Olivia

EUR/USD climbs to a two-week high on Friday amid the emergence of fresh USD selling. The risk-on impulse seems to be the only factor exerting pressure on the safe-haven buck. Bets for more aggressive Fed rate hikes could limit the USD downside and cap the major. The EUR/USD pair witnessed good two-way price swings on Thursday and finally settled nearly unchanged for the day, around the parity mark. The shared currency struggled to attract buyers after the European Central Bank (ECB) delivered an unprecedented 75 bps rate hike to snuff off record high inflation. It is worth mentioning that the Eurozone CPI surged to 9.1% in August and is expected to rise to double-digits in the coming months. In the accompanying monetary policy statement, the ECB said that it expects to raise interest rates further to dampen demand. The jumbo rate hike, however, was already priced in the markets and hence, did little to provide any meaningful impetus to the shared currency. This, along with the emergence of some intraday US dollar buying, dragged the pair to the 0.9930 area. Speaking at a Cato Institute conference, Fed Chair Jerome Powell reiterated the central bank's strong commitment to bringing inflation down… Read More »EUR/USD Forecast: Bulls remain at the mercy of USD price dynamics, eyes Lagarde’s speech

EUR/USD stages a goodish recovery on Wednesday amid a sharp USD pullback from a 20-year top. Retreating US bond yields and a recovery in the risk sentiment undermined the safe-haven buck. Bulls struggle to capitalize on the move as the focus remains on the ECB meeting and Powell’s speech. The EUR/USD pair witnessed a short-covering bounce on Wednesday and rallied around 135 pips from the vicinity of its lowest level since October 2002. The strong intraday move up lifted spot prices back above the parity mark and was sponsored by a sharp US dollar pullback. Following the recent strong run-up to a 20-year peak, the USD bulls opted to take some profits off the table amid retreating US Treasury bond yields. Apart from this, a late recovery in the US equity markets further undermined the safe-haven greenback. The shared currency further drew support from mostly better-than-anticipated economic releases from the Eurozone. According to the official data released earlier this Wednesday, German Industrial Production fell by 0.3% in July against the 0.4% decline expected. Furthermore, the Eurozone GDP was revised higher to show a growth of 0.8% during the second quarter of 2022 vs. 0.6% estimated previously. Adding to this, Russian… Read More »EUR/USD Analysis: Bulls remain on the sidelines ahead of ECB and Fed’s Powell

The ECB is expected to hike rates by 50 bps in its September meeting. Markets are wagering a 75 bps rate hike amid surging energy costs. The bank’s staff projections are in focus, with no respite seen for the EUR. After raising interest rates for the first time in over a decade in July, the European Central Bank (ECB) is set for another rate increase this Thursday, although the big question is whether the central bank will opt for 50 basis points (bps) or 75 bps hike amid record-high inflation and recession risks. The ECB will announce the interest rate decision at 1215 GMT, which will be followed by President Christine Lagarde’s press conference at 1245 GMT. The ECB remains in a tough spot The ECB finds itself in a tough spot in the last leg of the European summer. The old continent sees desperate times, in the face of rising inflation and an imminent recession. The central bank maintains its resolve to prioritize the taming of inflation even if it could mean some pain for the economy, and, therefore, is set to hike its three key interest rates by another 50 bps at this month’s monetary policy meeting. Following… Read More »ECB Preview: Will tough times call for tough measures?

Recent economic data paint a picture of increasing concerns about the economic outlook. In the US, high inflation and rising interest rates play a key role. In the euro area, the same factors play a role – although interest rates are still below those in the US – but skyrocketing energy prices and gas supply disruption are additional forces that should drag down growth. Easing price pressures in business surveys are a hopeful development but selling price expectations remain nevertheless exceptionally high given the weakening of order books. This could point to input price pressures that force businesses to charge higher prices to protect their margins. It is to be feared that slowing demand will make this increasingly difficult, forcing companies to cut back on investments and new hirings. The summer break is supposed to be a period of disconnecting from the economic and geopolitical news flow. The focus shifts to relaxing, food, enjoying the weather, etc. The focus of attention flips once the holidays are over. This year is no exception, rather to the contrary. The extreme conditions in many countries during the summer months – high temperatures, drought in some countries and flooding in others, forest fires –… Read More »Towards a frugal winter

Liz Truss’ pledge to freeze energy costs brings optimism on her first day, while the Nasdaq underperforms despite stronger service PMI data. Liz Truss energy plans bring hope that inflation can be brought under control “The pound has outperformed many of its peers today, with Liz Truss delivering a much-anticipated shock and awe announcement aimed at bringing energy prices under control. In a week that is dominated by central bank announcements from the RBA, BoC, and ECB, it should be noted that monetary policy’s ability to bring inflation under control in the face of weakening currencies and soaring energy prices is somewhat limited. The decision to freeze UK energy prices ahead of next month’s widely anticipated spike will arguably provide a greater impact on inflation expectations than a 75bp hike in interest rates. The dramatic Covid spending package enacted under Rishi Sunak looks to be just the beginning, with this package costing up to £130 billion over the coming 18 months. For the near-term this seems and effective way to bring greater certainty and relieve the pressure on the Bank of England, but the long-term consequence will undoubtedly result in another pile of debt that will ultimately need paying through… Read More »Truss energy cap brings hope that inflation can be controlled

EUR/USD hits a fresh two-decade low and is pressured by a combination of factors. Russian gas cut stokes recession fears and weighs heavily on the shared currency. Hawkish Fed expectations continue to underpin the USD and contribute to the fall. The EUR/USD pair opens with a modest bearish gap on the first day of a new week and drops to its lowest level since December 2002, below the 0.9900 mark during the Asian session. Russia's indefinite closure of its main gas supply pipeline stokes fears over a worsening energy crisis in Europe and weighs on the shared currency. Hours after the Group of Seven leaders agreed to implement a price cap on Russian oil, Gazprom cancelled the resumption of gas flows through the Nord Stream 1 pipeline citing an oil leak in a turbine. This, in turn, fuels worries about a potential economic recession in the Eurozone, which, along with a stronger US dollar, exerts downward pressure on the major. The USD Index, which measures the greenback's performance against a basket of currencies, rose to its highest level since late 2002 and remains well supported by hawkish Fed expectations. Despite Friday's mixed US monthly jobs report, investors seem convinced that… Read More »EUR/USD Analysis: Bears are back in control after Russia cuts off gas supply to Europe

Investors appear relatively pleased with the jobs report despite some initial choppy trade following the release. The headline NFP figure was a little larger than expected at 315,000 which may have created that initial unease as a knockout report could have effectively paved the way for a 75 basis point rate hike this month. But once you dig a little deeper, there are aspects of the report that will please the Fed and support the case for easing off the brake. While we can't put too much weight on one report, a surprise spike in participation from 62.1% to 62.4% will undoubtedly be welcomed, lifting unemployment to 3.7% from 3.5% along with it. As will hourly earnings rising by 5.2% against expectations of a small increase to 5.3%. All of this will be a relief to policymakers but I'm not sure it will be enough to change their minds at this point. There's been such an effort to put 75 basis points on the table in recent weeks, to change their mind on the back of this would seriously undermine their guidance in future. If paired with another decent drop in inflation in a couple of weeks, more may be… Read More »A welcome US jobs report

Europe After what has been a uniformly negative week, today’s US payrolls report has served to offer a brief respite to markets with a solid but not spectacular set of numbers, although the unemployment rate did see an increase from 3.5% to 3.7%. Today’s gains have been broad based with today’s outperformers including the likes of Abrdn, which appears to be enjoying some buying interest ahead of what is likely to be its eviction from the FTSE100 at the next reshuffle in what has been a disappointing year to date for the asset management sector. St. James Place is also having a positive day, after the shares hit their lowest levels since December 2020 earlier this week. The energy sector is also getting a lift on the back of a rebound in oil prices, with BP leading the way, and Shell shrugging off reports that CEO Ben Van Beurden is stepping down next year, after 40 years at the company. The DAX has been a notable strong performer, led by the auto and manufacturing sector. Today’s worst performers on the FTSE100 have been the house builders on the back of a downgrade from HSBC.   With the share prices of… Read More »US payrolls offer markets an end of week respite

Today’s market summary The Dollar strengthening has reversed. US stock indexes futures are down currently. Brent is edging up presently ahead of G7 finance ministers virtual meeting today where they are expected to agree on plans to impose a price cap on Russian oil. Gold is edging up today. Top daily news Global stocks are subdued currently ahead of August US payrolls report today after SP500 snapped 4-session losing streak Thursday. Amazon shares gained 0.83% outperforming the market, Microsoft shares lost 0.44% Thursday while Britain's antitrust regulator said Microsoft’s $69 billion acquisition of “Call of Duty” maker Activision Blizzard could harm competition in gaming sector and it needs to be investigated in depth. Forex news Currency Pair Change EUR USD -0.5% GBP USD -0.48% USD JPY +0.03% AUD USD +0.21%   The Dollar strengthening has reversed currently. The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, gained 0.7% Thursday while the US Bureau of Labor Statistics reported less Americans applied for initial jobless claims last week than expected while their number declined. EUR/USD joined GBP/USD’s accelerated sliding Thursday while the flash manufacturing PMI for euro zone was downgraded to 49.6 in the… Read More »Stocks slump ahead of August US payrolls report

US Dollar: Sep '22 USD is Down at 109.315. Energies: Oct '22 Crude is Up at 88.58. Financials: The Dec '22 30 Year bond is Up 1 tick and trading at 133.19. Indices: The Sep '22 S&P 500 Emini ES contract is 4 ticks Higher and trading at 3969.75. Gold: The Dec'22 Gold contract is trading Up at 1717.30. Gold is 80 ticks Higher than its close. Initial conclusion This is not a correlated market. The dollar is Down, and Crude is Up which is normal, but the 30-year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower, then the bonds should follow and vice-versa. The S&P is Higher, and Crude is trading Higher which is not correlated. Gold is trading Higher which is correlated with the US dollar trading Down. I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have… Read More »Jobs Friday [Video]