Key Releases
USD is strengthening against its main competitors – EUR, GBP, and JPY.
The July data from the US construction market was published yesterday, which alarmed investors: the number of building permits issued decreased by 1.3%, and the volume of new homes – by 9.6%. Also, the American Association of Mortgage Bankers said that the demand for loans is at its lowest level since 2000, as potential home buyers are not ready to put up with high rates. Thus, the labor market is beginning to experience significant difficulties against the backdrop of a serious tightening of monetary policy, and some experts have already started talking about the onset of a recession in this particular economic sector. Poor July retail sales data in the US were released today, showing zero dynamics instead of the expected growth of 0.1%, as the effect of lower gasoline prices was leveled by a decrease in car sales. In the evening, investors are waiting to release the minutes of the US Federal Reserve meeting, from which they hope to find out whether the rate will increase by 75.0 basis points, as before, or by 50.0 basis points. Any hint of a monetary policy correction could cause significant price movement.
EUR is weakening against USD but is strengthening against JPY and GBP.
Q2 Eurozone macroeconomic data were published today: gross domestic product (GDP) grew by 0.6% QoQ and 3.9% YoY, slightly lower than the forecasted 0.7% and 4.0 % but still positive. Employment in the region is also increasing, albeit slower than before: by 0.3% QoQ and by 2.4% YoY. However, experts believe that the further economic prospects for the Eurozone are negative: GDP will begin to decline in the second half of the year under the pressure of high inflation and disruptions in supply chains. Most analysts believe that by the end of the year, the European economy will enter a recession, and next year's growth will be very insignificant.
GBP weakens against USD and EUR but strengthens against JPY.
Investors are focused on the publication of July data on inflation in the UK, where the consumer price index fell from 0.8% to 0.6% MoM, not justifying the analysts' forecast of 0.4%, and it rose from 9 .4% to 10.1% YoY, which is higher than the preliminary estimate of 9.8% and is the highest value since 1982. Experts say that the main driver of inflation is the increase in energy prices, which intensified after the start of the Ukrainian crisis, and they fear that the fight against it in the UK may last longer than in other countries. Under these conditions, the actions of Bank of England officials come to the fore, who have already adjusted the interest rate six times but so far have not been able to stop the rise in prices. According to calculations, the regulator is expected to continue its hawkish policy of tightening monetary parameters, which could catalyze an even deeper recession in the British economy in the year's second half.
JPY is weakening against its main competitors – USD, EUR, and GBP.
Investors are focused on the publication of the July data on foreign trade in Japan: the volume of exports increased by 19.0% instead of 18.2%, while the volume of imports added 47.2%, which is higher than the forecasted 45.7% and brought the trade balance deficit to 1.4368T yen. In general, the situation for Japanese companies remains difficult due to rising fuel prices and a weakening yen, and experts fear that the export-oriented national economy may begin to decline in the event of a global economic crisis. Also, today, poor June data on orders in the engineering sector was released, which is the main indicator of investment in production: the indicator rose by 0.9% MoM against the forecast of 1.3%, and the value fell from 7.4% to 6.5% YoY.
AUD is weakening against its main competitors – EUR, JPY, GBP, and USD.
AUD is under pressure amid the publication of data on the wage change index in the second quarter of this year: the indicator remained at the same level of 0.7% QoQ instead of the expected growth of 0.8%, and it rose from 2.4 % to 2.6% YoY, which is less than the forecast of 2.7%. Although wages are rising at the fastest rate in almost eight years, they still lag behind the pace of inflation, so consumer demand remains under pressure, worsening the economic situation in the country. On the other hand, a serious increase in wages caused by a shortage of qualified personnel could become a catalyst for a new wave of consumer price growth, as enterprises will shift the costs of hiring and retaining employees to buyers of their products. Under these conditions, the Reserve Bank of Australia (RBA) will be forced to continue aggressively raising interest rates, further increasing the risks of a recession in the national economy.
Oil quotes are trying to reduce.
The American Petroleum Institute (API) weekly report on energy inventories was released yesterday, which was generally positive for the market: the figure fell by 0.448M barrels, exceeding the forecasted decrease by 0.117M barrels, while gasoline inventories fell by 4.5M barrels. However, these data failed to strengthen fuel quotes significantly, as investors' fear of an impending global recession, supported by poor production data in China and July inflation statistics in the UK, continues to prevail. Today, markets are waiting for data on oil inventories from the Energy Information Administration of the US Department of Energy (EIA): the value may decrease by 0.0275M barrels, which will support energy prices.
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