The Aussie might take a break from falling. Overview for 19.04.2022

AUDUSD is slowing down its decline in response to the RBA Meeting Minutes.

The Australian Dollar is taking a break from falling against the USD. The current quote for the instrument is 0.7389.

Earlier today, the Reserve Bank of Australia released its latest Meeting Minutes, which provided the Aussie with serious support. The Australian currency had been under significant pressure from the “greenback” recently and a short break must do good.

So, the document says that the RBA sees the inflation boost and expects it to continue. In the next few quarters, the CPI might exceed 3%. The energy price surge, as well as some other commodities, will boost inflation in the future. In the upcoming months, the Australian regulator is planning to collect more data on inflation and labour expenses.

The stability of the labour market confirms that the Australian economy is now pretty strong. This is the reason why the RBA might raise its benchmark interest rate sooner than expected.

This was a quite unexpected comment from the RBA, which recently had been acting like the global rate hikes had nothing to do with it. The AUD found some support here.

Now that the RBA policymakers agree that the financial climate in Australia remains quite favourable, market players are expecting the regulator to raise the rate in the second or third quarter.

If the Australian policymakers confirm their intentions to raise the rate, the Aussie might reverse.

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

The Yen may continue weakening. Overview for 21.04.2022

After reaching new highs, USDJPY started a correction.

Having updated its 20-year lows against the USD, the Japanese Yen reached stability but is still looking very weak. The current quote for the instrument is 128.05.

The Yen dropped to 129.41 this week but later managed to correct a little bit and reach stability.

As the Bank of Japan Governor Haruhiko Kuroda mentioned recently, the current excessive volatility of currency rates has a negative impact on business activity. According to the BoJ, the currency rates should move steadily and reflect fundamental indicators instead of fluctuations in the market sentiment. The Japanese regulator intends to continue monitoring the impact of currency fluctuations on the country’s economy and pricing environment.

The Ministry of Finance of Japan is very worried about the current situation with currency rates. The sudden devaluation of the Yen raises questions and makes market players think about how it might influence the economic indicators in the future. Sharp fluctuations of currencies are unacceptable – this is the Ministry’s official stance.

None of the Japanese monetary policymakers offers any possible scenarios of the Yen weakening. It is believed that due to the massive attack of the “greenback” and the difference in interest rates, the “carry trade” strategy and the JPY weakening will remain in effect for a while. It means that the Yen may hit new lows after a short break.

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

The Euro ran upon the rocks. Overview for 25.04.2022

EURUSD continues plummeting without a pause.

The major currency pair remains under bearish pressure. The current quote for the instrument is 1.0747.

Market players barely paid attention to Emmanuel Macron’s win in the presidential elections. Apparently, the results were foregone, so the choice of French people didn’t matter for the Euro. 

The major currency pair is under huge pressure from the domination of the US Fed’s monetary policy over the ECB’s one. The European regulator’s stance to tighten the policy is less aggressive than the Fed’s, so if the ECB doesn’t provide any positive signals of its intentions, the Euro may plunge much deeper.

This is especially important in anticipation of the US Fed meeting scheduled for next week.

Before that, the US will report on the GDP for the first quarter of 2022. So far, forecasts aren’t so positive – the indicator is expected to gain just 1.0% q/q after adding 6.9% q/q the quarter before. if the actual reading turns out to be worse than expected, the “greenback” might weaken on all fronts. However, this scenario is rather unlikely because the expected reading is already erroneously low.

The USD has nothing to be afraid of as long as it is supported by the Fed’s “hawkish” policy.

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

No salvation for the Euro. Overview for 26.04.2022

EURUSD hit another bottom and remains extremely weak.

The major currency pair reached new lows yesterday. The current quote for the instrument is 1.0707.

The market is currently against the Euro due to the difference in interest rates and monetary strategies of the US Fed and the ECB. However, there is a nuance – investors are too negative towards the European Central Bank, although the regulator was more “hawkish” during its April meeting than usual.

At the same time, the situation around the US Fed is looking like a Brazilian carnival – those who have brighter expectations are right. Overall, the benchmark interest rate might leap up 125-175 basis points and both the country’s economy and experts are completely fine with that. However, there are forecasts that imply a 200-point total hike. It’s good but there are risks of “overheating” the economy and wave-like defaults of the companies that didn’t include such a quick rate hike in their forecasts.

In general, everything pivots on the difference in interest rates and monetary strategies of regulators. The volatility is expected to remain high as long as this difference situation is resolved.

In this light, market players are barely interested in statistics. However, there will be a couple of reports worth paying attention to today – the Durable Goods Orders and the Conference Board Consumer Confidence.

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

The “greenback” skyrocketed to its 5-year highs. Overview for 28.04.2022

EURUSD hit another bottom – and it didn’t surprise anybody.

The major currency pair reached new lows – the last time the asset was moving there was in March 2017. The current quote for the instrument is 1.0541.

The USD rally doesn’t stop. The nearer the date of the Fed’s May meeting and the GDP release, the more dramatic the situation.

The Trade Balance report published by the US yesterday showed $-125.32B in March after being $ 106.35B the month before. Goods cover 75% of the total Trade Balance, so the deficit is not a good signal.

However, market players do not pay much attention to the statistics and continue choosing the USD. They tend to escape risks due to the Chinese lockdown and the overall geopolitical escalation. Moreover, investors are looking forward to the US Fed’s meeting that is scheduled for the next week. The American regulator announced a quick and aggressive rate hike to take control over inflation on several occasions, and it’s a good signal in favour of the “greenback”.

Later today, market players will turn their attention to the GDP Q1 2022 report, which is expected to show 1.1% q/q/ which is much worse than the quarter before, when the indicator gained 6.9% q/q. The better the numbers, the stronger the rally in the USD.

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

The Aussie intends to rise. Overview for 04.05.2022

AUDUSD is keeping its positive momentum thanks to the Reserve Bank of Australia.

The Australian Dollars keep on trying to recover against the USD. The current quote for the instrument is 0.7118.

Yesterday, the Reserve Bank of Australia raised the benchmark interest rate by 25 basis points, up to 0.35%. At the same time, it became known that the regulator would stop reinvesting in the assets to be repayable. It will help the RBA’s portfolio to reduce in the next quarters and bounce back later.

It’s interesting that investors are expecting more rate hikes until the end of 2022. They might support the Aussie, which is currently experiencing significant concerns due to the coronavirus outbreak in China. 

Average market expectations imply a 40-point hike after the RBA’s June meeting and 2.5% by the end of 2022.

Another factor that pressures the Aussie is the USD, which remains extremely strong.

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

The Euro stumbled again. Overview for 06.05.2022

After taking a short break, EURUSD resumed its decline.

The major currency pair got back under bearish pressure quite quickly. The current quote for the instrument is 1.0558.

The weekly Unemployment Claims report published yesterday by the US showed 200K against the expected reading of 182K. The difference is quite acceptable – the current situation in the labour market doesn’t raise concerns.

The Euro enthusiasts negatively responded to the words of the Member of the Executive Board of the European Central Bank Philip Lane, who said that the target date for the rate hike wasn’t important at all. He emphasized that the regulator was planning to raise the rates gradually. In addition, Lane said the Euro Area was very unlikely to get back to inflation below the target level like it was before the pandemic. A significant energy price surge, which has been seen since the summer of 2021, caused a serious macroeconomic shock and its consequences will be here for a long time. 

Not many investors were inspired by Lane’s comments – they are way too realistic.

Later today, as it usually happens on the first Friday of each month, they will switch their attention to some more reports on the US labour market. The Unemployment Rate in April is expected to reduce to 3.5%, while the Average Hourly Earnings might remain the same. The Non-Farm Payrolls might add 391K after gaining 431K in March.

Strong numbers will support the “greenback”, which is already too strong. On the other hand, weak or neutral reports are unlikely to trigger an enormous controversy.

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

New lows in EURUSD. Overview for 12.05.2022

EURUSD hit another multi-month bottom while investors are trying to escape risks.

The major currency pair is back to falling. The current quote for the instrument is 1.0429.

Earlier today, the Euro hit the bottom of March of 2020 and it might be only the beginning. Market players are escaping risks when each new sale causes another wave of panic. The ECB’s monetary policy is far behind the Fed’s stance – it doesn’t surprise anybody but this factor continues working against the Euro.

Geopolitical escalations and inflation boost might force the ECB to raise the rate during its July meeting. However, it’s just an assumption but not a fact of life.

The CPI data released by the US yesterday was rather unusual. The indicator showed 0.3% m/m in April against the expected reading of 0.2% m/m. However, on YoY, it slowed down a bit and showed 8.3% after being 8.5% in March. Should it be considered a positive signal? Very unlikely. First of all, the Core CPI remains high. Secondly, the effect of the increased interest rates will appear only in a couple of months – no one should draw any conclusions about the regulator’s policy efficiency before that. It’s highly likely that the current slowdown is just a pause in the inflation rally.

The Core inflation, by the way, showed 0.6% m/m and 6.2% y/y in April – both readings are higher than expected.

Later today, market players should pay attention to the weekly Unemployment Claims report to be published by the US. However, their major focus will turn to emotional fluctuations in EURUSD.

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

The Yen managed to reach stability. Overview for 16.05.2022

USDJPY moved away from its multi-month highs but the “greenback” has an ace in the hole.

Early in another week of May, the Japanese Yen reached stability against the USD. The current quote for the instrument is 129.34.

The statistics published in the morning showed that the Producer Price Index in Japan leaped up 10.0% y/y in April after being 9.7% y/y in March and against the expected reading of 9.3% y/y.

It means that inflation in Japan is rising and the next CPI report will definitely confirm it. For Japan, deflation has been a major problem for many years. It’s quite clear that the prices are pressured by interruptions in deliveries and the energy price surge. However, even considering all this, the dynamics are pretty good.

The Machine Tool Orders gained 25.0% y/y in April after adding 30.0% y/y the month before.

The good news is that the industrial sector continues operating very actively, providing an impulse to other industries and helping the economy to keep afloat.

The pause in the Yen devaluation might be quite long – market players need time to assess risks without buying the “greenback”.

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

The Euro is looking for options. Overview for 18.05.2022

EURUSD is taking a break after four days of recovering.

The major currency pair slowed down its recovery. The current quote for the instrument is 1.0508.

The statistics published by the US yesterday were quite confident. The Retail Sales added 0.9% m/m in April after gaining 1.4% m/m the month before and against the expected reading of 1.0% m/m. The Core Retail Sales showed 0.6% m/m, which is better than forecasted.

The Industrial Production gained 1.1% m/m last month, which is much better than the expected reading of 0.4% m/m, after expanding by 0.9% m/m in March. The Capacity Utilization Rate also improved, up to 79.0%.

However, the primary focus was on the speech to be delivered by the US Fed Chairman Jerome Powell. He said that the Fed was going to raise the rates until inflation started to fall. If it implies pushing the boundaries of the theoretical conception of neutrality, the Fed will do what is necessary without hesitation.

We remind you that the April CPI reading was 8.3%, while the target level is 2.0%. Earlier this month, the regulator raised the rate by 50 basis points, for the first time in 20 years. It was the second consecutive rate hike and the Fed is expected to raise the benchmark interest rate after every meeting until the end of 2022.

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

The Euro managed to correct. Overview for 20.05.2022

EURUSD got rid of the pressure and intends to rise.

The major currency pair is fixing within a “flat” on Friday. The current quote for the instrument is 1.0568.

It seems like the comments about European inflation don’t scare anyone anymore. The ECB vice president Luis de Guindos said yesterday that the CPI would remain high in the upcoming months. At the same time, he believes that mid-term inflation expectations remain unchanged at 2%. Guindos is confident that the European regulator should act smoothly and be careful about its monetary policy.

The ECB Monetary Policy Meeting Accounts released yesterday confirmed the fact that European policymakers were very worried about inflation in the region. Some of them emphasised that the ECB should show resolve to fight prices and help them reach stability.

The regulator should remain flexible because there are several factors that might help to make the CPI more stable. Even the slightest changes will be enough to make the accommodation monetary policy more “hawkish”.

This time, the fact that the regulator sees all inflation risks and realises the necessity of active measures supported the European currency.

The statistics published by the US weren’t too confident. The weekly Unemployment Claims report showed 218K against the expected reading of 200K. The indicator is volatile but not all that much.

Today’s economic calendar won’t offer any numbers from Europe and the US, so market players will continue analysing what they already have. If nothing surprising happens, the Euro may continue its slow growth.

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

The Aussie couldn’t hold the balance. Overview for 24.05.2022

AUDUSD is declining in response to disappointing statistics.

The Australian Dollar stopped rising against the USD on Tuesday; right now, the Aussie is retreating. The current quote for the instrument is 0.7102.

The preliminary statistics published in the morning showed that the Manufacturing PMI in Australia dropped to 55.3 points in May after being 68.8 points the month before. The Services PMI fell to 53.0 points against 56.1 points in April.

The indicators are probably declining due to the Chinese economic slump – China is Australia’s key trade and economic partner. Another factor that might have influenced both PMIs is the change of seasons.

The RBA’s stance remains “hawkish”. However, with the allowance for the global economic slowdown and several domestic risk factors, the regulator’s strategy might disappoint investors and capital markets. For the Aussie to rise, there should be, among other things, an appropriate risk attitude. But the lack of positive catalysts may eliminate the country’s relative economic stability and it may result in a new wave of decline in the AUD rate.

The RBA’s benchmark interest rate might significantly rise until the end of 2022. Average market expectations imply that the regulator will introduce 25-point rate hikes during its meetings in June, July, and August. Another hike might happen in November. By the end of the year, the rate might reach 1.25 1.35%.

The RBA’s next meeting is scheduled for 7 June.

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