anchor expectations (and market rates) for the coming year-end.   The new era ahead requires an updated forward guidance What exactly the central bank’s new forward guidance will be we cannot predict. However, recent global risk-off scenarios (a US credit rating downgrade, Chinese property woes, energy-related issues related to threatened LNG worker strikes in Australia that could impact gas prices, the collapse of the Black Sea grain deal, plus talk of further interest rate hikes by major central banks – even if they don't materialise) are adding a lot of unwanted uncertainty. In this regard, we won’t be surprised if there is some extra hawkishness from the central bank, underscoring the need to be super-cautious in its second phase of policy normalisation. Such a speech could emphasise patience, leading to a possible (short) pause from September and/or a reduction in the pace of rate cuts. In contrast with the growing uncertainty of market stability, price stability seems to be less of an uncertainty, at least in the short run. Headline inflation peaked at 25.7% in January and sat at 17.6% in July. Thanks to the base effects and collapsing domestic demand, disinflation will speed up in the coming months with the reading falling close to or even below 10% as soon as October. Such sharp disinflation will result in a massive positive real interest rate environment as the fourth quarter arrives. This clearly opens the door to base rate cuts, especially given the record-long technical recession, which has stretched out to four quarters after a significant downside surprise in economic activity in the second quarter.     ING's inflation and base rate forecasts for Hungary   All of this will make the Monetary Council's decision on interest rates after September quite delicate. There are opposing forces, such as green lights on the inflation outlook and some red flags on the market stability outlook. This is the main reason why we think the National Bank of Hungary will strike an extremely cautious tone in its revised forward guidance. It might try to steer investors to the hawkish side, as this seems to be a safer bet for the central bank in this environment.

All ears on Powell and Lagarde at Jackson Hole today   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     After an initially positive start to the day yesterday, only the FTSE100 managed to eke out any sort of gains, after a rebound in yields and the fading of the Nvidia sugar rush saw European markets slip into negative territory.   US markets, having started very much in a positive vein with the Nasdaq 100 leading the way higher, also turned tail as bond yields pushed higher, along with the US dollar, finishing the day sharply lower. As we look towards today's European open, the rise in yields and weak finish in the US, as well as weakness in Asia this morning, is set to see European markets open lower this morning. Much of the narrative for this month was supposed to be centred around what Fed chair Jay Powell would likely say at Jackson Hole today with respect to the prospect of another pause in the rate hiking cycle when the FOMC meets next month.   This week's poor economic data out of Germany and France has shifted the spotlight a touch when it comes to central bank policy towards the European Central Bank and Christine Lagarde's speech, at 8pm tonight, after Powell who is due to speak at 3:05pm.   While this year's Symposium is titled "Structural Shifts in the Global Economy" it won't be just Jay Powell whose words will be closely scrutinised for clues about rate pauses next month it will also be the Bank of England and the Bank of Japan where markets will be looking for important insights into the risks facing central banks in terms of the risks in over tightening monetary policy at a time when the challenges facing the global economy are numerous.   This week's PMIs have highlighted the challenges quite clearly to the point that it appears the ECB may well also look at a rate pause next month, alongside the Federal Reserve, although the reasons for an ECB pause are less about inflation falling back to target, than they are about a tanking economy.   The latest German PMIs suggest the prospect of another quarter of contraction in Q3, while the Bank of England has a similar problem, although the bar for a pause next month is slightly higher given how much higher UK CPI is relative to its peers.   Before we hear from ECB President Christine Lagarde, Powell will set the scene just after US markets open, and his tone is likely to be slightly less hawkish than he was a year ago.  When Powell spoke last year, he made it plain that there was more pain ahead for US households and that this wouldn't deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up. While Powell is unlikely to be anywhere near as hawkish, as he was last year, he won't want to declare victory either. As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it's unlikely he will deliver any dovish surprises.   This belief of a slightly hawkish Powell is likely to have been behind yesterday's sharp declines in US markets, which were driven by rising yields as investors continued to price in higher rates for longer. Not even a set of blow-out earnings from Nvidia was enough to keep markets in the black, with the shares opening at a new record high above $500, before sliding back to finish on the lows of the day, closing unchanged. The inability to hold onto any of the early gains suggests that the recent enthusiasm for this $1trn chipmaker may be due a pause. While investors will be focussing on Powell, the focus today returns to the German economy and in the wake of this week's poor PMIs we'll be getting the latest snapshot of the business sentiment in Europe's largest, but also sickest economy, as well as the final reading of Q2 GDP.   The most recent German IFO business climate survey showed sentiment falling to its lowest level since October last year in July at 87.3 and is expected to slow further to 86.8. Expectations also slipped back to 83.5 suggesting the economy could remain in recession in Q3.   Any thoughts that we might see an improvement in August are likely to have been dealt a blow by the sharp rise in oil prices seen in the last few weeks, as well as this week's PMIs. With recent economic data out of China also suggesting a struggling economy, German exporters are likely to continue to find life difficult.        EUR/USD – sinking below the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feelsrange bound with resistance at the 1.1030 area.   GBP/USD – slipped below the 1.2600 area which could well open up a move towards 1.2400 and the 200-day SMA.  We still have resistance at the 1.2800 area and 50-day SMA.       EUR/GBP – the rebound off this week's 11-month low at 0.8490 looks set to retest the 0.8600 area. We also have resistance at the 0.8620/30 area.   USD/JPY – rebounded off the 144.50 area with resistance at the highs this week at the 146.50 area, with resistance also at 147.50.   FTSE100 is expected to open 5 points lower at 7,328   DAX is expected to open 39 points lower at 15,582   CAC40 is expected to open 16 points lower at 7,198    

The Japanese yen is trading quietly at the start of the week. In the North American session, USD/JPY is trading at 146.60, up 0.11%. The yen has plunged 3.05% in August against the US dollar and is trading at its lowest levels since November 2022.   Powell, Ueda speak at Jackson Hole  There was a degree of anticipation as major central bankers gathered at the Jackson Hole summit. The meeting has been used as a launch-pad for shifts in policy, but one would be hard-pressed to point to any dramatic news from the summit. Bank of Governor Kazuo Ueda stayed true to his script that underlying inflation remains lower than the BoJ’s target of 2% and as a result, the BoJ will stick with the current ultra-easy policy. Ueda has followed his predecessor Haruhiko Kuroda and insisted that he will not lift interest rates until there is evidence that domestic demand and stronger wage growth replace cost-push factors and keep inflation sustainably around the 2% target. Ueda continues to argue that inflation is below target and that he expects inflation to fall, but core inflation indicators continue to point to broad-based inflationary pressures and have remained above the 2% target for around 15 months. Still, the BoJ is sticking to its loose policy and trying to dampen speculation that it will tighten policy. The BoJ tweaked its yield curve control policy in July but at the time, Ueda insisted that the move was not a step towards normalization of policy. Federal Chair Jerome Powell delivered the keynote speech on Friday, but anyone looking for dramatic headlines walked away disappointed. Powell reiterated that the battle to lower inflation to the 2% target “still has a long way to go”. Powell was somewhat hawkish with regard to interest rates, saying that the Fed would “proceed carefully” with regard to raising rates or putting rates on hold and waiting for additional data. There was no mention of rate cuts, a signal that the Fed isn’t looking to trim rates anytime soon. The future markets responded by raising the odds of a rate hike in September to 21%, up from 14% a week ago.   USD/JPY Technical There is resistance at 147.19 and 147.95 145.86 and 145.10 are providing support    

Remember that 'back to school' feeling at the end of summer? A tedious car journey home after holiday fun, knowing you'll be picking up where you left off? I'm afraid we've got a very similar feeling about the global economy right now. 'Are we nearly there yet?'. No.  Very few reasons to be cheerful Lana del Rey's Summertime Sadness classic comes to mind as we gear up for autumn. And I'm not just talking about chaotic weather or even, in my case, disappointing macro data. Most of us have had the chance to recharge and rethink over the past couple of months. and I'm afraid all that R&R has done little to brighten our mood as to where the world's economy is right now. Sure, the US economy has been holding up better than we thought. And yes, the eurozone economy grew again in the second quarter. Gradually retreating headline inflation should at least lower the burden on disposable incomes. And let's be thankful for the build-up of national gas reserves in Europe, which should allow us to avoid an energy supply crisis this winter unless things turn truly arctic. But that's about as upbeat as I can get. We still predict very subdued growth to recessions in many economies for the second half of the year and the start of 2024. The stuttering of the Chinese economy seems to be more than only a temporary blip; it seems to be transitioning towards a weaker growth path as the real estate sector, high debt and the ‘de-risking’ strategy of the EU and the US all continue to weigh on the country's growth outlook. In the US, the big question is whether the economy is resilient enough to absorb yet another potential risk factor. After spring's banking turmoil, the debt ceiling excitement, and more generally, the impact of higher Fed rates, the next big thing is the resumption of student loan repayments, starting in September. Together with the delayed impact of all the other drag factors, these repayments should finally push the US economy into recession at the start of next year. And then there's Europe. Despite the weather turmoil, the summer holiday season seems to have been the last hurrah for services and domestic demand in the eurozone. Judging from the latest disappointing confidence indicators, the bloc's economy looks set to fall back into anaemic growth once again.   Little late summer warmth This downbeat growth story does have an upbeat consequence; inflationary pressure should ease further. It's probably not going to be enough to bring inflation rates back to central banks’ targets, but they should be low enough to see the peak in policy rate hikes. Central bankers would be crazy to call an end to those hikes officially; they don't want to add to speculation about when the first cuts might come, thereby pushing the yield further into inversion. And there's also the credibility issue - you never know, prices might start to accelerate again. So, expect major central bankers to remain hawkish at least until the end of the year. In our base case, we have no further rate hikes from the US Federal Reserve and one final rate rise by the European Central Bank. However, in both cases, these are very close calls, and the next central bank meetings are truly data-dependent. Sometimes, a Golden Fall or Indian Summer can make up for any summertime sadness. But it doesn’t look as if the global economy will be basking in any sort of warmth in the coming weeks. The bells are indeed ringing loud and clear. Vacation's over; school is here. And while I'm certainly too old for such lessons, I'm taken back to that gloomy, somewhat anxious feeling I had as a kid as summer wanes and the hard work must begin once again.      

ECB cheat sheet: Is a hike hawkish enough? Markets are torn. Will the ECB hike this week or not? We think it will, but we look at how different scenarios can impact rates and FX. Even in our base case, we suspect that convincing markets that this is not the peak will be very hard, and dovish dissenters may get in the way. The upside for EUR rates and the euro may not be that big and above all, quite short-lived.       As discussed in our economics team’s European Central Bank meeting preview, we narrowly favour a rate hike this week. The consensus of economists is slightly tilted towards a hold, and markets also see a greater chance of no change (60%). In the chart above, we analyse four different scenarios, including our base case, and the projected impact on EUR/USD and 10-year bunds. We expect to see a more fragmented than usual Governing Council at this meeting. Whichever direction the ECB decides to take, the debate will likely be fiercer than in previous meetings, as lingering core inflationary pressure is being counterbalanced by evidence of rapidly worsening economic conditions in the euro area. Accordingly, expect the overall messaging by the ECB to be influenced not only by the written communication but also by: a) how much President Christine Lagarde manages to conceal growing division and disharmony within the Governing Council during the press conference and; b) any post-meeting “leaks” to the media, which could be used by dissenters to influence the market impact.        

GBP: Wage data not as hawkish as it looks The UK has just released wage and employment data. On the face of it, an as-expected 7.8% three-month/year-on-year rise in ex-bonus weekly earnings in July makes the case for the Bank of England to remain hawkish. But here is what our UK economist, James Smith, thinks of the data.    The UK wage numbers are actually more dovish than they look at first glance. At the headline level, regular pay growth stayed at 7.8% on a 3M/YoY basis- - no surprises there. But drill down and if you strip out the public sector, private sector pay barely increased in level terms between June and July. And if we look at the altnerative wage measure based on payrolls, that actually fell in level terms for the second consecutive month. It is only one data point, admittedly, and several upside surprises preceded it. But with unemployment notching higher, the labour market data doesn't scream a need to keep hiking rates much further. We think it right not to chase EUR/GBP too much lower on this data (it is currently reversing from a brief dip to 0.8570) and what could prove a mildly hawkish ECB on Thursday warns of EUR/GBP breaking above 0.8600 later this week.

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.

Goods and shelter progress enough for a pause, cuts will require improvement in ex-housing services: A third straight 0.2% m/m core CPI print would meet many Fed officials’ criterion to consider a pause, at least based on progress on the inflation mandate. Indeed, at a Q&A during a 13 July speech, Governor Waller (one of the more hawkish-leaning FOMC participants) said that two more “good” CPI prints could suggest stopping hikes. July comprised one, and we think August will comprise two. While this outcome is likely to help justify a pause, we think the Fed will need to see more progress on the non-housing services inflation front in order to entertain rate cuts. To wit, Powell said “some further progress here [in non-housing services inflation] will be essential to restoring price stability.”  

EUR: Resistance holds In the end, EUR/USD did not even get to test resistance at 1.0765 before falling back. 1.0650 seems the risk today given the event risk of hawkish Fed speakers. Locally, the focus will be on the eurozone PPI figures, another set of weak German industrial production figures and some European Central Bank speakers later in the day. As we have been saying recently, the euro story looks weak and EUR/USD will only rally if the US story is weak enough to trigger some clear bullish flattening of the US yield curve. That scenario looks premature. The baseline may be some kind of 1.0550-1.0750 range now unless the US data takes a decided turn for the worse. Elsewhere, the Scandi FX story has been interesting. The Swedish krona understandably did well in the lower rate, risk-on environment. The Norwegian krone performance has been very underwhelming and warns that EUR/NOK could be banging on the door at 12.00 again if US rates move higher again. Here, look out for event risks from US Treasury auctions this week. Three, ten and thirty-year Treasuries are auctioned today through Thursday.

CEE: Rates should drive FX to further gains This week we start today in the Czech Republic, where wage numbers, key to the central bank, will be released. Markets expect real wages to fall 0.7% YoY in Q3, while the central bank expects 1.0% YoY. The National Bank of Poland (NBP) has a press conference scheduled today after the MPC published a statement on Friday on the incoming government's intention to suspend the governor. On Wednesday and Thursday, we will have some hard economic data across the region including industrial production or retail sales in the Czech Republic, Hungary and Romania. Also on Wednesday, we will see a decision from the NBP. We expect interest rates to be unchanged in line with market expectations. So the main event here will be the press conference on Thursday. On Friday, we will see inflation numbers in Hungary, where we expect another jump down from 9.9% to 7.9% YoY, slightly below market expectations. Also on Friday, S&P will publish a rating review of Hungary. The agency cut the rating down earlier this year, so we can't expect much new here. CEE FX remains volatile following the global story. However, if EUR/USD stabilises this week, rates should take over as the main driver again. Here, the picture for CEE remains positive. With core rates falling and lower beta of local rates in the region, interest rate differentials have improved in favour of CEE across the board. We expect more gains from PLN, which should be supported by the NBP's hawkish turn. EUR/PLN briefly touched lows of 4.320 on Friday, and we expect further testing of lower levels later. EUR/HUF, despite wild moves last week, should head lower after HUF rates stabilised. On the other hand, we expect EUR/CZK to move up towards 24.40 after the dovish data expected this week.

Eurozone, German Service PMI ease in December Euro snaps four-day rally The euro has snapped a four-day winning streak on Friday. In the European session, EUR/USD is trading at 1.0949, down 0.38%. The euro has enjoyed a strong week, with gains of 1.77%. Soft Eurozone, German services PMIs weigh on euro Eurozone Services PMI eased in December, indicating that the economy continues to struggle. The PMI fell from 48.7 to 48.1 and missed the consensus estimate of 49.0. This marked a fifth straight month of contraction in the services sector, with 50 separating contraction from expansion. Germany, the largest economy in the eurozone, also reported a decline, with the PMI falling to 48.4, down from 49.6 in November and short of the consensus estimate of 49.8. Euro soars after ECB pause The European Central Bank held the benchmark rate at 4.0% for a second straight time on Thursday. This move was expected, but the central bank pushed back against market expectations for interest rate cuts next year, sending the euro soaring 1.09% against the US dollar after the announcement. ECB President Christine Lagarde reaffirmed that the Bank would continue its “higher for longer” stance, saying that the Bank was not about to let down its guard and lower rates. Lagarde sounded hawkish even though the ECB lowered its inflation forecast at the meeting. Inflation has fallen to 2.4% in the eurozone, within striking distance of the 2% target. Lagarde acknowledged that inflation was easing but said that domestic inflation was “not budging”, largely due to wage growth.   There is a deep disconnect between the markets and the ECB with regard to rate policy. ECB President Lagarde poured cold water on expectations for rate cuts, arguing that inflation had not been beaten. The markets are marching to a very different tune and have priced in at least in around six rate cuts in 2024 and are confident that Lagarde will have to change her stance, with inflation falling and the eurozone economy likely in recession. . EUR/USD Technical EUR/USD is testing support at 1.0957. Below, there is support at 1.0905 1.1044 and 1.1096 are the next resistance lines    

Bank of Canada preview: Too early for a radical pivot Core inflation came in hotter than expected in December which rules out the Bank of Canada shifting meaningfully in a dovish direction at the January meeting. However, higher interest rates are biting and we continue to look for rate cuts from the second quarter onwards. US-dependent BoC rate expectations and the Canadian dollar may not move much for now.   Hot inflation warrants caution before dovish turn The Bank of Canada is widely expected to leave the target for the overnight rate at 5% when it meets next week. Policymakers continue to talk of their willingness to “raise the policy rate further if needed”, and inflation does indeed continue to run hotter than the BoC would like, but we see little prospect of any additional policy tightening from here. Instead, the next move is expected to be an interest rate cut, most probably at the April meeting. The latest BoC Business Outlook Survey reported softening demand and “less favourable business conditions” in the fourth quarter with high interest rates having “negatively impacted a majority of firms”, leading to “most firms” not planning to “add new staff”. Job growth does appear to be cooling and the Canadian economy contracted in the third quarter and is expected to post sub 1% growth for the fourth quarter. Also remember that Canadian mortgage rates will continue to ratchet higher for an increasing number of borrowers as their mortgage rates reset after their fixed period ends. This will intensify the financial pressure on households, dampening both consumer spending and inflationary pressures. Unemployment is also expected to rise given the slowdown in job creation and high immigration and population growth rates. Given this backdrop, we expect Canadian headline inflation to slow to 2.7% in the first quarter and get down to 2% in the second versus the consensus forecast of 2.6%. As such, we see scope for the BoC to cut rates by 25bp at every meeting from April onwards – 150bp of interest rate cuts versus the consensus prediction and market pricing of 100bp of policy easing.   Rate expectations in US and Canada   Fighting market doves is still hard Markets currently price in 95/100bp of easing by the Bank of Canada this year. As shown in the chart above, the pricing for rate cuts in the US and Canada has followed a very similar path. The implied timing for the first rate cut is also comparable: May for the Fed (March is 50% priced in), June for the BoC (April is 45% priced in). That is despite the communication by the Federal Reserve which has already pivoted (via Dot Plots) to the easing discussion while the BoC officially still retains a tightening bias. In practice, even if the BoC chooses – as we suspect – to delay a radical dovish pivot and stay a bit more hawkish than the Fed, pricing for the BoC will not diverge too much from that of the Fed. So, the room for a rebound in CAD short-term rates appears more tied to USD rates than BoC communication.     FX: USD/CAD to stabilise In FX, the story isn’t much different. The Canadian dollar has been a de-facto proxy for US-related sentiment, acting less and less as a traditional commodity currency – that would normally be hit by strong US data – thus outperforming the rest of high-beta G10 FX since the start of the year. The rebound in USD/CAD to 1.35 is in line with a restrengthening of the USD primarily due to risk sentiment, positioning and seasonal factors, rather than a divergence in Fed-BoC policy patterns. In fact, the USD-CAD two-year swap rate gap has widened further in favour of CAD so far in January, from 20bp to 32bp.   We expect the impact on CAD from this BoC policy meeting to be modestly positive as expectations of a radical dovish shift are scaled back. However, Governor Tiff Macklem already introduced the idea of rate cuts in a speech this month and will need to acknowledge the downward path for the policy rate to a certain extent. While waiting for the Fed meeting a week later and the crucial US CPI numbers for January, US-dependent rate expectations in Canada may not move much. USD/CAD may trace back to 1.34, but we don’t see much further downside for the pair this quarter as USD shows the last bits of strength.    

Say something hawkish, I'm giving up on you By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The week started on a positive note on both sides of the Atlantic Ocean. Equities in both Europe and the US gained on Monday. The tech stocks continued to do the heavy lifting with Nvidia hitting another record. The positive chip vibes also marked the European trading session; the Dutch semiconductor manufacturer ASML regained its status as the third-largest listed company in Europe, surpassing Nestle, thanks to an analyst upgrade.  Moving forward, the earnings announcements will take the center stage, with Netflix due to announce its Q4 results today after the bell. The streaming giant expects to have added millions more of new paid subscribers to its platform after it scrapped password sharing last year.   Away from the sunny US stocks, the situation is much less exciting for China. Right now, the CSI 300 stocks trade near 5-year lows and Chinese stocks listed in Hong Kong are trading with the deepest discount to the mainland peers in 15 years, as the Chinese interventions are said to be less felt in Hong Kong than in the mainland. Today, though, the Chinese stocks are better bid because Chinese Premier Li Qiang called for more effective measures to stabilize the slumping Chinese stocks, but the truth is, investors left Chinese stocks because of the ferocious government crackdown on most loved Chinese companies. Nothing less than drastic financial support would be enough to bring investors back.  The Japanese stocks continue to be the bright spot among the Asian equity markets. The Bank of Japan's (BoJ) negative interest rates, the cheap yen and the positive outcomes of the tech war between the US and China have been pushing the Japanese Nikkei index to multi-decade highs, and these factors are not ready to reverse just yet. Today, the BoJ didn't only announce that it would keep the interest rates unchanged at -0.10% and the upper band for the 10-yer yield steady at 1%, but the bank lowered its inflation forecasts citing the decline in oil prices. We haven't heard the BoJ presser at the time of writing but lowering inflation forecast highlights that there is no emergency to make any changes to the BoJ policy, even less so after a powerful earthquake hit the island at the very beginning of the year. On the contrary, if inflation – which is the bad side of low rates – is under control, the bank would do better to keep the rates low and its economy supported. As such, the USDJPY remains bid above the 148 level after the BoJ decision and before the post-decision presser. The long yen trade looks much less appetizing today than it did by the end of last year. Yet going short the yen is a risky option considering the rising risk of a verbal intervention when the USDJPY approaches the 150 level. Therefore, the USDJPY will likely waver between the 145/150 range, until there is more clarity about the timing of the BoJ normalization.   Elsewhere, the day is expected to unfold slowly. Investors will monitor the Richmond manufacturing index and await Netflix's earnings release. Additionally, attention is on Donald Trump, who has gained favoritism after Ron DeSantis withdrew his support and endorsed Mr. Trump for this year's presidential race. The potential impact of a Trump victory on financial markets is challenging to quantify; he may adopt a tougher stance on China, implement tax cuts, and increase spending, leading to mixed effects.   For those who missed out on the meme stock frenzy, it's however intriguing to observe Trump's special-purpose acquisition company, DWAC, which surged nearly 90% yesterday.  

Expect the Bank to drop its tightening bias Financial markets expect the Bank Rate to be one percentage point lower in two or three years' time than was the case in November. That will have important ramifications for the Bank’s two-year inflation forecast, which is seen as a barometer of whether markets have got it right on the level of rate cuts priced. Previously, the Bank’s model-based estimate put headline inflation at 1.9% in two years’ time, or 2.2%, once an ‘upside skew’ is applied. We wouldn’t be surprised if this ‘mean’ forecast (incorporating an upside skew) is still a little above 2% in the new set of forecasts. And if that’s the case, it can be read as the BoE subtly pushing back against the quantity of rate cuts markets are pricing in. If that happens, we suspect markets will largely shrug it off. The bigger question is whether the Bank makes any changes to its statement – and its forward guidance currently reads like this: Policy needs to stay “sufficiently restrictive for sufficiently long.” It’s likely to stay restrictive for “an extended period of time.” “Further tightening” is required if evidence of “more persistent inflationary pressures.” We think the baseline assumption going into this meeting is that the last of those sentences gets dropped and that the three hawks who'd been voting for a rate hike in December finally throw in the towel, given the recent run of inflation data. A hawkish surprise is, therefore, a statement that looks much the same as December’s, with at least one or two committee members voting for a further rate hike. A dovish surprise would see the Bank remove or water down the sentence on how long policy needs to stay restrictive. There’s also a tail-risk that Swati Dhingra, known to be the most dovish committee member, votes for a rate cut, though our base case is a unanimous decision to keep rates unchanged (6-3 previously).     Markets seem more sensitive to dovish nuances of late The market discount for BoE rate cuts has moderated. At the end of last year, a first cut by May was still fully discounted, and overall more than six cuts were fully priced in for 2024. This has come back towards slightly more than 50% implied probability of a May cut and four cuts overall being priced in. These are not unplausible scenarios but are obviously dependent on data and, for instance, the government's tax plans. But looking at markets more globally, they appear more sensitive to softer data and any dovish nuances provided in communications. As such, we do see a possibility for front-end rates to tick slightly lower if the MPC, for instance, removes its hike bias - in its commentary as well as the voting split. Further out the curve 10Y gilt yields have risen back towards 4% from around 3.5% at year-end. But yields appear capped at 4%, facing resistance to move higher. If we take a simple modelling approach, augmenting a short-term money-market-based estimate of the 10Y gilt with yields of its US and German bond peers, we conclude that gilts see slightly too high yields already. Keep in mind that the BoE meeting is flanked by the Fed meeting, jobs data in the US, and the CPI release in the eurozone, which should be crucial in driving wider sentiment. When it comes to FX markets, sterling has been the best-performing G10 currency against the dollar this year. Its implied yield of 5.2% means that it is the only G10 currency up against the dollar on a total return basis this year. As above and given that the market is minded to look for the more dovish interpretation of central bank communication in what should be a year of disinflation, the idea of the BoE playing dovish catch-up with the Fed and the ECB could be a mild sterling negative.  That probably means that EUR/GBP will struggle to maintain any break below strong support at 0.8500 in the near term, and the BoE event risk means EUR/GBP could start to trade back over 0.8600.  However, our end-quarter target of 0.8800 looks too aggressive now. Scope for tax cuts in early March, sticky services inflation and composite PMI readings comfortably above 50 in the UK could well mean that EUR/GBP traces out a 0.85-0.87 range through the first half of this year. For GBP/USD, the FX options market currently prices a very modest 42 USD pips of day event risk around the Wednesday FOMC/Thursday BoE meeting. Our baseline scenario assumes GBP/USD could trade back down to/under 1.2700 on Thursday, especially should the FOMC meeting have disappointed those looking for a March rate cut from the Fed.