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Daily Currency Update The Australian dollar tested new lows through trade on Tuesday, unable to extend gains enjoyed through a brief improvement in the underlying risk narrative. Having slipped below US$0.6450, the AUD mounted a recovery through the domestic session clawing its way back above US$0.65 to mark intraday highs at US$0.6510. After two days of hyper volatility, markets appeared content in consolidating positions and investors looked again to risk assets, prompting a short-run improvement in demand for risk through the Asian session. The upturn was, however, short lived. More hawkish Fed commentary, coupled with a string of solid US data sets, fresh concerns surrounding UK economic vulnerability and a surge in gas prices conspired to push investors back toward haven assets, allowing the USD to recoup early losses and enjoy another overnight uptick. Faced with broad based USD strength the AUD drifted back below US$.6450, marking fresh lows at US$0.6415, a new 30 month low. With little of note on today’s macroeconomic ticket our attentions remain with broader market themes. The UK’s inherent vulnerabilities should continue to stifle any real risk on relief, while commentary from key European and US central bank figures and the promise of tighter financial… Read More »A new day, same old story; AUD/USD tests new lows amid risk aversion

Summary The Consumer Confidence Index rose to its highest level since April, and now sits more than 12 points higher than where it was just two months ago. Falling gasoline prices and a still-tight labor market are the main reasons we have seen a recent rebound in confidence. But as inflation persists and the Fed lifts rates to combat it, we are unlikely to see confidence approach pre-pandemic levels. Read the full report here

EUR/USD kick-started a new round of declines as flash PMIs figures across Europe pointed at a further fall in business activities with both the EU services and manufacturing PMIs edging lower in the contraction area weaker than expected. As seen on the four-hour chart, a decisive break below the 0.98065 barrier paved the way for euro sellers to try the 0.97434 hurdle, around the 161.8% Fibonacci projection of the last upswing from 0.98065 to 0.99086. If selling pressure intensifies at 0.97434, the price may overcome this obstacle, heading towards the next support at 0.97044. Further push below this level can bring more sellers to join the market and turn their attention towards 0.96412. Otherwise, should buyers retake control, they may keep the pair sideways between 0.97434 and 0.98065. Further traction above the broken support of 0.98065 can put the last top at 0.99086 on the spotlight. Diverging EMAs exhibit accelerating bearish sentiment with the 50-EMA being below the 200-EMA. Short-term momentum oscillators reflect a bearish bias in the market. RSI is floating in the oversold area below the 30-level. That means the price may hang out at the 0.97434 hurdle before clearing that. Momentum is also moving down in the… Read More »EUR/USD downtrend deepens on mounting recession [Video]

The vision of ever-increasing interest rate hikes in the US, along with worse macroeconomic data readings in the form of PMI indexes, may have negatively affected stock indexes on Friday 23.09.22. An addition Added to this was the UK's tax cut plan, which in the current situation could send investors into a tailspin. As of 12:52 GMT+3, Germany's DAX is losing more than 2%. Britain's FTSE100 is down nearly 2% to 7036 points. (the lowest in 10 weeks) the broad Stoxx Europe 600 index of European companies has fallen 20 percent from its November 2021 peak to 391 points, indicating a potential downswing. The EU50 index hit its lowest level in 22 months at 3356 points, while Germany's DAX fell to 12354 points, its lowest in 22 months. Announcements of more hikes, UK plan and weak data There seems to be no good news in the markets today, only bad or even worse news, which may be reflected in the behaviour of stock indices. Stock market investors face the prospect of increasingly expensive capital on both sides of the Atlantic, as ECB President Christine Lagarde has said that Eurozone policymakers will continue to raise interest rates over the next few… Read More »Bloody Friday on global markets – Today’s stock market declines

The Dow Jones was sharply down on Friday, losing around 1.5% for the day until the mid-US session and extending sharp fall into fifth straight day. The index is also on track for a big weekly loss of over 4% and also for a second consecutive week in red. Strong risk aversion on growing fears of a recession as well as concerns about the strength of the impact of aggressive Fed’s policy tightening on corporate earnings, was the main driver of the price. Fresh weakness pressures key supports at 29654/29638 (Fibo 38.2% of 18044/36830, 2020/2022 rally / 2022 low of June 17), break of which would generate strong bearish signal for further acceleration lower and expose targets at 28875 / 27437 (55MMA / 50% retracement of 18044/36830). Bearish studies complement to weak sentiment and only substantial change in fundamentals could slow or reverse the current steep fall. Meanwhile, limited corrective upticks on oversold conditions and profit-taking would provide better levels to re-join strong downtrend. Res: 30000; 30107; 30238; 30395 Sup: 29000; 28875; 28000; 27437

Central banks were front and center this week, as major institutions such as the Federal Reserve, Bank of Japan (BoJ) and Bank of England (BoE) met to assess monetary policy in their respective economies. At a high level, policymakers generally communicated a hawkish outlook for monetary policy, although the Fed's updated “Dot Plot” garnered the most attention and resulted in renewed volatility across global financial markets. However, the BoJ's commitment to accommodative monetary policy and FX intervention from the Ministry of Finance were also notable, while U.K. financial markets tumbled in the aftermath of the BoE announcement and government fiscal stimulus. Heading into this week, we believed the U.S. dollar would continue to strengthen through the end of this year. After the events of this week, we have increased conviction in that view, and now believe dollar strength could continue into the early part of 2023. We will make a more formal assessment of currency markets and provide updated exchange rate forecasts in our September International Economic Outlook, although as of now, we are likely to extend our dollar strength view into Q1-2023. Read the full report

S&P 500 continued its downswing without much of a respite even though bonds favored stocks to reach higher than they did one hour before the closing bell. Interestingly, VIX has barely moved in spite of the quite meaningful downside continuation – let alone Wednesday‘s reversal that caught so many off guard. Thankfully not you! Today, we‘re already below my direction-setting level described in these two tweets. USD is up, and much of the forex antidollar plays in disarray (beyond the usual suspect, Japan) – this isn‘t yet a dollar top. That‘s a consequence of Treasuries price action – no top in yields, not enough fresh buyers to make up for the vacated Fed place, is putting and will put even more serious pressure on asset prices. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action – today short) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets… Read More »Treasuries flashing red

Summary United States: Whatever It Takes As widely expected, the FOMC raised the target range for the fed funds rate by 75 bps for the third consecutive time. The housing market continues to buckle under the pressure of higher mortgage rates, while the Leading Economic Index has signaled a broader loss of momentum across the economy. Next week: Durable Goods (Tue), Consumer Confidence (Tue), Personal Income & Spending (Fri) International: Bank of Japan's Policy Actions Offset Each Other Aside from the Fed, the central bank that caught the attention of market participants this week was the Bank of Japan (BoJ). As expected, the BoJ left monetary policy settings unchanged; however, the communication around the decision was widely interpreted as dovish. Next week: Central Bank Speakers (Mon-Fri), China PMIs (Thu), Eurozone Inflation (Fri) Interest Rate Watch: Aggressive Fed Path Boosts Inflation-Fighting Credibility The FOMC delivered its third straight 75 bps hike and a hawkish message for rates going forward at its meeting this week. The FOMC now sees it likely the fed funds target range will rise to 4.4% by the of this year and 4.6% by the end of next year as inflation is expected to be more intractable than… Read More »Weekly economic and financial commentary

With the Fed meeting out of the way, a quieter week is on the horizon, barring of course any flare up of tensions between Russia and Ukraine. Either way, the spotlight will probably fall on the euro as far-right parties are expected to gain ground in Italy’s parliamentary election on Sunday, while preliminary inflation readings will come to the fore at the end of the week. In the US, the highlight will be on the PCE inflation figures, though it’s doubtful whether it will change much regarding the Fed policy outlook.

Daily Currency Update There is plenty to digest as we return from the public holiday in observance of the Queen’s passing with the AUD testing a break below $0.66 US cents. The AUD plunged through key supports in the wake of the FED and FOMC policy update Thursday morning, giving up $US0.6680 to mark fresh intraday and 24-month lows at $US0.6570. As expected, policymakers lifted rates by 75 basis points while significantly revising interest rate forecasts. The Fed’s dot plot implies policymakers will add another 125 points to the Fed Funds cash rate before the year is up, lifting expectations for the peak cash rate to 4.6%. With inflation pressures largely unchecked the Fed seems hell-bent on extending the current tightening cycle deeper into restrictive territory. The maintenance of this aggressive monetary policy program will likely continue to weigh on the AUD as risk appetite sours and the USD enjoys sustained demand both on haven and yield plays. Having slipped below $US0.66 the AUD has clawed back some losses as the furor that followed the Fed policy announcement subsides. Our attentions turn now to US manufacturing and services data while the UK mini budget will afford a key insight into… Read More »AUD/USD plunges as Fed promises to maintain aggressive path of rate hikes