EURUSD is in demand. Overview for 27.05.2022

After a 2-day break, EURUSD resumed its growth.

The major currency pair is back to growing on Friday. The current quote for the instrument is 1.0746.

Demand for the USD is not rather low right now. First of all, the global risk attitude is quite high. Secondly, the US Fed confirms its strategy to tighten the monetary policy – here everything is clear and transparent. And finally, the statistics published by the US say that the country’s economy might not handle too aggressive rate hikes.

The second estimate of the US GDP Q1 showed -1.5% m/m against the first estimate of -1/4% q/q. The expected reading was -1.3% q/q.

The components of the report showed that the export and wholesale trade made a major contribution to the indicator slowdown. Interestingly, consumer spending rose 3.1%, while the fixed investment added 6.8%. In fact, the economy continues moving forward, although official data demonstrates a decline. 

The Pending Home Sales showed -3.9% m/m in April after -1.6% m/m in March. It’s not a good signal for the real estate sector – people are interested in real estate but aren’t ready to buy.

Later today, investors should switch their attention to the Personal Spending/Income in April, as well as the Revised University of Michigan Consumer Sentiment. If the data is no surprise, the local uptrend in EURUSD will continue.

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

The Yen is retreating again. Overview for 31.05.2022

USDJPY is back to rising; demand for the “safe haven” Yen dropped.

The Japanese Yen is falling against the USD on Tuesday. The current quote for the instrument is 128.05.

The global risk attitude is currently quite positive. This is one of the reasons why the demand for the Yen declined.

The statistics published in the morning showed that the Unemployment Rate in Japan dropped to 2.5% in April after being 2.6% in March, although the indicator wasn’t expected to change.

The Retail Sales leaped up 2.9% y/y in April after gaining 0.7% y/y the month before and against the expected growth of 2.6% y/y. An improvement in consumer demand may be a positive signal for the economy but it's better to wait and see if the tendency continues.

According to the preliminary data, Industrial Production in Japan lost 1.3% m/m in April after adding 0.3% m/m in March and against the expected decline of 0.1% m/m. The drop can be explained by complicated logistics, exchange rate fluctuations, and uncertainty with new orders. It’s bad news – a slump in production may affect all adjacent sectors.

The Japanese Prime Minister that spoke yesterday said that the Bank of Japan would continue moving towards the inflation target of 2%. The current CPI boost, in his words, is the result of the oil sector rally. In theory, inflation might force manufacturers and enterprises to slow down a bit to monitor how the situation will unfold and assess inflation prospects.

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

EURUSD is back to growing. Overview for 03.06.2022

The major currency pair recovered after a 2-day plunge and is currently waiting for the news.

EURUSD is stable on Friday; investors are saving strengths in anticipation of the news. The current quote for the instrument is 1.0758.

It seems like market players managed to take their minds off global risk aversion. It made the “greenback” retreat, while other traded currencies had a chance to recover.

The statistics published yesterday were rather mixed. For example, the PPI in the Euro Area added 1.2% m/m in April after gaining 5.3% m/m in March and against the expected reading of 2.5% m/m. On YoY, the indicator turned out to be better than expected.

The US started reporting on the labour market a bit later than usual due to the national holiday earlier this week. The ADP Non-Farm Employment Change showed 128K in May after being 202K the month before and against the expected reading of 295K. There is no direct correlation between reports from ADP and NFP to be released on Friday, but they are sometimes pretty close.

The Factory Orders gained 0.3% m/m in April against market expectations of 0.8% m/m. As a rule, the indicator offers no surprises because the overall situation is already displayed in the Durable Goods Orders report. However, the spring of 2022 is not the time when you can be sure of anything.

Later today, the US will continue reporting – the Unemployment Rate is expected to drop to 3.5%, while the Non-Farm Payrolls might show 325K after being 428K in the previous month.

Strong labour market readings will provide significant support to the “greenback”: if the employment in the country is fine, then consumers are handling inflation quite well and the CPI may continue rising. This, in turn, will make the US Fed act more aggressively.

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

The Yen dropped to new lows. Overview for 07.06.2022

USDJPY updated its 20-year highs.

The Japanese Yen dropped to its 20-year lows against the USD on Tuesday. The current quote for the instrument is 132.94, the lowest since April 2002.

The key trigger for this decline was US bond yield growth, which supported the “greenback” – it added 3.04%, the biggest gain in three weeks. If this rally continues, the Yen may continue plunging.

The statistics published by Japan this morning showed that Household Spending lost 1.7% y/y in April, which is better than the March data but worse than the expected decline by 0.5% y/y.

This report is a leading indicator, and that’s why it’s very important for assessing future prospects. Slow inflation remains a strong headache for the Ban of Japan and the Ministry of Finance.

Average Cash Earnings gained 1.7% y/y in April, ahead of a 1.5% expectation but far behind the March reading.

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

Nothing can prevent the Yen from devaluating. Overview for 09.06.2022

After hitting a new 20-year low, USDJPY stopped.

The Japanese Yen got even weaker against the USD. The current quote for the instrument is 133.82.

A new high in USDJPY is at 134.56 – the asset continues to devalue. The process started on 27 May and the Yen has dropped 5.85% since that time. As for 2022, the Japanese currency has already lost 16.5%.

The rally in US bond yield supports the “greenback”, which puts additional pressure on the Yen. Market rumour has it that the bond yield had to be contained to help the Yen to correct because all other factors are against the Japanese currency.

The Bank of Japan sticks to the “soft” monetary policy, thus making the Yen more vulnerable in the currency market because the “greenback” gets a lot of support from the US Fed’s aggressive stance.

In addition, there are serious doubts that current monetary policy, slow wage indexation, and low CPI and Household Spending growth rates might help inflation reach the target level of 2%. Even if it does, there is no guarantee that the BoJ will be able to hold it there. In this light, risks in USDJPY remain very high.

Moreover, demand for the Yen as a “safe haven” asset, which has always supported the Japanese currency, is extremely low this year.

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

Yen is near new lows. Overview for 14.06.2022

The Japanese yen against the US dollar has put falling on a pause, but this is temporary. The current quote is 134.66.

Thus, the devaluation of the Japanese yen is going on with no hints of pausing. This year, the JPY is falling fast and decisively. The key trigger is the lagging of the monetary policy carried out by the Bank of Japan from that of the Fed, ECB, and others. The BoJ is literally the only CB among developed economies that remains ultra soft. Among other things, this applies pressure to the national currency.

The Japanese minister of finance on Tuesday noted that worries about the circumstances around the national currency were only growing. The authorities are ready to apply some control on the yen if necessary. However, the verbal intervention made no impression on the currency market.

Statistics issued today demonstrated that production in April in Japan dropped by 4.9% y/y, which turned out worse than the expected -4.8% y/y. Producers seem to have no confidence that they will be able to sell their produce with all the global inflation and supply issues.

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

US dollar remains strong. Overview for 16.06.2022

On Thursday, the major is very cautious. The quote is 1.0443.

News is plenty today, and all about global regulators. For example, the Federal Reserve system increased the interest rate by 75 base points to 1.50-1.75%. This is the most devisive action taken by the Fed since 1994. The expectations were more or less like that: after the inflation statistics for May were published, it was doubtful that the Fed will hold its monetary aggression back.

In the comment, it is said that after a decline at the beginning of the year the US economy expanded with a foothold in the growing payrolls and low unemployment. Meanwhile, inflation remains high due to the imbalance of supply and demand. Inflation risks remain under attention of the regulator that considers valid increasing the target range.

Quite interestingly, the Fed returned to voicing an inflational goal of 2.0%.

Interest rate forecast for 2022 was expanded to 3.4% from 1.9%.

Jerome Powell did manage to calm down investors explaining that this increase in the rate was unnaturally big and would not come into practice.

The head of the ECB Christine Lagarde on Wednesday spoke about the necessity to be strong and consistent in the monetary policy and noted that crises are never the same. Apart from this, the ECB announced flexible reinvesting by PEPP in order to keep functioning the mechnisms of passing over monetary policy.

In other words, the Fed is ready to attack inflation, while the ECB is still waiting for a miracle. That is why the US dollar us growing while the euro remains depressed.

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

Yen took a pause. Overview for 20.06.2022

The Japanese yen against the US dollar began the new week with a consolidation. The current quote is 134.74.

The market seems quiet, but there are reasons for it. Firstly, there are almost no serious statistics today, and investors save energy for future volatility. Secondly, all important events have already happened, and market players already have all facts on hands. It is high time to pause and think.

This week, Japan will issue important statistics. Normally, the yen hardly reacts to statistics, but this time, some movements might occur. The question is base inflation in Tokyo. This report is interpreted by investors as a leading indicator before the main inflation release. There are reasons to forecast growth of this index.

If there are confirmations of growth of inflation in Japan, the BoJ will have to change rhetoric and decide on tougher steps.

This might be a starting point for the growth of the yen. Currently, it is quite depressed by the difference in the monetary policies of the Bank of Japan with a negative interest rate and, for example, the Fed that has decided on lifting the rate. In case the BoJ, leaning on the growth of the CPI, will begin to toughen its policy, the JPY will recover.

Naturally, this is not a question of one day. However, the statistics on base inflation in Tokyo scheduled for Friday will at least let us know whether this is possible at all.

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

The USD is gaining steam again. Overview for 22.06.2022

EURUSD couldn’t keep its positive momentum – the asset is retreating.

The major currency pair got under pressure again in the middle of the week. The current quote for the instrument is 1.0499.

According to the BBVA, the US bond yield might continue rising until the moment the US Fed stops raising its benchmark interest rate. And it sounds about right – future expectations imply 3.4% in the middle of 2023. The US bond yield is steadily growing and providing the “greenback” with significant support.

In addition, the American currency is once again in the spotlight due to global risk aversion.

At the same time, the Euro gets little support because the European Central Bank is not as aggressive when it comes to the rate hikes as the American regulator. The closest rate hike might occur in two months, so why worry now?

Later today, US Fed Chairman Jerome Powell is scheduled to speak. If his comments about the regulator’s monetary policy are “hawkish” enough, the USD will have more reasons to continue rising.

Investors are slowly switching their attention to Thursday, when the Euro Area will report on the PMIs. If the numbers are stronger than expected, it will tip the scales in favour of the Euro.

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

EURUSD: mood swing again. Overview for 24.06.2022

The major currency pair is looking weak on Friday. The current quote for the instrument is 1.0530.

During his second day of reporting in US Congress, the US ed Chairman Jerome Powell described the American labour market as strong and admitted that it might remain strong if inflation was kept under control.

The regulator has no clear understanding of how all launched mechanisms will eventually work. For example, when it comes to the labour market, the Fed doesn’t exclude a possibility that the unemployment rate might go up from it’s all-time lows. Powell believes that the labour sector is “overheated”, whatever it could mean.

As for the economy, the Fed said that the demand/supply ratio should be more balanced. Powell mentioned that financial markets were doing a good job and the country’s banking system was strong. There are problems with long-term supply in the real estate market but demand remains high this year, so the growth in this sector should be strong.

It’s interesting that Powell emphasised that the regulator wouldn’t want to reduce the rates. Does it mean that the era of cheap money, affordable loans, and energetic consumer demand is over and the economy will face real tightening? It’s a very important question that has yet to be answered.

And if on the first day of speaking Powell managed to calm market players down, then the next day they didn’t like what he was saying. The “greenback” is in demand again because investors aren’t confident about future economic prospects and require “safe haven” assets.

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

AUD: capitalising on the situation. Overview for 28.06.2022

AUDUSD ignores bad forecasts for the Australian GDP.

The Aussie is slowly growing against the USD on Tuesday. The current quote for the instrument is 0.6957.

The local weakness of the American currency allows the Aussie to recover a bit. At the same time, investors are paying no attention to negative news.

According to S&P Global, the Australian GDP in 2022 might be worse than it was preliminary expected – the indicator might add just 3.6% against 4.0%. On the other hand, in 2023, the GDP might gain 2.8% against 2.7%.

Inflation in Australia might reach 5.0% this year. In 2023 and 2024, the indicator might drop to 3% and 2.5% respectively.

As for the benchmark interest rate, S&P Global believes that it might be raised to 1.75% this year, and up to 2.3% and 2.75% in 2023 and 2024 respectively. Only in 2025, the rate might start going down.

One must admit that expectations announced by S&P Global are looking extremely realistic as they are based on the weakening of export demand due to a slowdown in all global economies. In the long term, it’s not a good signal for the AUD.

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

GBP: stress might be over. Overview for 30.06.2022

GBPUSD took a break after a couple of days of plummeting.

The Pound sterling stopped falling against the USD. The current quote for the instrument is 1.2135.

First of all, the Pound is under domestic pressure – the United Kingdom has just survived the most significant rail strike in 30 years. However, labour unions aren’t likely to stop here – teachers are the next. All of them are demanding wage indexation because of increasing inflation.

Secondly, the strong USD prevents the Pound from taking advantage of the situation and rebounding.

The Governor of the Bank of England Andrew Bailey, who spoke yesterday at the ECB Forum on Central Banking, said that the key task of the British regulator’s monetary policy was to reduce inflation. He believes that the entire economic system is in a state of shock. If the Bank of England realise that the inflation boost isn’t slowing down, it might act more aggressively.

In his opinion, the current situation leaves a lot of options open.

The BoE also mentioned that it would like to use its fiscal policy to help and protect the most vulnerable population.

As a matter of fact, the British regulator doesn’t have a lot of mechanisms it may use right now. The rate will rise, no doubt about it. However, one shouldn’t expect the monetary policy to be tightened very quickly – the Bank of England is very reluctant to raise its rates and always prefers to wait until the economy reaches stability without any interference.

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