The Yen is slowly retreating. Overview for 19.11.2021

After experiencing some significant fluctuations earlier this week, USDJPY is slowly growing.

The Japanese Yen is slowly falling against the USD at the end of this trading week. The current quote for the instrument is 114.34.

According to the statistics published earlier today, the National Core CPI in Japan showed 0.1% y/y in October, the same as expected and previous readings.

The Inflation Rate in the country also showed 0.1% y/y in October after being 0.2% y/y the month before. On MoM, the indicator lost 0.3%.

As a result, we’ve seen no confirmation of the September readings, which were quite promising and showed the highest improvement since January 2021. It’s not surprising but Japan is now back to its usual situation – low inflation in YoY and deflation in MoM.

Deflation and low inflation are the key reasons for the Japanese regulator’s headache. The population doesn’t want to spend money without seeing any positive outlook on the country’s economy. The government “injects” a lot of money into the economy every month, but can’t handle low inflation. 

As a rule, the Yen doesn’t care about macroeconomic data, but inflation is too important to ignore. One may assume that today’s drop in the Yen is somehow connected with disastrous inflation readings.

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The “greenback” is overwhelming. Overview for 23.11.2021

EURUSD is staying near its local lows; market players like the USD.

The major currency pair remains under global pressure. The current quote for the instrument is 1.1267.

There were few macroeconomic statistics recently, but investors are still pulling for what is happening in the news.

On one hand, the “greenback” is “sitting pretty” after the US agreed on its global infrastructure plan: the country’s economy will get more money. On the other hand, market players are still waiting for the next US Fed Chairman to be assigned or the current one to be extended. If Jerome Powell, who is in favour of the soft monetary policy and careful fiscal moves, keeps his position, the USD has nothing to fear. In this case, the monetary policy will tighten slowly but steadily. However, if the position is taken by Lael Brainard, a fan of a tough monetary approach, the path to the interest rate hike will be much shorter. anyhow, both ways are good for the USD.

Today, investors are waiting for European statistics. The Euro Area is scheduled to publish the preliminary report on the Manufacturing PMI, which is expected to drop in November. This might be another signal in favour of negative sentiments in the Euro.

Later in the evening, the US will report on the Markit Manufacturing and Services PMIs for November and both indicators are expected to grow.

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

EURUSD is knocked out again. Overview for 25.11.2021

After testing another “bottom”, the major currency pair is consolidating.

EURUSD continued falling and tested another low yesterday; right now, it is consolidating. The current quote for the instrument is 1.1218.

The “greenback” was once again supported by the news and statistics. The more economic data the US publishes, the clearer it can be seen that the American economy is doing great and can handle the monetary policy tightening. In the meantime, investors are already expecting three rate hikes before the end of 2022.

The statistics publishes yesterday showed that the second estimate of the US GDP was 2.1% q/q in the third quarter, and that’s better than expected. The third estimate might be even better.

The Durable Goods Orders dropped 0.5% m/m in October after losing 0.3% m/m the month before and against the expected reading of +0.2% m/m. The Core Durable Goods Orders added 0.5% m/m, which is quite good.

The labour market data was good. The weekly report on the Unemployment Claims showed 199K after being 270K the week before and against the expected reading of 259K. the actual reading is the lowest since the 1960s. 

The Personal Income showed 0.5% m/m, better than expected, and smoothed the September decline a little bit. The Personal Spending showed 1.3% m/m, also above expectations. The fact that Americans are ready to spend money is positive for the country’s economy.

The US is celebrating Thanksgiving Day today, that’s why the market activity is lower than usual.

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

The demand in the “greenback” is increasing. Overview for 29.11.2021

After making a short pause on Friday, EURUSD is falling again.

The major currency pair is under pressure again after a short break. The current quote for the instrument is 1.1291.

Last Friday, capital markets were under severe stress when they learned about the new coronavirus strain from South Africa, which made a lot of countries seal their borders from visitors from South African countries and revise their stance on the current epidemiological situation. All this resulted in huge risk aversion and a lot of short positions in EURUSD.

The “greenback” is looking quite confident due to the demand for “safe haven” assets. At the moment, there is no need to worry that the new strain has already made its way into the US. According to the report, it might take up to two weeks to study the new strain but it’s already clear right now that it’s very aggressive.

As for today, investors should pay attention to the speeches to be delivered by heads of the ECB and the USD Fed.

Later this week, as it always happens early in the month, the US will report on its labour market, this time for November. The data is promising to be very interesting because the weekly report on the Unemployment Claims was really good. Strong numbers will provide the “greenback” with significant support.

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

The Aussie rose. Overview for 01.12.2021

AUDUSD is recovering, this time quite successfully.

The Australian Dollar rose against the USD on Wednesday. The current quote for the instrument is 0.7152.

Strategically, the Aussie remains under pressure. However, even the slightest attempt to recover is looking quite positive.

The statistics published in the morning showed that the GDP dropped 1.9% q/q in the third quarter, and that’s much better than experts expected, -2.7% q/q. In the previous quarter, the indicator expanded by 0.7% q/q.

This is the first time the indicator was below zero after four consecutive quarters of growth. The country’s economy in the third quarter is 0.2% below its pre-pandemic values and that’s not good news.

On YoY, the indicator added 3.9% in the third quarter, more than expected.

The main reason why the growing impulse can’t continue is social restrictions forced by the pandemic and lockdowns. In the third quarter, Australia introduced restrictions in New South Wales and Victoria due to the increasing number of new coronavirus cases. Selective lockdowns resulted in the reduction of consumer spending, which, in its turn, had a negative influence on the GDP.

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

The “greenback” got even stronger. Overview for 03.12.2021

EURUSD is quite calm in anticipation of the US labour market statistics.

The major currency pair is barely moving while waiting for the statistics. The current quote for the instrument is 1.1292.

The Unemployment Claims data published yesterday showed that the indicator was 222K this week after being 194K the week before. and against the expected reading of 238K.

Later today, the US will report on other labour market indicators for November.

Possibly, the Unemployment Rate may drop from 4.6% to 4.5%. Another report, the Non-Farm Payrolls, is expected to show 553K after being 531K in the previous month. The Average Hourly Earnings may add 0.4% m/m, the same as in October. It will be good news.

Overall, market expectations are quite positive. If actual readings match them, the USD rate may improve.

The labour market stability will allow the US Fed to close the QE programme faster than it was announced earlier this week.

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

The Aussie is rising. Overview for 07.12.2021

AUDUSD keeps rebounding; the RBA is consistent in its decisions.

The Australian Dollar is rising against the USD for the second trading session in a row. The current quote for the instrument is 0.7094.

The Reserve Bank of Australia had another meeting today and decided to keep its monetary policy intact. The benchmark interest rate remained at 0.10%.

In the comments that followed, the RBA Governor said that the Australian economy was recovering after the outbreak of the previous COVID-19 strain, while the investment forecasts significantly improved. The household consumption was also recovering. The Australian economy is expected to get back to its pre-delta strain trajectory in the first half of 2022.

Leading indicators show that the employment sector is recovering quite steadily and salaries are expected to continue increasing.

As for the regulator’s further fiscal plans, the RNA is going to keep its accommodative monetary policy. The regulator won’t raise the rate until inflation reaches the range of 2-3% and fixes inside it. According to the RBA’s forecasts, the indicator may reach 2.5% by 2023.

As a matter of fact, not everything is so simple here. First of all, the US Fed will surely tighten its monetary policy within the next 6 months and other global regulators, willing or not, are believed to follow. Secondly, the Reserve Bank of New Zealand has already raised the rate twice and the country’s economy is doing fine. Such external pressure may force the Australian regulator to raise the rate much earlier than mid-2023.

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

The Euro skyrocketed. Overview for 08.12.2021

EURUSD rose pretty much over the last 24 hours.

The major currency pair was barely moving for a long time but then skyrocketed. The current quote for the instrument is 1.1320.

There are two reasons for yesterday’s growth of the major currency pair. First of all, it’s a risk appetite, which is back after the concerns about the new COVID-19 strain stepped back. The Omicron variant is no longer considered as dangerous as was thought before, and that made capital markets more optimistic. Another reason is significant fluctuations in EURGBP yesterday – the Pound was falling due to the rumours that the United Kingdom was ready to introduce new social anti-coronavirus restrictions literally starting Thursday. These movements supported the European currency and resulted in the growth of EURUSD.

There were no important statistics, that’s why these rumours turned out to be the key catalyst for investors.

Later today, market players should pay attention to the weekly Unemployment Claims report from the US, which may show a slight improvement.

Global markets are now focused on Friday’s data on the US Consumer Price Index, which is promising to be very interesting.

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

EURUSD is “coolheaded”. Overview for 13.12.2021

EURUSD remains stable; investors are focused on the US Fed meeting.

The major currency pair is neutral early in the week. The current quote for the instrument is 1.1316.

Last Friday’s statistics on the US Consumer Price Index were quite high, just as expected. The indicator showed 6.8% y/y in November. On MoM, inflation was 0.8%, higher than expected, after being 0.9% the month before.

The US Fed now considers high inflation as a new reality instead of a temporary thing, that’s why such high readings didn’t trigger any serious reactions.

Market players’ attention is slowly switching to the December meeting of the American regulator scheduled for this week. The Fed is assumed to announce its decision (based on the latest inflation reports, among other things) to speed up the closure of its QE programme by at least fifty per cent. It means that the program may be completed as early as March 2022. The regulator will require some time to collect and analyse data. As a result, it may start discussing the benchmark interest rate hike in May or June.

Average market expectations for 2022 imply that the rate might be raised by 50 basis points. Capital markets are quite okay with this number, which may easily help the “greenback” to get stronger.

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

The Pound braces its fall. Overview for 15.12.2021

GBPUSD is trying to keep its sideways tendency and avoid further decline.

The British Pound is growing a little bit against the USD on Wednesday. The current quote for the instrument is 1.3273.

The statistics published earlier showed that the Unemployment Rate in the United Kingdom was 4.2% in October, the same as expected. The actual reading is 0.2% higher than the pre-pandemic value, and that’s good news. The Claimant Count Change showed -49.8K in November after being -14.9K in the previous month. This factor will also provide great support to the British economy.

Stable numbers helped the Pound to continue its recovery, which started when the “greenback” took a break.

The International Monetary Fund believes that the British economy may add 6.8% in 2021. Expectations for 2022 imply 5.0%. Inflation in the country may reach its peak of 5.5% in spring 2022 and resume falling after that.

The Fund thinks that the United Kingdom will introduce coronavirus-related restrictions due to the Omikron strain, that’s why its economy may slow down a bit early in 2022.

As for the Bank of England, it’s high time to close the QE programme. At the same time, the accommodation monetary policy should remain in force.

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

The Pound managed to rise. Overview for 17.12.2021

After growing for three consecutive trading sessions, GBPUSD started consolidating.

The British Pound is consolidating against the USD on Friday after a significant improvement earlier. The current quote for the instrument is 1.3336.

During its December meeting, the Bank of England decided to raise the benchmark interest rate from 0.10% to 0.25%. It’s the first rate hike in three and half years. The decision was made 8 votes against 1.

As for the QE programme, it remained unchanged at £875B (plus £30B of corporate bonds) and the regulator was mum on any changes here. The BoE chose a different approach, which implies raising the rate first, and then tapering the QE.

In the comments, the regulator said that there were signs of stable inflation, which made the BoE nervous. It’s not quite clear right now how the Omikron strain will influence the country’s economy but the regulator is expecting it to affect inflation. It is essential to respond to high inflation.

It seems rather unusual: as a rule, the bank of England sticks to its conservative stance when it comes to inflation and prefers to avoid talking about it. In most cases, inflation requires no interference and reaches stability by itself. However, this time the British regulator may have to be more aggressive and act preventively because of the measures implemented by the US Fed.

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

The Pound remains weak. Overview for 21.12.2021

GBPUSD remains under pressure amid global COVID-related concerns.

The British Pound remains rather weak against the USD. The current quote for the instrument is 1.3212.

The coronavirus pandemic is still against the British currency. The number of new cases in the United Kingdom is increasing, the mayor of London declared a “Major incident” in the city. There is an opinion that the United Kingdom may follow the example of the Netherlands and be the next country to announce lockdown for the Christmas and New Year holidays.

All this is not good for the Pound’s future. social restrictions may hurt business sentiment, hence industrial production and retail sales. 

The BoE’s rate hike is already included in the Pound price. It’s important to understand that the rate hike was a rather critical measure for the British regulator – as a rule, the BoE is very conservative and never rushes to interfere using monetary mechanisms.

According to the data published yesterday, the CBI Industrial Order Expectations dropped to 24 points in December after being 26 points the month before. Probably, businesses and manufacturers have already statured to reduce their business activity.

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