Important calendar events
The dollar edged higher on Wednesday and the dollar index rose to the 102.9 level. US Treasury yields retreated slightly, however, with the US 10-year bond yielding 3.72%.
The U.S. Federal Reserve kept its interest rate steady at its June policy meeting for the first time in over a year. Fed officials have voted to keep the central bank’s interest rate at a target range of 5.00% to 5.25%.
The Fed has signaled that its tightening cycle is not over yet and that its peak rate might be higher than anticipated. The purpose of suspending rate hikes is to give policymakers time to assess the pace of cooling inflation and many economists believe that the Fed may resume rate hikes as early as July if inflation remains sticky. Fed Chair Jerome Powell has warned that additional firming may be appropriate, hinting at the possibility of two more rate hikes.
Powell’s speaking at the ECB Central Bank Forum in Sintra, Portugal, on Wednesday, warned that further tightening should be expected. Powell stressed that a pause in June was required to assess the progress of US inflation but stated that consecutive rate hikes may be resumed if required. Powell added that the majority of FOMC members are in favor of two more rate hikes this year.
US Headline inflation dropped sharply to 4.0% year-on-year in May, from 4.9% in April. US Inflation cooled more than expected in May, as markets were anticipating a 4.1% print. Core CPI, on the other hand, which excludes food and energy, remained sticky at 0.4% every month and 5.3% on an annual basis. US headline inflation dropped to its lowest point since March 2021 after 12 consecutive months of declines. Easing inflation enhances the odds of a pause in rate hikes at Wednesday’s Fed meeting.
The US economy expanded by 1.3% in the first year of 2023 against predictions of a 1.1% growth. The preliminary GDP Price Index, which is an important inflation gauge, exceeded expectations, rising by 4.2% in Q1 of 2023 versus the 4.0% anticipated.
Economic data may cause volatility in dollar prices ahead of the Fed interest rate decision in July. The final GDP for the first quarter of the year is due on Thursday. Preliminary GDP data were optimistic, showing that the US economy expanded by 1.3% in the previous quarter. The final GDP Price Index is also due on Thursday. This is an important inflation gauge and preliminary estimates indicate that the index rose by 4.2% in the first quarter of the year. Unemployment claims on Thursday may also affect the dollar, as the performance of the labor market is a fundamental part of the US economy.
The Euro edged lower against the dollar on Wednesday, with EUR/USD dropping to 1.090. If the EUR/USD pair declines, it may find support at 1.084, while resistance may be encountered near 1.101.
The ECB Central Bank Forum in Portugal is one of the key financial events of the week. ECB President Christine Lagarde and other ECB policymakers are discussing the central bank’s policy in detail. The heads of several major central banks deliver speeches at the forum on Wednesday, including Fed chair Powell and BOE Governor Bailey.
Lagarde’s speech on Wednesday was especially hawkish, stressing that there is still a lot of ground to cover to bring inflation down and pointing at another rate hike in July. Lagarde admitted that recent economic data were weak and that the Eurozone economy remains stagnant, but remained confident that the EU would avoid going into recession.
The ECB raised interest rates by 25 bp at its policy meeting in June, bringing its main refinancing rate to 4.00%. The ECB has signaled that further rate hikes are required as inflationary pressures in the EU remain high. The ECB revised upwards its inflation forecasts for 2023, 2024, and 2025 by one-tenth of a percent, to 5.4%, 3.0%, and 2.2%, respectively. Higher inflation projections raised expectations for additional monetary tightening. ECB President Christine Lagarde has pointed to further rate hikes up ahead to tackle sticky inflation in the Eurozone.
Headline inflation in the Eurozone cooled to 6.1% year-on-year in May from 7.0% in April, beating expectations of 6.3%. Core Inflation, which excludes food and energy, also slowed to 5.3% on an annual basis in May versus 5.6% in April and 5.5% forecast. The latest inflation print is showing that the ECB’s efforts to bring inflation down are paying off, but it will likely not be sufficient to induce the central bank to abandon its hawkish policy just yet.
GDP data for the first quarter of the year showed that the Eurozone is technically entering a recession. Revised GDP showed a contraction of 0.1% for Q1 of 2023, in contrast to the Flash GDP data released earlier which showed an expansion of 0.1%. Deteriorating economic conditions in the Eurozone may force the ECB to rethink its hawkish monetary policy.
The Sterling sank on Wednesday, with GBP/USD dropping to 1.260. If the GBP/USD rate goes up, it may encounter resistance near 1.285, while support may be found near 1.248.
The BOE raised interest rates by 50 basis points at its June meeting, bringing the bank rate to 5.0%. Sticky inflation in the UK is putting pressure on BOE policymakers to increase interest rates. Bailey warned that if price pressures remain persistent, further tightening would be required. Bailey also stressed after the policy meeting that unsustainable wage rises were largely responsible for the 50-bp rate hike. Labor shortages in the UK have pushed up wage growth, increasing inflationary pressures.
The BOE is expected to continue to increase interest rates in the coming months as it fights to bring inflation down. The BOE has been following an aggressively hawkish monetary policy, aiming to bring inflation down. As the US has paused rate hikes, BOE interest rates are now almost on par with Fed rates, boosting the Sterling.
BOE Governor Andrew Bailey spoke at the ECB Central Bank Forum in Sintra on Wednesday. Bailey defended the central bank’s decision to hike rates by a surprise 50 bps, saying that the UK is showing signs of sticky inflation, emphasizing once again the role of the British labor market in high inflation rates. Bailey’s unwavering hawkish stance boosted the dollar on Wednesday.
Headline inflation in the UK remained unchanged at 8.7% year-on-year in May according to CPI data released on Wednesday. UK inflation remains sticky, exceeding expectations of a drop to 8.4%. Core CPI, which excludes food and energy, was also hotter than anticipated in May. Core CPI rose to 7.1% on an annual basis from 6.8% in April, versus 6.8% expected. This is much higher than the BOE’s goal of 2% and public confidence in the BOE’s efforts to curb inflation has fallen to its lowest level on record.
Britain’s economy expanded by 0.2% month-on-month in April after a contraction of 0.3% in March. GDP grew by 0.1% for the 3-month figure to April pointing to slow growth, and cooling recession concerns.
The Yen edged lower on Wednesday and USD/JPY rose to the 144.4 level. If the USD/JPY pair declines, it may find support near 139.8. If the pair climbs, it may find resistance at 145.
The Yen has been retreating, weighed down by the BOJ’s persistently dovish policy. Japanese authorities, however, have stressed that they are monitoring the Yen’s decline and may intervene to boost the currency against excessive short-selling. On Wednesday, Masato Kanda, Japan's top currency diplomat warned against further falls in the yen, stating that Japanese authorities are keeping a close eye on FX developments. Japanese Finance Minister Suzuki also warned that they were ready to respond appropriately to one-sided currency trading.
The BOJ maintained its ultra-accommodating monetary policy at its June meeting, holding its short-term interest rate target steady at -0.10% and keeping its yield curve control program unchanged. The BOJ has signaled it is in no rush to change its dovish stance despite rising inflation rates.
BOJ Governor Kazuo Ueda has stated that, even though price pressures are expected to grow over the next few months, there is high uncertainty on next year's wage growth. Ueda also stressed that more time is needed until the bank’s 2% inflation target became sustainable.
The BOJ summary of opinions released on Monday showed that policymakers are considering a tweak to the central bank’s Yield Curve Control policy. Even though Ueda has repeatedly downplayed such a possibility shortly, some analysts see a potential tweak to the policy as early as this July.
National Core CPI dropped to 3.2% in June from 3.4% in May. June’s print exceeded expectations of 3.1%, indicating that inflation in Japan continues to rise contrary to BOJ’s expectations. BOJ Core CPI rose to 3.1% in June from 3.0% in May. Inflation in Japan remains steadily above the BOJ’s 2% target, putting pressure on businesses and households.
Final GDP data for the first quarter of the year released last week showed that the Japanese economy expanded by 0.7%, against a preliminary GDP print of 0.4%. The GDP data exceeded expectations, alleviating recession concerns for Japan. The final GDP Price Index printed showed a 2.0% annual expansion, versus 1.2% the previous quarter. Japan’s economic recovery increases the odds of a hawkish pivot in BOJ’s monetary policy.
Retail Sales and Consumer Confidence data on Thursday may cause some volatility in the price of the Yen.
The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.
Written by:
Myrsini Giannouli
kehadiran industri sebagai Penyedia Likuiditas
dan eksekusi yang dapat diandalkan
dana klien
dukungan pelanggan
Situs web yang sekarang Anda lihat dioperasikan oleh TopFX Global Ltd, entitas yang diatur oleh Otoritas Jasa Keuangan (FSA) Seychelles dengan Lisensi Dealer Sekuritas No SD037 yang tidak didirikan di Uni Eropa atau diatur oleh Otoritas Kompeten Nasional UE.
Jika Anda ingin melanjutkan, harap konfirmasikan bahwa Anda memahami dan menerima risiko yang terkait dengan perdagangan dengan entitas non-UE (karena risiko-risiko ini dijelaskan dalam Own Formulir Pengakuan Inisiatif dan bahwa keputusan Anda akan menjadi inisiatif eksklusif Anda sendiri dan bahwa tidak ada permintaan yang dibuat oleh TopFX Global Ltd atau entitas lain dalam Grup.
Jangan tampilkan pesan ini lagi
Situs web TopFX menggunakan cookie untuk mengoptimalkan pengalaman pengguna.
Cookie ini termasuk dalam kategori berikut: cookie penting, fungsional, dan pemasaran. Cookie pemasaran juga dapat mencakup cookie pihak ketiga.
Anda dapat menyesuaikan pilihan cookie mana yang ingin Anda terima.
Cookie ini diperlukan agar situs web dapat berfungsi dengan baik dan tidak dapat dinonaktifkan.
Cookie fungsional memungkinkan situs web mengingat preferensi pengguna dan pilihan yang Anda buat di situs web seperti nama pengguna, wilayah, dan bahasa.
Cookie ini digunakan untuk melacak pengunjung di seluruh situs web kami dan menampilkan iklan yang lebih relevan kepada Anda. Cookie pemasaran juga mencakup cookie pihak ketiga dari mitra. Untuk informasi lebih lanjut terkait perlindungan & pengumpulan data, silakan lihat Kebijakan Privasi dan Pengungkapan Cookie kami.
