JPY takes pause. Overview for 04.07.2023

The Japanese yen, paired with the US dollar, has paused its devaluation. The current USDJPY quote is 144.59.

For four days in a row, there has been no change for the yen, with the devaluation scenario remaining dominant, while there are no reasons for a correction.

The statistics released yesterday showed that the Tankan non-manufacturing index rose to 23 points in the second quarter from 20 points previously, exceeding the forecasts. The same index for the largest manufacturers expanded from 1 to 5 points. Tankan surveys are interesting in terms of their extensive coverage, as they involve over 8000 companies in the manufacturing sector, making them the most reliable reports among similar releases.

Important data from Japan will not be released until Friday this week. There will be a crucial report on household spending, along with data on average wages and leading economic indicators.

The ultra-loose monetary policy of the Bank of Japan remains a key factor influencing the yen. Once the focus shifts to the interest rate differential, the JPY is expected to decline again.

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

USD receives a signal. Overview for 06.07.2023

The major currency pair remains under pressure on Thursday. The current EURUSD quote is 1.0840.

The US dollar gained support from the Federal Reserve yesterday when it released the minutes of its last meeting, which was held two weeks ago.

Some monetary committee members are ready to support a 25-basis points rate hike in July. At the same time, it was noted that the employment market is tight, and the US economy is growing steadily. In addition, there are tendencies towards a decrease in inflation towards the 2% target.

However, in the longer term, the Fed is poised to slow down the pace of interest rate hikes. The Fed sees foresees potential signs of a recession in the country's economy and aims to prevent such a scenario.

According to the CME FedWatch data, there is an 89% likelihood of a 25-basis point interest rate increase at the July meeting. This is a supportive factor for the US dollar.

Today the US begins releasing its labour market statistics for June. The private sector employment data from ADP is worth a look.

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

EURUSD has managed to rise. Overview for 10.07.2023

The most traded currency pair remains in positive territory on Monday. The current quote in EURUSD is 1.0960.

Friday's block of US employment market statistics left the US dollar without support. Investors were confused: it was expected that strong figures in the labour sector would give the Federal Reserve another strong argument in favour of policy tightening. However, the signals turned out to be mixed.

The unemployment rate in the US for June remained unchanged at 3.6%, as before. Non-farm payrolls increased by only 209,000 jobs, falling short of the forecasted growth of 225,000 and the previous figure of 306,000. Average wages rose by 4.4% y/y, exceeding the forecasted 4.2% y/y.

There are two important signals here. The first one is that the NFP, the crucial release of the season, is slowing down its pace of growth. The second is the strengthening of the inflation component within the payroll report.

The Federal Reserve is likely to raise interest rates at its July meeting, but it will do so without relying on employment data this time.

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

NZD is poised to grow. Overview for 12.07.2023

The New Zealand dollar looks positive against the US dollar. The current NZDUSD quote is 0.6224.

The Reserve Bank of New Zealand left the interest rate at the level of 5.5% per annum at the meeting in July. In the comments, the RBNZ confirmed that previous decisions to raise the interest rate had caused the planned effect: they limited expenses and held back inflation growth.

It has been mentioned that consumer spending dropped after the 20-month cycle of interest rate hikes alongside activity in housing construction. Simultaneously, housing prices decreased to more stable levels.

It is worth mentioning that the RBNZ, trying to beat inflation, has raised the interest rate by 525 basis points since October 2021. This is the most aggressive monetary policy phase since the interest rate was introduced in 1999. The regulator is likely to leave the interest rate at the current limiting level. As for inflation parameters, the CB thinks that it will drop from the peak.

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

EUR keeps hitting new highs. Overview for 14.07.2023

The major currency pair still appears very strong by Friday. The current EURUSD quote is 1.1240.

The euro has been rising for seven days straight. The most traded currency pair looks seriously overbought, but the bulls still have a lot of strength.

The rally was mostly triggered by the US statistics: first on the employment market for June and then on inflation. On the whole, they gave reason to believe that the US Federal Reserve would raise the interest rate by 25 basis points at its July meeting and stop here. The level of 5.50% per annum looks restrictive for the financial system and economy. The economy is dealing well with tight credit conditions, but given that inflation retreats, it is important to stop at the right time.

The US statistics on the producer price index released yesterday confirmed the general downward trend in inflationary pressure.

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

EURUSD is rising again. Overview for 18.07.2023

The major currency pair has not lost momentum by Tuesday and keeps ascending. The current EURUSD quote is 1.1250.

The US dollar remains weak; the problem is in the expectations concerning the interest rate. In one way or another, market talks are mostly concentrated on the credit costs in the US and the Eurozone as well as the outlook for these rates.

The latest signals from the US represent a slowdown of inflation and certain stabilisation of the labour market. The US Federal Reserve, deciding upon the interest rate, uses the Core PCE instead of the main inflation index. The former also demonstrates a decrease in the CPI pressure, though not so noticeable.

The US economy shows a marvel of sustainability within the long period of high interest rates, yet it has some limits to its strength. The interest rate of around 5.25-5.50% is restrictive and the chances for a recession will rise no matter how happy markets feel about the prospects.

Today it is worth paying attention to the US statistics on retail sales and industrial production in June.

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

GBP struggles to maintain support levels. Overview for 20.07.2023

The British pound sterling has suspended its rally against the US dollar, and the currency pair is now in a corrective phase. The current GBPUSD quote is 1.2950.

Yesterday's published UK Consumer Price Index statistics for June reflected a decline to 7.9% y/y from 8.7% a month earlier. Core inflation stood at 6.9% y/y, down from 7.7% in May. This decrease in inflation, coupled with the apparent overbought condition of the pound, seems to be the reason for its decline. With prices trending downward, it is likely that the Bank of England will not need to rush into raising interest rates.

The input producer price index (PPI) fell by 1.3% m/m following a previous 1.2% decrease. On the output side, the same indicator decreased by 0.3% m/m compared to a 0.6% decline in May.

The retail price index (RPI) also saw a decline, dropping to 10.7% y/y in June from the previous 11.3%.

All these reports indicate one thing: local price pressures have eased. While this is beneficial for the economy and consumers, it poses challenges for the GBP exchange rate.

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

EURUSD remains under pressure. Overview for 24.07.2023

The major currency pair is gearing up for a week filled with significant events. The current EURUSD quote is 1.1120.

A period of heightened emotions awaits the currency market. The meeting of the US Federal Reserve System is set to conclude on Wednesday, followed by the European Central Bank's meeting on Thursday. Both regulators are expected to announce a 25-basis-point increase in the interest rate. The difference lies in their accompanying comments and future policy outlook.

The Fed will raise the rate to 5.5% per annum and is likely to stop further increases at this point, at least based on average forecasts. This poses the main market intrigue: what and how the Fed will communicate about the future of monetary policy. A rate of 5.5% is restrictive for the economy and the financial system. Anything higher could have negative consequences for the nation's economic system and lead to rapid recession.

The question is how the Fed views inflation and the sustainability of the economy. The Fed's assessment of inflation and the economy is critical in shaping its future policy decisions. Signals indicating a potential pause in rate hikes will likely result in a weaker dollar.

The ECB is very likely to maintain its tough approach, despite recent positive inflation signals. Prices seem to have been brought under control, but it remains uncertain whether this is a coincidental occurrence or a developing trend. Any indications of further rate hikes will support the EUR's value.

In summary, the focus is on global regulators, as they are now taking on the role of the primary market influencers.

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

AUD remains highly volatile. Overview for 26.07.2023

The Australian dollar, paired with the US dollar, is once again facing pressure. The current AUDUSD quote is 0.6759.

The Aussie’s volatility is drawing attention. On one hand, a strong US dollar exerts pressure on the AUD. On the other hand, China is sending quite positive signals.

Today’s statistics revealed that inflation in Australia for the second quarter declined to 5.4% year-over-year. On a quarterly basis, the indicator rose by 0.8% following a 1.4% increase from January to March this year. The easing of inflationary pressure is a positive signal. The Reserve Bank of Australia is likely to acknowledge this at its next meeting and keep the interest rate unchanged. The Australian dollar is reacting precisely to this development.

China’s readiness to stimulate its economy is favourable for Australia. As Australia’s primary trading and economic partner, all positive news coming from China is also encouraging for the AUD.

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

USD is strong again. Overview for 28.07.2023

The major currency pair is under pressure on Friday. The current EURUSD quote is 1.0970.

The European Central Bank has taken the initiative in raising interest rates from the Fed and raised the cost of borrowing by 25 basis points to 4.25% per annum. In its comments, the ECB stated that the portfolio of securities acquired under the anti-crisis asset purchase programme is being reduced as planned, and the funds will be reinvested. The ECB is prepared to review all necessary instruments to bring inflation back to the 2.00% target.

The Central Bank's assessment of core inflation remains high, but there are signals of a slight slowdown in the rally. Financial conditions in the region have tightened, and all further efforts by the ECB will be directed towards maintaining rates at a restrictive level.

The interim conclusion is that the ECB still views inflation as the primary risk factor. In September, the regulator remains open to taking any necessary actions. It is generally expected that the rate may increase to 4.50% per annum by the end of this year.

The US GDP grew by 2.4% in the second quarter, which is considerably higher than the data from the beginning of the year.

Friday will also be interesting. The US will release statistics on Core PCE, which is the inflationary component the Federal Reserve relies specifically on when making monetary decisions. Parameters of income and personal spending of Americans will also be published.

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

JPY is plummeting. Review for 16.08.2023

The Japanese yen paired with the US dollar is devaluing at a rapid pace. The current USDJPY exchange rate stands at 145.49.

Due to the interest rate differential and monetary sentiment, the JPY exchange rate remains under significant pressure. This is occurring even amid a slight adjustment in the Bank of Japan's monetary policy.

Japan's GDP for Q2 2023 grew by 1.5% q/q against the forecasted growth of 0.8% and the previous increase of 0.7%. On a year-on-year basis, the Japanese economy skyrocketed by 6.0%, exceeding expectations twofold.

The weak yen has presumably provided substantial support to exporting companies. In turn, these companies have replenished the country's budget well, allowing for the preservation of infrastructure and social expenditures.

Currently, devaluation remains the only viable option for the JPY.

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

The decline of the AUD has come to a halt. Overview for 18.08.2023

The Australian dollar, paired with the US dollar, has ceased its decline but remains in a weakened position. The current AUDUSD exchange rate stands at 0.6398.

The day before, AUD reached its lowest point in 9 months.

Some stabilisation in AUD sentiment can be attributed to the actions of China's Central Bank. Yesterday, the regulator intervened by buying yuan on the currency market, thereby partially easing tensions in the markets. This stabilisation of the yuan has also benefited other Asian currencies.

As of this morning, it is known that Chinese authorities have instructed state banks to continue currency interventions. The necessary funds are available for this purpose. We will await the outcome, but it is believed that the results will become evident in the coming days.

The AUD exchange rate reacts strongly to developments in China's economy and finances, given that China is Australia's primary trade and economic partner.

There are also sufficient domestic factors exerting pressure on the AUD exchange rate. The main one is the Reserve Bank of Australia's inaction regarding the matter of interest rates.

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