AUD is not reacting positively to the RBA. Overview for 07.11.2023

The Australian dollar is falling against the US dollar on Tuesday. The current AUDUSD exchange rate stands at 0.6437.

At its November meeting, the Reserve Bank of Australia decided to raise the interest rate to 4.35% per annum from the previous 4.10%. In its comments, the RBA noted long-term inflation concerns. Naturally, this did not sit well with anyone.

The RBA decision was not surprising for investors. First of all, the regulator does not keep its monetary stance secret, repeatedly saying it will increase the borrowing cost. Secondly, it relies on clear signals that are also evident in the market.

According to the RBA, in the future, it will consider the latest statistics and make decisions based on the data.

Today, the Aussie is under pressure not just from the central bank’s moderate stance but also from the increased risk aversion in the stock market.

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

GBP started a decline. Overview for 09.11.2023

The British pound sterling fell against the US dollar for the third consecutive session. The current GBPUSD exchange rate stands at 1.2286.

The pound intensified its decline when the Bank of England's chief economist suggested interest rate cuts by mid-2024. The speaker was Huw Pill, and he said future rate cuts do not seem unreasonable to him.

Earlier, Bank of England Governor Andrew Bailey noted it was too soon to talk about a likely cut in interest rates. However, Bailey is confident that inflation will return to the target level of 2% by the end of 2025.

Market expectations for interest rates could indeed change. Investors are currently forecasting a 25-basis point reduction in the cost of borrowing next August. The postponement of a rate cut, even if theoretical, has put pressure on the already uncertain pound.

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

AUD gathers strength. Overview for 14.11.2023

The Australian dollar paired with the US dollar is consolidating after a decline. The current AUDUSD exchange rate stands at 0.6370.

In November, Australia's Consumer Confidence index dropped by 2.6 points compared to the previous 2.9 points. This leading indicator reflects consumer spending levels, illustrating countrywide economic activity parameters.

Australia's Business Confidence Index in October was -2 points, down from September's reading of 1 point. A value above zero signals improving market sentiments, while a value below zero indicates worsening market conditions.

Evidently, the sentiment situation, both in business and among consumers, remains quite mixed. On one hand, this is related to interest rate levels. The RBA has previously raised the rate and expressed its resolution to fight inflation. On the other hand, Australia's employment sector remains relatively stable, providing economic resilience.

Today's movements of the AUD will be largely influenced by US inflation data, with increased volatility expected in the afternoon.

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

GBP started to decline. Overview for 16.11.2023

The British pound sterling paired with the US dollar is experiencing a decline on Thursday. The current GBPUSD quote stands at 1.2391.

The UK continues to report its success in mitigating price pressure. The consumer price index decreased to 4.6% y/y in October, down from the previous 6.7%. Last month, core inflation fell to 5.7% y/y from 6.1%. The retail price index saw an even more significant drop to 6.1% y/y from 8.9%.

The input producer price index was 0.4% m/m, compared to the 0.6% estimate from a month ago. The output PPI rose by a mere 0.1% m/m, aligning with expectations.

This appears to be the exact effect the Bank of England foresaw when increasing the interest rate. The price response seems promising. It will be interesting to see the regulator's next move – whether it will see confirmation of the price reduction trend and reverse monetary policy or quietly await further declines in inflation.

Two factors worked against the pound: the recovery of the US dollar's positions and a decrease in price pressure within the country.

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

EURUSD reaches new high. Overview for 20.11.2023

The primary currency pair is hovering near a two-month peak this Monday. The current EURUSD exchange rate stands at 1.0922.

Market expectations have turned against the US dollar. Following the release of a series of weak macroeconomic reports in the previous week, including the inflation report, investors have begun to contemplate the outlook for monetary policy. The conclusion is that the Fed will likely need to adjust its monetary policy as the economy signals deteriorating conditions.

According to the CME FedWatch tool, the market expects the US to ease its monetary policy in March with a 30% probability.

It is essential to adopt a more objective attitude. The Federal Reserve is unlikely to make abrupt changes; it will first gather as many arguments as possible in favour of a shift in its policy. However, expectations reflect the evolving sentiments in the market.

These sentiments do not currently favour the US dollar at present but tend to lean towards risk.

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

EUR retreats slightly. Overview for 22.11.2023

The primary currency pair on Wednesday looks neutral. The current EURUSD exchange rate stands at 1.0910.

The US existing home sales data for October fell below expectations, dropping from 3.95 million to 3.79 million homes.

In the minutes published yesterday from the last meeting of the US Federal Reserve, concerns were expressed about the potential acceleration of inflation due to robust economic growth. At the same time, committee members agreed on the necessity of adopting a cautious approach to credit and monetary policy, lending support to the position of the USD.

Today marks the most eventful day of the week in terms of macroeconomic publications. Due to Thanksgiving on Thursday and Black Friday, investors will not have time for trading later, so the most interesting events will unfold today.

It is worth paying attention to the statistics on the volume of durable goods orders, where specific components of this report are most interesting. The November report on the consumer confidence index from the University of Michigan will also be published. In both cases, the data is expected to worsen.

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

JPY manages to keep balance. Overview for 24.11.2023

The Japanese yen continues to maintain equilibrium against the US dollar. The current USDJPY exchange rate stands at 149.21.

In October, the general inflation rate in Japan accelerated to 3.3% y/y against 3.0% y/y in September. This is the highest level since last July.

Preliminary statistics published this week showed a slowdown in business activity for November, reaching an 11-month low. This is due to the persisting weakness in the production sector.

The Bank of Japan reaffirmed its intention to keep a soft credit and monetary policy when it held its October meeting. On that day, the regulator made minor adjustments to the yield curve control. This was considered by the market but proved insufficient for the currencies.

The BoJ’s interest rate remains negative at -0.1% per annum. Due to the colossal spread between the interest rates of the US Federal Reserve and the Bank of Japan, investors are turning away from the yen.

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

EUR takes a pause. Overview for 28.11.2023

The primary currency pair paused on Tuesday. The current EURUSD exchange rate stands at 1.0947.

The DXY dollar index is concluding its most challenging month in 2023. This is linked to market confidence that the Federal Reserve has completed its stringent monetary policy cycle and is prepared to maintain high rates. There is growing confidence in the foreign exchange market that rates could begin falling in the first half of 2024.

In this context, the dollar itself is softening, losing ground. However, it is crucial not to lose vigilance: as soon as everyone is convinced that the rates will be lowered, the Fed will find something to say.

According to CME FedWatch monitoring, futures suggest a softening of the Fed’s credit and monetary policy in March with a probability of 23%. By May, the likelihood is expected to reach 50%.

Yesterday's report on newly constructed home sales in the US for October was disappointing: the indicator dropped to 0.68 million from the previous 0.76 million. Today, Christine Lagarde, President of the ECB, will deliver a speech, and the US will present the CCI for November from the Conference Board.

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

EURUSD removes emotions. Overview for 30.11.2023

The main currency pair appears neutral on Thursday. The current EURUSD quote stands at 1.0970.

Since yesterday, the currency market has successfully corrected its excessive overbought conditions.

The US statistics turned out interesting. The GDP for Q3 in the second reading increased by 5.2% q/q, surpassing the forecasted 4.9% rise and the previous 2.1% increase. While a robust report was expected, the market is now pondering the prospects: will inflation accelerate with such strong consumer demand?

The primary forecast from the US Federal Reserve suggests that by the end of 2023, the real US GDP will have grown by approximately 2.1%.

Today, a significant flow of crucial data will persist in the market. Parameters for personal income and spending for October will be released alongside the core consumer consumption expenditure price index for the same month. This Core PCE index is pivotal for the Federal Reserve in deciding its credit and monetary policy. The index is expected to decrease from 3.7% to 3.5% y/y. While a decline in the indicator will be a positive sign for the capital markets, it may be interpreted as local adverse news for the USD.

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

JPY is growing stronger. Overview for 04.12.2023

The Japanese yen has become much stronger against the US dollar. The current USDJPY exchange rate stands at 146.83.

The yen's rapid and assertive performance took many by surprise.

The fundamental outlook for the Japanese national currency appears mixed without apparent positive factors. Last weekend, the Bank of Japan Policy Board provided a clear commentary: the regulator had not accelerated inflation growth to a pace justifiable by a wage rise.

The Bank of Japan will likely continue to adhere to its ultra-soft monetary policy in the coming period. This means the interest rate will remain negative at -0.10% per annum.

The Japanese economy demonstrates mild recovery from the weak Q3. For the end of the year, economic growth might remain restrained.

Little will probably change in the credit and monetary policy structure until spring.

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

EURUSD is going deeper down. Overview for 06.12.2023

The main currency pair on Wednesday continues falling. The current EURUSD exchange rate stands at 1.0793.

Bulls in the USD are back on scene. At the same time, attention is focused not as much on the Fed's interest rate but on the ECB's rate. Earlier the ECB's representatives mentioned that inflation in the eurozone was under control, so the reasons for further tightening become more and more scarce.

Market attention is shifting to the US employment statistics. The first report will come out today, which is the private sector payrolls for November. However, investors are much more interested in the real economy situation represented by the NFP report scheduled for Friday. Nonfarm payrolls are one of the most convincing indicators of the economic situation.

Expectations from this report are quite assertive. The economy must have created 180 thousand new jobs. If reality lives up to the forecasts, this release will be better than the previous one. The unemployment rate in November is likely to remain at 3.9%.

High NFP levels will mean that the monetary policy carried out by the Federal Reserve is still adequate. This could provide strong support for the USD.

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

JPY: what a surge! Overview for 08.12.2023

The Japanese yen is strengthening its position against the US dollar. The current USDJPY exchange rate stands at 143.64.

When we mentioned a couple of days ago that the yen was on the brink of significant movements, we could not have imagined that the Japanese national currency would rise so quickly and sharply. However, the market anticipated something of this nature.

So, the JPY exchange rate has surged overnight to the peak of 8 August 2023. What happened?

Bank of Japan Governor Kazuo Ueda mentioned yesterday that the regulator's policy would become even more complex at the end of this year and undergo a transformation the following year. The monetary policymaker outlined several options for future developments. Earlier, Ueda’s deputy commented on how the end of the ultra-soft credit and monetary policy could potentially influence the economy.

These statements ignited a real fire in the yen. It experienced the most substantial daily increase since January, and the yields on Japanese five-year treasury securities saw their most significant sell-off in a decade.

Just four weeks ago, the yen was hovering near 30-year lows, while the dollar was rapidly climbing towards 150.00. The markets were teetering on the brink of the CB’s intervention meant to support the currency – but the JPY was remarkably lucky, and circumstances changed.

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