The pound is consolidating. Overview for 06.08.2021

On Friday, the British pound in pair with the US dollar is busy consolidating. The current quotation is 1.3924.

Yesterday, the Bank of England finished another meeting, and this time the regulator seemed excessively conservative. The interest rate remained at 0.10% annually, which is the all-time low. The stimulation program also remained without a change at 875 billion pounds. Only one committee member voted for reducing stimulation.

The BoE repeated again that would start reducing the volumes of bought assets only when it was sure that the economy functioned well. If the financial system works as forecast, the BoE will moderately toughen the credit and monetary conditions. Everything as said before.

The regulator expects that the British GDP in Q2, 2021 has grown by 5%, and in Q3 it will rise by 3%. By Q4, it should reach the pre-pandemic level.

For the pound, no changes in the credit and monetary policy and no dubious signals became a good foothold.

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Dollar remains strong. Overview for 10.08.2021

Euro/dollar has renewed the low since April 4th this year and is trying to correct. The current quotation is 1.1739.

The profitability of American treasury bonds remains high after the labor market report on Friday. Further support is provided by the new vacancies information in June but for the agricultural sector: the result was 10.07 million against 9.48 million before. Employees are hired much more often, which only confirmed that the employment sector data was correctly revised last Friday.

All this might make the rhetoric of the Fed concerning the stimulation and interest rate tougher. The market is again speculating on the probability of the Fed announcing winding up of some stimulation programs by the end of this year - or even starting to wind them up in reality.

This pushes the profitability of treasury bonds upwards and makes the dollar strong.

Now we are waiting for the US inflation data that are due on Wednesday.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

Agitation around dollar would not subside. Overview for 12.08.2021
Euro/dollar has coped with strong market pressure. The quotations are 1.1740. Yesterday the pair renewed the local low near 1.1704 but did not go deeper down.

So, the USA presented inflation statistics for July, and they called down nervous investors. Inflation remains at its all-time high of 5.4% y/y, but monthly speaking, it has slowed down. In July, the CPI extended to 0.5% m/m after growing by 0.9% m/m previously.

The main sources of the annual inflation remain expenses on traveling and logistics, as well as the postponed negative influence of supply systems failures. Base inflation in the USA in July reached 4.3% y/y after 4.5% y/y in June. Last year's low-base effect constantly smoothes out here.

There is a certain imbalance of supply and demand in certain sectors of economy because business makes attempts to rebuild its resources and cut down on the number of supply problems. Simultaneously, the growth of demand was stimulated by low interest rates and federal packages of economic support. Taken together, this provoked price pressure.

Agitation around these inflation data was stunning: earlier the Fed used to talk about labor market state and inflation as about two separate parameters, stabilizing which it could reduce stimulation. The labor market looked perfect but questions remained about consumer prices. Now the refined inflation index that the Fed cares about is at its highs since winter 1991. Inflation might have reached its peak and will start going down somewhat, yet the market still expects the Fed to make comments on toughening of its credit and monetary policy, as long as the economy is doing well.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The USD remains solid. Overview for 16.08.2021

EURUSD is keeping its balance; market players are sympathetic towards the “greenback”.

Early in another week of August, EURUSD is keeping its balance. The current quote for the instrument is 1.1780.

A preliminary report on the Consumer Sentiment from the University of Michigan published last Friday showed 70.2 points in August after being 81.2 points the month before, although it wasn’t expected to change at all. This was some terrible news for the USD, however, the major currency pair was oversold for a very short period of time and managed to keep balance. 

The actual reading of the indicator is the lowest since 2011. Such a significant drop may be connected to people’s economic insecurity. The components of the report were quite depressing: the Current Conditions dropped from 84.5 to 77.9 points, while the Consumer Expectations went from 79.0 to 65.2 points.

At the same time, the Inflation Expectations also got worse: 4.6% against 4.7%. The 5 Year Inflation Expectations is 3.0% after being 2.8% earlier.

Based on these indicators, investors sort of postponed their expectations of an early reduction of the US Fed stimulus. However, one should admit that these forecasts contain too many emotions, which continue ruling the market and make it volatile.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The Kiwi plummeted after the RBNZ decisions. Overview for 18.08.2021

NZDUSD plunged after the New Zealand regulator decided not to raise its benchmark interest rate.

The New Zealand Dollar updated its 10-month lows against the USD. The current quote for the instrument is 0.6890.

So, during its August meeting, the Reserve Bank of New Zealand decided not to revise its rate and kept it at 0.25%, while market expectations implied 0.50%.

The regulator’s reserved attitude is connected with another coronavirus outbreak of the disease in the country, which made the government re-introduce a lot of social restrictions. A new delta COVID-19 strain led to the first outbreak over the last 6 months. Authorities’ response was pretty quick as they ordered to isolate the country. Under such circumstances, the RBNZ would be very unwise and untimely to raise the rate because the country’s economy is not ready for that.

Average market expectations imply a 60% possibility of a 25-point rate hike during the October meeting. At the end of 2021, it should remain at 0.50% but may be revised up to 1.5% by the middle of 2022. At the end of 2023, the rate in New Zealand is expected to reach 2%.

Before this coronavirus outbreak, New Zealand authorities were pretty successful in restoring the country’s economy and the rate hike would be quite justifiable.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The Euro is staying near the lows. Overview for 20.08.2021

EURUSD is trying to recover reluctantly but the bearish market is stronger.

The major currency pair is staying not far from its 10-month lows. The current quote for the instrument is 1.1680.

Yesterday, EURUSD updated another low at 1.1664. Today’s attempts to recover aren’t effective – market players are still sympathetic with the USD.

We remind you that the “greenback” is supported by the US Fed Meeting Minutes published on Wednesday. The document offered investors exactly what they were looking for: it said that the regulator was ready to reduce its QE program before the end of the year. Policymakers still haven’t reached a final decision and the document mentions this as well.

In the future, market players will probably wait for the Fed to confirm its intentions. It means that every time an FOMC member says something, their announcements will literally “go under the microscope”.

The weekly Unemployment Claims report showed 348K after being 377K the week before and against the expected reading of 362K. Investors barely paid attention to the data, although it’s quite positive for the USD.

There won’t be any important American statistics today, that’s why the major currency pair is expected to continue moving within the current range.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The Pound couldn’t keep its positive momentum. Overview for 24.08.2021

GBPUSD is falling after yesterday’s rebound.

The British Pound couldn’t keep its positive momentum against the USD as the pair is moving downwards on Tuesday afternoon. The current quote for the instrument is 1.3697.

The preliminary report on the Services PMI in the United Kingdom showed 55.5 points in August after being 59.6 points the month before. The Flash Manufacturing PMI dropped from 60.4 to 60.1 points over the same period of time.

Manufacturers are careful, the more especially as the United Kingdom is adding new places to the list of red zones – it may have a negative influence on both consumer activism and business communities.

The CBI Industrial Order Expectations in the UK increased quite unexpectedly, from 17 points in July to 18 points in August against the expected decline to 16 points. It’s good news, which means that the upcoming autumn may be more confident and productive.

There will be another report from the CBI this week, the Realized Sales for August, which may be quite interesting – market players need to understand how much consumers believe in the better tomorrow and what amount of money they are ready to spend. The better the statistics are, the higher hopes that official data on the retail sales might be.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The Yen is plummeting. Overview for 26.08.2021

USDJPY has been growing for the third consecutive trading session.

The Japanese Yen is quickly falling against the USD. The current quote for the instrument is 110.20.

The problem is probably not the external background – of course, there is a demand for risks, which reduces the interest to the “safe” Yen. However, the key reasons are more global, for example, the semiconductor supply shortage. That’s quite a hit in the Japanese economy’s pocket because it’s the reason why Toyota is ready to shut down 14 facilities and reduce the output by 40% in September alone.

Shortage of chips may remain an issue at least until the end of 2021 if the pandemic continues to have a negative influence on businesses in Asia. The increasing number of new coronavirus cases in Japan, Malaysia, and China forces manufacturers to be more cautious when planning long-term. It’s not good news for the Japanese economy.

The semiconductor crisis did a lot of damage to the Japanese car manufacturers. Decreases in tax payments will influence both the country’s budget and economy in the future. Shutdowns of car factories will surely affect the export, the thing that is supporting the current recovery of the Japanese economy. However, no one can say right now when this crisis is over.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The Euro is trying to keep its positive momentum. Overview for 30.08.2021

EURUSD may continue forming its rising impulse.

The major currency remains stable and may resume trading upwards. The current quote for the instrument is 1.1800.

During his speech at the Jackson Hole symposium last week, Jerome Powell, the chairman of the US Federal Reserve System, said that the regulator didn’t exclude a possibility of an earlier reduction of its QE program before the end of the year. At the same time, Powell mentioned that there was no need in tightening the monetary policy at that moment. The inflation boost was believed to be temporary.

The QE reduction is good but market players included this factor in prices a long time ago. On the other hand, no one expected a possibility of refusal of the policy tightening. The “greenback” plunged and investors will surely need some time to include this fact in prices.

There won’t be many statistics from the USA and the Euro Area today. in this light, the Jackson Hole symposium results will remain the key driver for a while.

However, as early as Tuesday, the macroeconomic calendar will offer a lot of data, such as the CPI Flash Estimate for August in the Euro Area, as well as the HPI for June and the CB Consumer Confidence for August in the USA.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

EURUSD reached stability. Overview for 01.09.2021

The major currency pair retreated a little bit and intends to wait for the news.

The Euro stopped growing in the middle of the week and is trying to fix at the current levels. The current quote for the instrument is 1.1800.

The statistics published yesterday showed that the CPI in the Euro Area was 3.0% y/y in August, which is better than both previous and expected readings of 2.2% y/y and 2.7% y/y respectively. The Core CPI also improved and showed 1.6% y/y after being 0.7% y/y in July.

As a result, the current CPI value is the highest over the last 10 years and may probably increase further. The inflation boost may force the European Central Bank to revise its stance on the pricing environment and pay more attention to it.

The key triggers for the inflation boost in August were increasing prices for electricity and food products. Non-grocery goods also jumped.

Now, it would be interesting to see the ECB’s inflation forecasts. In the past, they were going up slowly bt only to avoid scaring everyone with final readings.

There is an opinion that the inflation boost in the Euro Area may calm down in November or December 2021.

The Conference Board Consumer Confidence in the USA dropped to 113.8 points in August after being 125.1 points in July. It also didn’t make the “greenback” happy or more optimistic.

Later today, one should pay attention to the Unemployment Rate in the Euro Area for July. In the evening, the USA is going to publish the first report on its labour market, the ADP Non-Farm Employment Change.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The “greenback” got weaker. Overview for 03.09.2021

The major currency pair continues growing; the USD weakened to its 5-week low.

EURUSD continues trading within the uptrend. The current quote for the instrument is 1.1880.

Investors are actively playing against the American currency. One may assume that it is happening amid expectations that there won’t be any significant revisions of the monetary policy by the US Federal Reserve System before the end of the year except for an earlier reduction of the QE program.

The USD could really use some good news right now, so the statistics scheduled for today might be the catalyst the “greenback” needs so bad.

Today, market players’ attention will be focused on August reports on the American labour market. The Unemployment Rate is expected to drop from 5.4% in July to 5.2% in August. The Average Hourly Earnings may add 0.3% m/m after expanding by 0.4% the month before. This improvement may support the USD.

The Non-Farm Employment Change is expected to show 720K in August after being 943K in July. The thing that matters is that the indicator value should be pretty high. In this case, investors will stop being nervous about unstable statistics and possible problems in the labour market.

If the latter report shows strong readings, the “greenback” may count on support and recovery for some period of time.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.

The Australian Dollar dropped. Overview for 07.09.2021

AUDUSD was quite emotional in its response to the RBA’s comments.

The Aussie dropped pretty much against the USD on Tuesday. The current quote for the instrument is 0.7411.

During its September meeting, the Reserve Bank of Australia decided to keep the benchmark interest rate intact at its all-time low of 0.10%. This decision was expected, so market players were not surprised.

At the same time, in the comments, the RBA confirmed its intentions to reduce the global QE program because it was expecting a quicker economic recovery in the near future. According to the regulator, the main reason for that is the vaccination campaign effect.

As we mentioned above, the RBA is planning to decrease the weekly QE volume from A$5B to A$4B. Another decision implies that the program will continue the stimulus program until mid-February 2022. Market players immediately forgot everything that was said before and perceived the last announcement as “rather soft”.

Investors did have such expectations: they really thought that the RBA might postpone the reduction of the QE program until better days because of lockdowns in Sidney, Melbourne, and other big cities in Australia. However, the regulator said that the outbreak of the delta strain would postpone the economic recovery but not sabotage it.

Forecasts for other instruments can be found in the section "Forex Forecasts and Analysis" on our website.