Important calendar events
The dollar eased on Thursday, with the dollar index dropping to 106.3, after rising to the 106.8 level earlier in the week, its highest value since November 2022. The dollar is moving in overbought territory supported by increased rate hike expectations and diminishing risk sentiment. US Treasury yields remained firm on increased future rate hike expectations, with the US 10-year bond yielding 4.62%.
Final GDP data for the second quarter of 2023 were released on Thursday. GDP data showed that the US economy expanded by only 2.1% in Q2 of 2023 against expectations of 2.2% growth. The final GDP price index for the 2nd quarter of the year also came in below expectations at 1.7% versus 2.0% anticipated.
US Unemployment data released on Thursday were optimistic. Jobless claims come in at 204k for the week ended September 23 versus 214k anticipated. Pending Home Sales on the other hand slumped in August, shrinking by 7.1% against a 0.5% growth in July.
Hawkish Fed speak boosted the dollar this week. Minneapolis Fed Governor Neel Kashkari delivered a hawkish speech on Tuesday, stating that he expects interest rates to go up again this year. FOMC member Michelle Bowman also hinted at another rate hike this year.
FOMC members unanimously voted last week to keep interest rates unchanged at a target range of 5.25% to 5.50%. The Fed decided to pause rate hikes but that does not necessarily mean it has reached its rate ceiling.
The Fed policy statement following the meeting left the door open for further rate hikes. Market odds of another rate hike within the year are increasing, although it is clear that the Fed’s future policy direction will be data-driven.
Market participants focused especially on FOMC Economic Projections last week. US policymakers upgraded the US GDP outlook to 2.1% from 1.0% for 2023. Inflation was forecast to decrease further, with core PCE for 2023 expected to drop to 3.7% from previous estimates of 3.9%. The US economy is showing signs of picking up, giving the Fed more leeway to raise interest rates. At the same time, inflationary pressures are proving quite stubborn and may force the Fed to continue its hawkish policy.
US inflationary pressures are not easing just yet, despite the Fed’s high-interest rates. Headline inflation came in hotter than anticipated, climbing to 3.7% year-on-year in August from 3.2% in July versus 3.6% expected. Rising fuel costs are primarily to blame for the stubbornly high inflation rates in the US.
The Core PCE Price Index on Friday is expected to affect the dollar. This is the Fed’s preferred inflation gauge and is expected to attract the attention of market participants.
EUR/USD dipped in early trading on Thursday bouncing off the 1.050 level support, its lowest level since December 2022. The currency pair gained strength later in the day though, climbing to 1.058. If the EUR/USD pair declines, it may find further support at 1.022, while resistance may be encountered near 1.073.
German inflation data released on Thursday were optimistic, boosting the Euro. German headline inflation came down to 4.5% year-on-year in September from 6.1% in August. Spanish Flash CPI data, on the other hand, showed that annual inflation rose to 3.5% in September from 2.6% in August.
ECB President Christine Lagarde delivered a hawkish speech on Monday, providing support for the Euro. Testifying before the Committee on Economic and Monetary Affairs in Brussels, Lagarde implied that the ECB will not raise interest rates further but reiterated that borrowing costs will remain elevated for as long as needed to bring inflationary pressures down.
Inflation in the Euro area is cooling, albeit at slow rates, according to Final CPI data released last week. Headline inflation in the Eurozone dropped slightly to 5.2% year-on-year in August from 5.3% in July. Flash CPI estimates had shown that annual CPI had remained unchanged from July at 5.3%.
The ECB raised interest rates by 25 bp at last week's monetary policy meeting, bringing its main refinancing rate to 4.50%. The ECB had the difficult task of assessing the risk to the fragile Eurozone economy against high inflation rates. In the end, persistently high inflation induced the central bank to raise interest rates again on Thursday.
The ECB hinted that it had reached its interest rate ceiling, putting pressure on the Euro. ECB President Christine Lagarde signaled an end to rate hikes at the press conference after the conclusion of the meeting but warned that interest rates will remain at sufficiently restrictive levels for as long as necessary.
Final GDP data for the Euro area were disappointing, showing that the Eurozone economy expanded by only 0.1% in the second quarter of the year against expectations of 0.3% growth. The Eurozone economy barely expanded in the second quarter after contracting by 0.1% in Q1 of 2023. The EU economy is struggling and cannot withstand much further tightening.
EU Flash CPI data on Friday may affect the Euro as traders will be watching the direction of the Euro area inflation. ECB President Christine Lagarde is also due to deliver a speech on Friday. Market participants follow her speeches closely for hints into the ECB’s future policy which may cause volatility in the Euro.
GBP/USD gained strength on Thursday rising to 1.220. If the GBP/USD rate goes up, it may encounter resistance near 1.242, while support may be found near 1.210.
Last week the BOE maintained its official rate at 5.25% against expectations of a 25-bp rate hike that would bring the interest rate at 5.50%. The BOE also signaled that it had reached its peak interest rate.
BOE Governor Andrew Bailey stated last week that the central bank would be watching closely to see if further rate hikes are needed. Bailey also emphasized that the BOE will be holding interest rates in restrictive territory long enough to see inflation down to the bank’s 2% target. Bailey’s comments implied that the BOE has likely reached its rate ceiling after a long run of rate hikes.
Inflationary pressures in the UK are finally receding and likely tipped the balance in favor of a pause in rate hikes. British Inflation cooled more than expected in August, demonstrating the effectiveness of the BOE’s consistently hawkish policy. Headline inflation dropped to 6.7% year-on-year in August from 6.8% in July against expectations of 7.0%.
British economic growth forecasts are not optimistic with BOE predicting a weaker economic outlook. A combination of a struggling economy and high inflation is making the BOE’s task more difficult. Further tightening is needed to bring inflation down at the risk of tipping the British economy into recession.
Britain’s economy contracted by 0.5% month-on-month in July after expanding by 0.5% in June. The prognosis was more optimistic, with markets forecasting a 0.2% decline in GDP. The state of the British economy is fragile, as prolonged tightening has taken its toll on the labor market and other vital economic sectors. The British economy weakened more than expected in July, likely influencing the BOE’s decision to pause rate hikes.
On the data front, important fundamentals are due on Friday for the UK, including Current Account and Final GDP.
USD/JPY traded above the key 149 level on Thursday, touching 149.5. If the USD/JPY pair declines, it may find support near 147.3. If the pair climbs, it may find further resistance at 150.
The Yen has been weakening, pushed down by the BOJ’s ultra-accommodating monetary policy. The Yen’s weakness has been a subject of concern for Japanese authorities as it undermines the country’s importing potential and causes financial distress in households.
Japanese authorities have been repeatedly warning speculators against excessive short-selling of the Yen. The Yen’s continued weakness is raising market awareness of another intervention by the Japanese currency to support the ailing currency. Many market analysts view the USD/JPY 150 level as the line in the sand for another intervention.
Japan’s Finance Minister Shunichi Suzuki stressed on Tuesday that no options were off the table alerting traders to the risk of another government intervention. Suzuki reiterated his warning on Thursday, stating that excessive currency moves would be addressed by the Japanese government. The looming threat of government intervention is providing some support for the Yen. As however, Japanese officials are only issuing verbal warnings so far with no attempt at a new intervention the Yen continues to weaken.
The minutes of the Bank of Japan's July meeting were released on Wednesday and the minutes indicated that Japan’s policymakers are set to maintain the bank’s ultra-loose monetary settings.
At its policy meeting last week, the BOJ maintained its short-term interest rate target steady at -0.10% and showed no signs of relaxing its ultra-easy policy. Nevertheless, market odds of a BOJ rate hike in January have increased above 60%.
BOJ Governor Kazuo Ueda had hinted in the past few weeks that a policy shift may finally be on the horizon. Ueda delivered a hawkish speech on Monday, stressing that the wage and inflation outlook remains uncertain. Ueda added that inflation would need to remain sustainably above the BOJ’s 2% target before the central bank could consider abandoning its ultra-easy policy.
The BOJ has maintained its dovish bias, putting more pressure on the Yen as other major central banks have been moving in a hawkish direction for over a year. Even though the Fed kept interest rates steady last week, the US central bank has delivered a hawkish message hinting at more rate hikes within the year. The Yen becomes even more vulnerable as other major central banks continue raising interest rates.
National Core CPI dropped to 3.1% in July from 3.3% in June. Inflation in Japan has remained above the BOJ’s 2% target for more than a year, encouraging the BOJ to tighten its monetary policy. BOJ Core CPI climbed to 3.3% on an annual level in August beating expectations of 3.2%.
Final GDP data for the second quarter of the year showed that the Japanese economy expanded by 1.2%, disappointing expectations of 1.4% growth. The final GDP Price Index showed a 3.5% annual expansion, versus 3.4% the previous quarter. Japan’s economic recovery increases the odds of a hawkish pivot in BOJ’s monetary policy.
Important fundamentals are scheduled to be released on Friday for Japan, including Core Tokyo CPI data.
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
Bir Likidite Sağlayıcı olarak sektördeki varlığımız
ve güvenilir uygulama
müşteri fonları
müşteri desteği
Şu anda görüntülemekte olduğunuz web sitesi, Avrupa Birliği'nde yerleşik olmayan veya bir AB Ulusal Yetkili Makamı tarafından düzenlenmeyen SD037 numaralı Menkul Kıymet Satıcı Lisansı ile Seyşeller Finansal Hizmetler Kurumu (FSA) tarafından düzenlenen bir kuruluş olan TopFX Global Ltd tarafından işletilmektedir.
Devam etmek isterseniz lütfen AB üyesi olmayan bir kuruluşla ticaret yapmanın risklerini anladığınızı ve kabul ettiğinizi onaylayın (bu riskler Kendi Girişim Kabul Formu ve kararınızın kendi inisiyatifinizde olacağını ve TopFX Global Ltd veya Grup bünyesindeki başka herhangi bir kuruluş tarafından herhangi bir talepte bulunulmadığını unutmayın.
Bu iletiyi bir daha gösterme
TopFX web sitesi, kullanıcı deneyimini optimize etmek amacıyla çerezleri kullanmaktadır.
Bu çerezler şu kategorilere girer: temel, işlevsel ve pazarlama çerezleri. Pazarlama çerezleri ayrıca üçüncü şahıslara ait çerezleri de içerebilir.
Kabul etmek istediğiniz çerezlere ilişkin seçiminizi özelleştirebilirsiniz.
Bu çerezler, web sitesinin düzgün çalışması için gereklidir ve kapatılamaz.
İşlevsel çerezler, web sitesinin kullanıcı adı, bölge ve dil gibi kullanıcı seçimlerini ve kullanıcı tercihlerini hatırlamasını sağlar.
Bu çerezler, web sitelerimizdeki ziyaretçileri izlemek ve size daha alakalı reklamlar göstermek için kullanılır. Pazarlama çerezleri ayrıca ortaklardan gelen üçüncü taraf çerezlerini de içerir. Veri koruma ve toplamayla ilgili daha fazla bilgi için lütfen Gizlilik Politikamızı ve Çerez Açıklamamızı inceleyin.
