EURUSD slumped even lower. Overview for 26.05.2023

The market's most traded currency pair fell even lower on Friday. The current EURUSD quote is 1.0730.

Investors are gradually withdrawing from risks without constructive news on the US government debt. The debate between Democrats and Republicans continues. Under these circumstances, the US dollar is in demand as a defensive asset.

News from Germany is also playing against the euro. Europe's biggest economy has fallen into recession: production volume fell by 0.3% in the first quarter after a 0.5% decline in the fourth quarter of 2022. Statistics show that the earlier skyrocketing energy prices had a negative effect on consumer spending.

At the same time, the Federal Statistical Office of Germany lowered its GDP estimate for the start of the year to zero.

The statistics commentary notes that continuing price rises were a heavy burden for the German economy at the start of 2023. This is reflected in household spending, which dropped 1.2% in the January to March period.

Such signals indicate that the European economy is in a difficult position despite all attempts to stabilise the situation. Price pressures are extremely high, and this is a negative factor for the euro.

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

EUR continues to decline. Overview for 30.05.2023

The market’s most traded currency pair fell below earlier levels on Tuesday. The current EURUSD quote is 1.0710.

The flow of information was scarce the day before, as markets in the US and parts of Europe and the UK were closed due to a public holiday.

Investors are returning to activity today. They will remain focused on the agreement between the Republicans and Democrats on the public debt. As a reminder, the framework agreement implies raising the public debt ceiling by 4 trillion USD over two years, while the federal government will refrain from increasing spending, except for the US defense sector.

The market believes that, while the agreement in its current form will significantly limit government spending, it is unlikely to reduce the overall budget deficit. In fact, it will not lead to any sharp changes in US finances.

The House of Representatives will vote on the agreement on Wednesday.

It will be some time before the Congressional Budget Office analyses its accounts in detail to form a politically neutral assessment of the impact of the decisions taken.

The US Consumer Confidence Index for May, published by the Conference Board today, is worth a look. Separate signals indicate a sharp decline in consumer spending, which is a bad sign.

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

AUD is declining even faster. Overview for 01.06.2023

The Australian dollar continues to decline against the US dollar. The current AUDUSD quote is 0.6488.

The Aussie is under increased pressure from a strong USD, and the flow of Chinese statistics. Official reports published by China yesterday reflected a deterioration in the country’s economic activity. China remains Australia’s main trade and economic partner, so anything happening there is important to Australia.

A private survey released today showed China’s factory activity recovered slightly in May. This partially improved the market mood, but the trend remains in place.

Morning statistics showed that Australian retail sales in May were at zero level after growing by 0.4% m/m in April. This might be connected to the seasonality factor.

Interest rate expectations continue to affect the AUD. By August, the rate might reach 4.1% per annum, rising from the current 3.85%.

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

EUR: from heaven to earth. Overview for 05.06.2023

The market’s most traded currency pair on Monday has declined and is consolidating. The current EURUSD quote is 1.0700.

The US NFP rose by 339 thousand in May, exceeding expectations almost twice. A month before, the index increased by 294 thousand. The unemployment rate grew from 3.4% to 3.7%, which was totally unexpected. The average hourly wage in the US in May rose by 0.3% m/m as forecast, upon increasing by 0.4% previously.

Strong signals from the employment sector gave the USD a surprising impulse, decreasing the bears’ expectations about the upcoming Fed’s steps.

Bears in the USD expect the Federal Reserve System to stop raising the interest rate soon. The regulator will have a meeting next week – we will see which position the Fed will stick to.

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

EURUSD is under pressure again. Overview for 07.06.2023

The market's most traded currency pair is moderately retreating on Wednesday. The current EURUSD quote is 1.0690.

The EUR felt some pressure following comments by Isabel Schnabel of the European Central Bank. She noted that an ECB rate hike might take longer than expected to have an impact on the economy. With the current skills shortage in the labour market, Schnabel said, we can expect the influence of the monetary policy on the economy to be weaker than usual.

Euro fans counted on the ECB's consistency and confidence in raising the interest rate. With comments of this nature appearing now, trust in the regulator has somewhat diminished, and this is reflected in the trajectory of the euro.

Today statistics will be as scarce as they were the day before. The US will release the consumer credit data for May in the afternoon. The index is expected to have dropped markedly after April.

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

EUR strengthens significantly. Overview for 09.06.2023

The main currency pair rose by the end of the week. The current EURUSD quote is 1.0780.

One of the reasons for this rise was the previously released weekly data on the number of claims for unemployment benefits in the US. The figure increased to 261,000 against the forecast of 236,000 and the previous value of 233,000.

The labour market is sending mixed signals. The rise in the number of claims is not related to seasonal factors, as the services sector is currently in need of a workforce. There is a possibility that these are the first signs of job cuts by large and medium-sized companies. If so, investors may face many unpleasant revelations.

The GDP data for the eurozone in the first quarter did not cause distress, although the indicators confirmed the recession in the region's economy. A recession is defined as two consecutive quarters of declining GDP, which is what happened indeed. Capital markets say that this recession is the mildest the stock markets have ever seen.

There are few significant statistics today, but the market will be kept busy shaping expectations for the future meeting of the Federal Reserve in the US.

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

JPY is under pressure again. Overview for 14.06.2023

The Japanese yen is hit by a new wave of devaluation against the US dollar. The current USDJPY quote is 140.05.

Goldman Sachs investment bank revised its inflationary expectations for Japan, increasing them. They are now even higher than the forecast of the BoJ. In fact, a decrease in the CPI below 2% for the coming months has been excluded.

Meanwhile, the BoJ is not likely to take any steps towards changing the credit and monetary policy on Friday. The monetary strategy might be adjusted at the meeting in July when the CB will update its inflationary forecasts. Inflation in Japan at the end of the fiscal year is expected to reach 2.8% against the previous forecast of 1.8%. The Goldman Sachs forecast is for consumer prices excluding fresh food.

At the same time, the latest statistics are far from these ambitious expectations. The Corporate Commodity Price Index (CGPI) rose by only 5.1% in May compared with April's reading of 5.9%. Investors have little faith in the potential of the BoJ since the JPY is falling again.

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

The Bank of Japan supported the JPY. Overview for 16.06.2023

The Japanese yen has somewhat stabilised against the US dollar. The current USDJPY quote is 140.61.

On Friday, the Bank of Japan held its regular meeting, following which it kept the interest rate at -0.1% per annum. Thus, the regulator continues to ignore global trends among central banks and sticks to its stimulus plan. In its comments after the meeting, the BoJ noted that the yield curve control programme (YCC) remains unchanged.

Above all, the BoJ maintains its view that inflation in the country will slow down in the coming months. This viewpoint contradicts that of most economists. There is a certain risk here: if the regulator believes that the pressure on the consumer price index will decrease, it is unlikely to take any action regarding the interest rate.

Such as stance plays against the JPY in the medium term, as it leaves a high spread between the interest rates of the Bank of Japan and the US Federal Reserve.

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

GBP is attempting to rise. Overview for 21.06.2023

The British pound sterling is seeking reasons to increase against the US dollar. The current GBPUSD quote is 1.2765.

Today's statistics on British inflation have provided informative insights. Prices in the country have remained higher than expected for four months in a row. This could be a basis for a new interest rate hike. In May, the CPI rose by 8.7% y/y, as before. Core inflation accelerated to 7.1% from 6.8% previously. The core price indicator was expected to drop to 8.4%.

These figures increase the risk of the Bank of England raising the interest rate on Thursday, thereby extending the period of its tightest monetary policy in four years.

The market thinks the economy could dip into a recession before the Bank of England manages to tame the inflation genie back into its bottle.

The GBP, however, is not deterred by the possibility of a recession.

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

JPY drops to a new low. Overview for 23.06.2023

The Japanese yen has returned to the course of devaluation against the US dollar. The current USDJPY quote is 143.01.

The yen reacts to macroeconomic reports selectively, but today is the case.

The latest statistics showed that consumer prices in Japan increased faster than expected in May. At the same time, a tendency towards inflation acceleration intensified. Thus, prices excluding fresh food rose by 3.2% y/y. This is less than in April when core inflation stood at 3.4%. Nevertheless, the statistics surpassed expectations of a 3.1% increase. The primary inflation indicator was also up to 4.3% y/y, reaching the highest level since 1981.

Most observers believe that the Bank of Japan may revise its quarterly price forecasts at a July meeting. An abrupt shift in position could trigger adjustments to the yield curve monitoring programme of the Bank of Japan. This will be the first step to changing the structure of the BoJ’s monetary policy.

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

The devaluation of the JPY has paused. Overview for 27.06.2023

The Japanese yen has taken a pause in the devaluation process against the US dollar. The current USDJPY quote is 143.47.

The news flow is neutral, and market reactions are subdued. However, there is something worth paying attention to.

Japan has reappointed Masato Kanda as vice finance minister for international affairs for another year. He is known for coordinating interventions worth 65 billion USD last year when the yen was collapsing. Japan is thereby sending an unambiguous signal that it is ready to apply the currency intervention mechanism where it is deemed necessary.

There is a strong sentiment amongst investors that Japan will refrain from currency interventions unless the yen reaches the 150 JPY per dollar threshold. Devaluation is ongoing, but it seems that its pace no longer frightens anyone.

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

AUD is at the bottom again. Overview for 29.06.2023

The Australian dollar, paired with the US dollar, has reached its lowest level in four weeks. The current AUDUSD quote is 0.6606.

The peak of the Aussie at 0.6900 is now a distant memory.

The pause in AUD selling pressure may be due to the release of statistics from Australia. Fresh data demonstrate that May retail sales increased by 0.7% m/m. The indicator came out unexpectedly strong, adding to the reasons why the Reserve Bank of Australia may raise interest rates once again.

The Australian labour market also shows signs of a slight reduction in the number of job vacancies. Meanwhile, the employment sector remains robust. Overall, these combined data points have somewhat smoothed out yesterday's market disappointment following the release of the Australian inflation report, which showed a noticeable decline in prices.

Investors estimate a 36% likelihood of an interest rate hike to 4.35% per annum at the July meeting.

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