Ekonomické zpravodajství

Daily analysis 10/17/2024

17. 10. 2024 - Josef Brynda

Latest news
  • USD shows persistent strength, pushing EURUSD below 1.09 ahead of today's ECB meeting.
  • GBPUSD fell below the key 1.30 level following weaker UK inflation data.
  • USDJPY approaches the psychologically important 150 level, increasing the risk of Japanese government intervention.
  • Today's release of Japanese September inflation data will impact the JPY.
  • AUD strengthened due to strong labor market data, confirming the RBA's stance on maintaining interest rates.
  • ECB decides on interest rates today, with a 0.25% cut to 3.25% expected.
  • US retail sales release for September may influence expectations regarding Fed policy.
  • US initial jobless claims may provide further insight into the state of the labor market.
  • US industrial production for September could affect sentiment towards the USD.
  • Japan's trade balance fell into deficit in September 2024, potentially impacting the JPY.
  • Australia's unemployment rate remained at 4.1%, supporting the AUD.
  • UK bond yields plunged after inflation data release, affecting the GBP.
  • US 10-year yields hold around 4%, influencing USD attractiveness.
  • Oil prices remain range-bound, affecting currencies of oil-exporting countries.
  • Gold holds near record highs, potentially influencing safe-haven currencies like CHF.
  • Copper trades near key support levels, which may affect commodity-exporting countries' currencies.
  • Iron ore fell to a three-week low, potentially impacting the AUD.
  • Expectations of central bank rate cuts influence currency outlooks.
  • Geopolitical tensions support safe-haven currencies like USD, CHF, and JPY.
  • Concerns about fiscal instability in some countries affect sentiment towards their currencies.
  • De-dollarization process may have long-term effects on USD's position as a reserve currency.
  • Uncertainty surrounding US presidential elections may influence USD volatility.
  • Expected rate cuts lower the cost of holding gold, potentially affecting gold-linked currencies.
  • Silver crossed $32, which may influence currencies of silver-producing countries.
  • Concerns about demand in China, especially in the property sector, affect currencies dependent on Chinese growth.
News summary
  • The US dollar is showing persistent strength, reflected in major currency pairs. EURUSD has fallen below 1.09 ahead of today's ECB meeting, where a 0.25% rate cut to 3.25% is expected. This cut could further weaken the euro against the dollar. GBPUSD has dropped below the key 1.30 level following weaker UK inflation data. These movements highlight the USD's dominance and may continue to pressure EUR and GBP in the short term. So We may continue to see the EUR/USD pair move in the same direction as in recent days. Today's employment reports will be important, as they could take away some of the USD's gains if they turn out worse than expected
  • The Australian dollar strengthened due to strong labor market data, with unemployment remaining at 4.1%. This supports the RBA's stance on maintaining interest rates. However, falling iron ore prices to a three-week low may offset some of AUD's gains as same as china"s bad situation.. For NZD and CAD, the range-bound oil prices and copper trading near key support levels could influence their performance. Traders should monitor commodity price movements closely when trading AUD, NZD, and CAD pairs.
  • Upcoming US retail sales data for September and initial jobless claims may influence expectations regarding Fed policy and affect USD pairs. The US industrial production report could also impact sentiment towards the USD. Traders should pay attention to these releases for potential short-term volatility in USD pairs, including EURUSD, GBPUSD, USDJPY, AUDUSD, NZDUSD, and USDCAD.
  • Gold holding near record highs and geopolitical tensions are supporting safe-haven currencies like USD, CHF, and JPY. This trend may continue to influence currency pairs involving these currencies. Additionally, the de-dollarization process and uncertainty surrounding US presidential elections could affect USD volatility in the longer term.
  • In conclusion, the forex market is currently driven by a mix of economic data, central bank expectations, and geopolitical factors. Traders should closely monitor these elements when trading major currency pairs, especially those involving USD, EUR, GBP, JPY, AUD, NZD, and CAD.

Daily analysis 10/16/2024

16. 10. 2024 - Josef Brynda

Latest news
  • UK reported lower than expected September CPI figures, with headline inflation at 1.7% YoY vs. 1.9% expected.
  • UK core inflation came in at 3.2% YoY, a new cycle low and below the 3.4% expected.
  • Sterling dropped sharply on the soft UK CPI figures this morning.
  • New Zealand Q3 CPI was reported at 2.2% YoY, in line with expectations.
  • Canada's annual inflation rate dropped to 1.6% in September, below the 1.9% forecast and the Bank of Canada's 2% target.
  • The Japanese Yen firmed as US yields dropped.
  • US Oct. Empire manufacturing survey surprised very negatively with a reading of -11.9 vs. +3.6 expected.
  • US Treasury yields traded softer overnight, extending Tuesday's decline.
  • The US 10-year yield fell by 7 basis points to 4.03%.
  • German 2 and 10-year yields both softened ahead of Thursday's ECB rate decision.
  • GBPUSD is testing the psychologically important 1.3000 level.
  • The New Zealand dollar softened overnight after the country's Q3 inflation report.
  • Saxo's Q4 Outlook suggests the US rate cut cycle has begun.
  • The LBMA sees silver gaining 40% in the next twelve months.
  • Crude prices have steadied after suffering a +4% decline on Tuesday.
  • Gold trades higher for a second day, supported by declining US Treasury yields.
  • The US dollar maintained a solid footing despite the drop in US yields.
  • Canadian CPI data increased the likelihood of further rate cuts by the Bank of Canada.
  • Market participants are bracing for potential volatility around tomorrow's U.S. retail sales report.
  • The ECB rate decision on Thursday could impact Euro pairs significantly.
  • Metals Commodities Updates: Platinum Gains by 1.28%
  • UK 10-Year Gilt Yield Falls to 2-Week Low
  • China Stocks Wobble Ahead of Property Sector Briefing
  • New Zealand Dollar Falls After Weak Inflation Data

 

News summary
  • The UK reported lower-than-expected September CPI figures, with headline inflation at 1.7% YoY versus 1.9% expected, and core inflation at 3.2% YoY, a new cycle low. This softer inflation data caused the sterling to drop sharply, testing the psychologically important 1.3000 level against the USD. The lower inflation figures could potentially lead the Bank of England to adopt a more dovish stance, which may further weaken GBP. But potentially an ECB rate cut would put the EUR GBP pair under pressure again if further signs of economic instability in the Eurozone are confirmed
  • New Zealand's Q3 CPI was reported at 2.2% YoY, in line with expectations. However, the New Zealand dollar softened overnight, likely due to the lack of upside surprise in the inflation data. This could lead to pressure on NZD/USD and potentially benefit AUD/NZD as traders reassess the Reserve Bank of New Zealand's future policy path.
  • Canada's annual inflation rate dropped to 1.6% in September, below the 1.9% forecast and the Bank of Canada's 2% target. This increase in the likelihood of further rate cuts by the Bank of Canada could put pressure on the CAD, potentially weakening it against USD
  • The US Empire manufacturing survey came in significantly below expectations, contributing to a drop in US Treasury yields, with the 10-year yield falling by 7 basis points to 4.03%. This led to a firming of the Japanese Yen and could potentially weaken the USD against other major currencies. However, the US dollar has maintained a solid footing despite the yield drop, indicating mixed signals for USD pairs
  • The LBMA's bullish outlook on silver, with expectations of a 40% gain in the next twelve months, along with gold trading higher, could potentially support commodity-linked currencies like AUD and NZD. Conversely, the recent decline in crude prices, despite a slight recovery, might put pressure on oil-exporting currencies like CAD.
  • The wobble in Chinese stocks ahead of a property sector briefing could impact risk sentiment, potentially affecting AUD and NZD due to their economic ties with China, as well as influencing broader risk appetite in currency markets.
  • Looking ahead, we will need to closely monitor the upcoming data releases. Key factors to watch include the U.S. unemployment figures for the USD, tomorrow’s ECB rate cut decision, and further data from the UK. For NZD and AUD, China's economic performance will play a critical role. In my view, the USD should continue to show strength at least until the elections, while the ECB is likely to remain behind the USD in terms of performance. For CAD, it will be important to keep an eye on oil prices and the movement of the USD, as its strength often weighs on the CAD. Oil prices have dropped to a five-day low, indicating that the Canadian dollar could continue to weaken against the USD.

Daily analysis 10/15/2024

15. 10. 2024 - Josef Brynda

Latest news
  • US stock markets hit new all-time highs, with S&P 500 up 0.77% and Dow Jones up 0.47%.
  • Nvidia closed at a record high of $138.07, up 2.4%, leading a tech stock rally.
  • The VIX volatility index fell 3.71% to 19.70, indicating calm market sentiment.
  • Major earnings reports due today from UnitedHealth, J&J, Bank of America, and Goldman Sachs.
  • US 10-year Treasury yield trading just below recent highs above 4.1%.
  • Japanese 10-year bond yield approaching the 1.00% level ahead of Friday's inflation data.
  • Crude oil prices slumped on reports Israel won't target Iran's oil production facilities.
  • Copper prices hit multi-week lows, possibly due to disappointment with Chinese stimulus scale.
  • Gold corrected about 1% lower from recent highs, potentially due to strong US dollar.
  • US dollar strengthened across the board, possibly linked to rising odds of a Trump victory.
  • USDJPY approached the 150.00 level, seen as a possible intervention point for Japanese authorities.
  • Canadian dollar notably weak as US-Canada 2-year yield spread widens.
  • Germany's ZEW Survey and Eurozone Industrial Production data due at 0900 GMT.
  • US Empire Manufacturing and Canada CPI data expected at 1230 GMT.
  • Earnings season intensifying with reports from major banks and tech companies this week.
  • ASML, Dutch chip equipment maker, set to report earnings on Wednesday.
  • Netflix earnings report anticipated later this week.
  • Biden administration considering new restrictions on AI-chip sales to certain countries.
  • Nvidia approaching Apple's market cap as world's largest company.
  • Iron ore prices up in Asia overnight, contrasting with other commodities.
  • US Fed's Daly and Bostic scheduled to speak later today.
  • New Zealand Q3 CPI data due at 2145 GMT.
  • Australia RBA's Hunter to speak at 2200 GMT.
  • New Zealand RBNZ's Silk to speak at 2245 GMT.
  • South Africa SARB Monetary Policy review scheduled for 1400 GMT.
  • The euro falls to a two-and-a-half-month low against the dollar ahead of the European Central Bank's meeting on Thursday, where another interest rate cut is expected.
  • A rewidening in eurozone-U.S. rate differentials has prompted investors to scale back bets on the euro rising against the dollar.
  • Sterling remains steady after U.K. labor market data showed a drop in payrolls and easing wage growth, though inflation data on Wednesday is more likely to move the pound.
  • China's recent pro-growth stimulus could stabilize the economic outlook but may not be enough to address structural challenges, affecting currencies like AUD and NZD.
  • The USD Index is likely to continue rising, supported by technical levels and the recent breach of key resistance at 103.46.
  • The Bank of England is expected to cautiously cut interest rates in November, with wage growth slowing and unemployment data showing some uncertainty.
  • Gilt yields decline as the market prices in increased odds of a BOE rate cut following weaker wage growth and unemployment data.
  • The Bank of Thailand is expected to hold its policy rate at 2.50%, but some economists see a small chance of a cut due to economic growth risks.
  • Indonesia's weak trade data doesn't change the expectation that Bank Indonesia will maintain its policy rate, but the rupiah's recent decline remains a concern.
  • U.S. long-term yields continue to rise, supporting the dollar as rate differentials favor the greenback, keeping the USD bid.
News summary
  • The US dollar is showing significant strength across the board, supported by multiple factors. The rise in US stock markets to new all-time highs, coupled with the fall in the VIX volatility index, indicates a risk-on sentiment that typically benefits the USD. Additionally, the US 10-year Treasury yield trading near recent highs above 4.1% is attracting investors to dollar-denominated assets. This strength is particularly evident against the Japanese yen, with USDJPY approaching the 150.00 level, a point that might prompt intervention from Japanese authorities. The dollar's rise is also putting pressure on the euro, which has fallen to a two-and-a-half-month low against the USD ahead of the European Central Bank's meeting.
  • The Canadian dollar is notably weak against its US counterpart as the US-Canada 2-year yield spread widens. This weakness in the CAD is further exacerbated by the slump in crude oil prices, a key export for Canada. Meanwhile, the euro's decline is not only against the USD but also potentially against other major currencies like GBP and JPY, as investors scale back bets on euro appreciation due to the expected ECB rate cut and widening rate differentials with the US.
  • Sterling remains relatively steady following UK labor market data showing easing wage growth and a drop in payrolls. However, the pound's performance against both the USD and EUR will likely be influenced more significantly by upcoming inflation data. The Bank of England's cautious approach to potential rate cuts in November could provide some support for GBP against EUR, but may not be enough to overcome USD strength.
  • The Australian and New Zealand dollars are facing headwinds from multiple directions. The slump in commodity prices, particularly copper hitting multi-week lows, is negatively impacting these commodity-linked currencies. Additionally, disappointment with the scale of Chinese stimulus measures is weighing on AUD and NZD, as China is a major trading partner for both countries. However, the rise in iron ore prices provides a small counterbalance, particularly for the AUD.
  • The overall market sentiment seems to favor the US dollar, with its strength likely to continue against most major currencies. The EUR/USD pair is expected to remain under pressure, while GBP/USD may show mixed performance depending on upcoming data. The commodity currencies (AUD, NZD, CAD) are likely to struggle against the USD but may show varying performances against each other and the EUR depending on specific economic data and commodity price movements.
     

Daily analysis 10/14/2024

15. 10. 2024 - Josef Brynda

Latest news
  • Markets are at all-time highs, with strong earnings from JPMorgan and Wells Fargo.
  • The USD is flat after last week's surge.
  • Gold is pulling back toward cycle highs in a strong start to the week.
  • US 10-year yields remain near recent highs above 4.00%.
  • CPI data for many countries is due this week.
  • China's stimulus news at the weekend left markets with more questions than answers.
  • There was no language indicating support for consumption in the form of fiscal stimulus in China.
  • The ECB is expected to cut rates this Thursday.
  • The market is pricing nearly 100% odds of a 0.25% rate cut at this ECB meeting and the following one.
  • A dovish surprise from the ECB would require guidance for a possibly faster pace of easing.
  • US Fed's Waller is set to speak at 1900 GMT.
  • UK labor market data is due tomorrow early at 0600 GMT.
  • Sweden's September CPI is due at 0600 GMT tomorrow.
  • Germany's October ZEW survey is up at 0900 GMT tomorrow.
  • Earnings season begins to hit full stride this week.
  • JPMorgan and Wells Fargo delivered standout earnings, boosting financials.
  • Investors remain cautious regarding China's recent pledge for fiscal support.
  • The market will be focused on earnings from Citi, Bank of America, and Goldman Sachs.
  • Key economic data, including U.S. retail sales and jobless claims, will be pivotal in shaping market sentiment.
  • The VIX remains above 20, signaling that underlying market risks persist.
  • The US yield curve steepened again last week.
  • The market currently prices 90% odds that the Fed will hike 0.25% at its November 7 meeting.
  • Long yields remain near the recent highs, with the US 10-year yield in the pivotal 4.00-4.25% area.
  • Brent crude trades mid-range near 78 dollars per barrel.
  • Gold has pulled sharply higher to start the week, trading north of 2,660 this morning.
  • Weak action to start the week in currencies as the calendar is relatively light this week on US data.
  • September Retail Sales in the US are due on Thursday.
  • Several countries report their September CPI data this week, including Sweden and Canada tomorrow.
  • New Zealand and the UK report CPI on Wednesday.
  • Japan reports its CPI on Friday, an interesting test of the recent slide in the Japanese yen.
  • The market has removed a large chunk of the anticipated Fed easing later this year and into next year due to recent resilient economic data.
  • The Hang Seng index is still trading at the time of writing, with early reactions showing muted optimism as markets await more details on China's fiscal support.
News summary
  • Markets are currently at all-time highs, bolstered by strong earnings reports from JPMorgan and Wells Fargo, which have led to a positive sentiment in financials. The USD is flat after a strong surge last week, but the resilience of the U.S. economy continues to support the greenback in the medium term, keeping pressure on other currencies like CAD and EUR. However, the upcoming CPI reports for various countries could shift the USD further, depending on inflation trends.
  • Gold is pulling back toward cycle highs, trading above 2,660, reflecting growing concerns around inflation and market risks. This rise in gold prices could impact the AUD and NZD, as their economies are sensitive to commodity market fluctuations. Higher gold prices often lead to a stronger AUD due to Australia's significant gold exports, while NZD might experience some upward movement due to broader risk sentiment.
  • The US 10-year yields remain above 4.00%, signaling continued expectations of strong economic performance. Higher yields tend to strengthen the USD, putting pressure on other currencies like EUR and GBP, as they face weaker rate environments. A steepening US yield curve may continue to weigh on EUR, particularly as the ECB is expected to cut rates on Thursday. The market is pricing in nearly 100% odds of a 0.25% cut at this meeting, which would likely weaken the EUR further against the USD, as the divergence in monetary policy becomes clearer.
  • China’s recent announcement on fiscal stimulus left many investors uncertain, as no significant support for consumption was mentioned. This has led to mixed market reactions, particularly in the Hang Seng index. The muted optimism could weigh on currencies like AUD and NZD, as both are heavily dependent on trade with China. A lack of clear fiscal support in China could suppress demand for commodities, indirectly affecting these currencies.
  • Upcoming US retail sales and jobless claims data this week are crucial for shaping market sentiment. A strong retail sales report would further boost the USD. Meanwhile, weaker data could give some relief to CAD and GBP, which are sensitive to U.S. economic conditions. GBP will also be influenced by UK labor market data tomorrow, with weaker-than-expected employment figures potentially adding pressure on the Bank of England to pause future rate hikes, weakening the pound further against USD and EUR.
  • Lastly, the Japanese yen (JPY) remains under pressure as Japan is set to report its CPI on Friday. A continuation of low inflation combined with the yen's recent weakness could push the currency lower, especially against the USD, EUR, and AUD. Japan's dovish stance contrasts with the tightening or stable policy environments in other major economies, making the JPY a candidate for further depreciation.

Daily analysis 10/11/2024

11. 10. 2024 - Josef Brynda

Latest news
  • The S&P 500 eased lower while Chinese stocks slumped.
  • Oil prices rallied sharply, and gold continued its rebound.
  • The US dollar remained firm amid mixed economic data.
  • Treasury yields hit new highs in a 30-year auction but closed well off their peaks.
  • US Producer Price Index (PPI) increased following a hotter-than-expected Consumer Price Index (CPI) report.
  • Core US inflation unexpectedly edged up to 3.3% annually, above forecasts.
  • Market expectations for a November Fed rate cut decreased, with only 85% odds of a 25 basis point cut priced in.
  • US weekly jobless claims rose to 258,000, largely due to the impact of recent hurricanes.
  • France is implementing measures to cut spending and raise taxes, which may weigh on growth next year.
  • Tesla's Elon Musk unveiled plans for a robotaxi without a steering wheel or pedals, slated for 2026 release.
  • Chinese equities slumped ahead of an anticipated fiscal stimulus package announcement.
  • The Q3 earnings season kicks off with major US banks reporting.
  • Brent crude oil prices surged over three dollars per barrel at one point.
  • Gold rebounded, trading between its recent high of 2685 and local support.
  • US stock futures drifted higher as markets digested the hot CPI report.
  • AMD debuted its latest AI chips, competing with rivals Nvidia and Intel.
  • Warren Buffett's Berkshire Hathaway reduced its stake in Bank of America to below 10%.
  • The Bank of Japan may not be as dovish as Governor Ueda's cautious rhetoric suggests.
  • Shares of Trump's media company surged to their highest level in six weeks.
  • Three Fed officials downplayed the CPI report, while Atlanta Fed President Bostic was open to a pause in rate hikes.
  • The US annual inflation rate slowed to 2.4% in September, the lowest since February 2021.
  • Energy costs saw a greater decline, while food and transportation prices increased.
  • US weekly jobless claims hit a 14-month high at 258,000.
  • Hong Kong equities jumped 2.8% on optimism for Chinese fiscal support.
  • Treasury yields ended mixed, with short-term yields improving and long-term yields declining.
  • The 30-year Treasury bond auction yielded 4.389%, the highest since July.
  • Gold prices rose 0.84% to $2,629, rebounding from a three-week low.
  • WTI and Brent crude oil futures surged due to heightened US fuel demand and Middle East supply concerns.
  • The US dollar weakened against major currencies following disappointing labor market data.
  • The Australian dollar gained 0.14% to $0.67280, driven by an equity rally in China.
News summary
  • Global financial markets showed mixed performance across various asset classes. The S&P 500 eased lower while Chinese stocks slumped, reflecting ongoing economic uncertainties. However, US stock futures drifted higher as markets digested the latest inflation data. This divergence in equity performance could lead to increased volatility in currency pairs involving the USD, EUR, and CNY. The USD may experience short-term strength against the EUR and GBP due to the relative stability of US markets.
  • Inflation remains a key concern, with core US inflation unexpectedly edging up to 3.3% annually, above forecasts. The US Producer Price Index (PPI) also increased following a hotter-than-expected Consumer Price Index (CPI) report. These inflationary pressures may support a stronger USD in the short term
  • The commodities market saw significant movements, with oil prices rallying sharply and gold continuing its rebound. Brent crude oil prices surged over three dollars per barrel at one point, while gold rose 0.84% to $2,629. These commodity price fluctuations could boost commodity-linked currencies such as the CAD, AUD, and NZD.
  • In the fixed income market, Treasury yields hit new highs in a 30-year auction but closed well off their peaks. The 30-year Treasury bond auction yielded 4.389%, the highest since July. This yield movement could attract foreign investors seeking higher returns, potentially supporting the USD against other major currencies like the EUR and GBP. The EUR/USD pair might test lower levels if the yield differential widens further.
  • Economic data presented a mixed picture, with US weekly jobless claims rising to 258,000, largely due to the impact of recent hurricanes. This weaker labor market data, combined with the inflation report, led to decreased market expectations for a November Fed rate cut. These factors may create short-term volatility in USD pairs, potentially benefiting the EUR and GBP if the US economic outlook weakens
  • International developments, such as France implementing measures to cut spending and raise taxes, could put pressure on the EUR. The EUR/GBP pair might decline if UK economic data outperforms the Eurozone. 
  • Optimism surrounding Chinese fiscal support boosted Hong Kong equities, which may strengthen Asian currencies against major counterparts. This could benefit the AUD and NZD due to their close economic ties with China, potentially leading to gains in AUD/USD and NZD/USD pairs.
  • In the current forex landscape, the US dollar is expected to maintain its overall strength against major currencies, supported by robust economic data and higher inflation figures. However, potential job losses due to recent hurricanes could introduce short-term volatility. The euro is likely to face continued weakness due to concerning Eurozone economic data. Commodity-linked currencies like the AUD and NZD may benefit from anticipated Chinese fiscal stimulus, though the NZD could underperform against the AUD due to rate cut expectations. The CAD might gain from rising oil prices, but USD strength could limit its appreciation. The GBP shows potential for further gains against the EUR, backed by stronger UK economic data, despite rhetoric about faster rate cuts which may be seen as verbal intervention. Traders should remain alert to shifts in central bank policies, geopolitical events, and economic data releases that could alter these projected trends.
     

Daily analysis 10/10/2024

10. 10. 2024 - Josef Brynda

Latest news
  • The US Dollar Index extends its winning streak to eight sessions.
  • The Reserve Bank of New Zealand cut its official cash rate by 50 basis points to 4.75% in October 2024.
  • The Fed reduced the fed funds rate by 50bps to 4.75%-5%, the first cut since March 2020.
  • Japan's producer prices rose by 2.8% YoY in September, up from 2.6% in August.
  • Germany's exports rose by 1.3% to EUR 131.9 billion in August, beating expectations.
  • US CPI data for September is expected to show 0.1% MoM and 2.3% YoY inflation.
  • Treasury yields continue to rise ahead of today's CPI print.
  • US 10-year yields have risen by 22 basis points to 4.07% since last Friday's stronger jobs report.
  • The 2-year yield has climbed 31 basis points to 4.01%, flattening the curve.
  • Traders are adjusting to reduced expectations for Fed easing.
  • Gold prices fell for a sixth day after reduced rate cut expectations.
  • The dollar maintained its gains after the latest Federal Reserve meeting minutes.
  • The yen weakened toward the key 150 per USD level.
  • The New Zealand dollar was the worst performer, dropping to its lowest level since 19 August.
  • The Bloomberg Dollar Spot Index trades near a two-month high.
  • Activity currencies dependent on Chinese demand are among the hardest hit.
  • Scandinavian currencies are also significantly affected by dollar strength.
  • Volatility in Chinese equities continues at excessive levels.
  • A planned government briefing on fiscal measures in China is expected this weekend.
  • The US government is planning steps that will fundamentally change Google's grip on search.
  • The VIX dropped 2.61% to 20.86, signaling reduced near-term anxiety in markets.
  • Options pricing suggests a slightly elevated expected move for today's trading.
  • Expectations for the pace of Federal Reserve policy easing are fading.
  • A lackluster 10-year note auction influenced Treasury yields.
  • Crude traders' focus remains torn between geopolitical risks and sluggish demand outlook.
  • The EIA downgraded their global oil demand outlook for 2025.
  • Copper has stabilised following a two-day slump, with focus on potential Chinese stimulus.
  • Wheat prices jumped due to weather disruptions for major growers.
  • The dollar has seen gains against all major currencies, except the Mexican peso.
  • Traders are now looking ahead to today's US inflation report for further direction.
  • Italy Industrial Activity Rises Slightly Less than Expected.
  • UK 10-Year Gilt Yield at 3-Month High
News summary
  • The global forex market is experiencing significant shifts, driven by a combination of central bank decisions, economic indicators, and market expectations. The US Dollar Index has extended its winning streak to eight sessions, reflecting the greenback's strength across the board. This comes as Treasury yields continue to rise, with the 10-year yield reaching 4.07% and the 2-year yield climbing to 4.01%, flattening the yield curve. These factors are likely to put pressure on EUR/USD, potentially pushing the pair to test lower levels if the dollar's rally continues. Similarly, USD/CAD might see the Canadian dollar weakening against the USD, influenced by both dollar strength and fluctuations in crude oil prices, especially considering the EIA's downgraded global oil demand outlook.
  • Central bank actions are playing a crucial role in currency movements. The Reserve Bank of New Zealand cut its official cash rate by 50 basis points to 4.75%, while the Federal Reserve reduced its fed funds rate by 50bps to 4.75%-5%, marking the first cut since March 2020. However, expectations for the pace of further Fed easing are fading, contributing to dollar strength. This scenario is particularly impacting NZD/USD, with the New Zealand dollar already the worst performer, dropping to its lowest level since August 19. The pair is expected to remain weak following the RBNZ rate cut and overall USD strength. Meanwhile, GBP/USD may struggle against the dollar, with the UK 10-Year Gilt Yield reaching a 3-month high, although any positive surprises in UK economic data could provide some support.
  • Economic indicators are mixed across different regions. Japan's producer prices rose by 2.8% YoY in September, while Germany's exports increased by 1.3% in August. The US awaits crucial CPI data for September, expected to show 0.1% MoM and 2.3% YoY inflation. These figures, along with the upcoming US inflation report, are likely to significantly influence market direction. The yen's weakness, approaching the key 150 per USD level, suggests USD/JPY could see further upside, especially if US yields continue to rise. For EUR/GBP, increased volatility is expected as both currencies face challenges, with the outcome depending on relative economic performance and central bank policy expectations between the Eurozone and the UK.
  • The Australian dollar (AUD) is similarly pressured by the strong U.S. dollar and weakening global risk sentiment. The increase in oil prices, driven by Middle East tensions, adds to concerns about inflationary pressures globally, which could further weigh on the AUD, especially against the USD. The AUD and its performance will be highly dependent on developments in China, which has so far failed to meet expectations with its stimulus package. However, there is speculation about another package, and this will need to be closely monitored.
  • Chinese economic concerns continue to impact global markets, with excessive volatility in Chinese equities and a planned government briefing on fiscal measures expected this weekend. This uncertainty is affecting activity currencies dependent on Chinese demand. As a result, AUD/USD is likely to face challenges due to its sensitivity to Chinese economic news. The upcoming Chinese fiscal measures briefing could provide some support, but overall USD strength may dominate. In the AUD/NZD pair, the Australian dollar might outperform the New Zealand dollar, given the RBNZ's rate cut and potential positive impact from Chinese stimulus measures on the AUD.
  • These currency movements will be heavily influenced by the upcoming US inflation report and any developments in Chinese economic policy. Traders should also keep an eye on geopolitical risks and their potential impact on safe-haven currencies. The dollar has seen gains against all major currencies, except the Mexican peso, highlighting the broad-based strength of the USD. As market participants adjust to reduced expectations for Fed easing and await further economic data, volatility in forex pairs is likely to persist, with the dollar maintaining its dominant position against most major currencies in the near term.

Daily analysis 10/09/2024

9. 10. 2024 - Josef Brynda

Latest news
  • US equity futures are pointing to a lower open, potentially impacting risk sentiment in currency markets.
  • The dollar is holding near a seven-week high against major currencies.
  • Commodities are seeing broad losses on fading China stimulus hopes, which could affect commodity-linked currencies.
  • Markets are bracing for inflation data following Friday's strong US jobs report.
  • FOMC Minutes from the September 18 meeting are due today, potentially providing insight into future Fed policy.
  • Australia's NAB business confidence improved to -2 in September 2024 from -5 in August.
  • The Reserve Bank of Australia's minutes highlighted persistent inflation concerns.
  • China's NDRC introduced new support measures, including CNY 1 trillion in special sovereign bonds.
  • The US trade deficit narrowed by 10.8% in August to $70.4 billion.
  • Japan's September PPI YoY is estimated at 2.3% vs 2.5% previously.
  • PepsiCo lowered its fiscal year revenue guidance, potentially impacting USD.
  • US 10-year bond yields are trading at 4.02%, while 2-year yields are at 3.95%.
  • Japanese funds bought a record amount of U.S. sovereign bonds in August.
  • The lack of new measures in China saw crude oil slump by more than 4%, potentially affecting oil-linked currencies.
  • Gold traded lower for a fifth day as geopolitical risk premium deflated.
  • The Dollar index recorded its largest weekly gain in two years last week.
  • Strong U.S. jobs data lowered November rate cut expectations to 25 basis points.
  • The yen weakened further after Japan's top currency diplomat warned against speculative moves.
  • USDJPY rose back above 148 following the diplomat's comments.
  • NZDUSD fell to a seven-week low, dropping below 61 cents.
  • The RBNZ cut the official cash rate by 50 basis points to 4.75%.
  • Volatility eased, with the VIX dropping to 21.42 (-5.39%).
  • The 2s10s Treasury yield spread has tightened to around 6 basis points.
  • Investors are eyeing today's 10-year bond auction for potential impacts on yields and the dollar.
  • Taiwan Semiconductor reported a strong 40% YoY increase in September revenue.
  • Rio Tinto announced it would acquire Arcadium for $6.7bn, potentially affecting AUD.
  • The front end of the Treasuries curve led losses, extending Friday's post-payrolls decline.
  • Traders adjusted their expectations for Federal Reserve policy following recent data.
  • Geopolitical tensions added a bid to the dollar last week.
  • The combination of elevated VIX futures and market highs suggests caution in currency markets.
News summary
  • The forex market is currently navigating a complex landscape of economic data, central bank decisions, and geopolitical tensions. The US dollar continues to hold near seven-week highs, bolstered by last week's strong jobs report and reduced expectations for Federal Reserve rate cuts. This strength in the USD is putting pressure on other major currencies, particularly those of commodity-exporting nations.
  • In a surprising move, the Reserve Bank of New Zealand (RBNZ) cut its official cash rate by 50 basis points to 4.75%. This decision has sent the NZD/USD pair to a seven-week low, dropping below 61 cents. The aggressive rate cut is likely to keep the New Zealand dollar under pressure against major currencies, especially the USD and AUD, as the interest rate differential widens.
  • Meanwhile, the Australian dollar (AUD) is facing mixed signals. While Australia's NAB business confidence showed improvement, the Reserve Bank of Australia's minutes highlighted persistent inflation concerns.However, the RBNZ's rate cut might provide some support for AUD/NZD.
  • The Australian dollar (AUD) is similarly pressured by the strong U.S. dollar and weakening global risk sentiment. The increase in oil prices, driven by Middle East tensions, adds to concerns about inflationary pressures globally, which could further weigh on the AUD, especially against the USD. The AUD and its performance will be highly dependent on developments in China, which has so far failed to meet expectations with its stimulus package. However, there is speculation about another package, and this will need to be closely monitored.
  • The Japanese yen continues to weaken, with USD/JPY rising above 148 despite warnings from Japan's top currency diplomat against speculative moves. This trend could persist if the yield differential between US and Japanese bonds remains wide.
  • In Europe, the EUR and GBP are struggling against the strong dollar. The lack of significant economic data from the Eurozone and UK this week means these currencies are largely reacting to US data and global risk sentiment. The ongoing crisis in the Middle East is adding a layer of uncertainty, potentially supporting safe-haven flows to the USD and, to a lesser extent, the CHF.
  • The Canadian dollar (CAD) is facing headwinds due to the sharp decline in oil prices, which fell over 4% on fading hopes for Chinese stimulus. This could lead to weakness in CAD against the USD and potentially the EUR.
  • Looking ahead, forex traders will be closely watching the release of the FOMC minutes and upcoming US inflation data. These events could provide further direction for the dollar and, by extension, major currency pairs. Additionally, the ongoing geopolitical situation in the Middle East remains a wild card that could quickly shift currency dynamics, particularly if it leads to a flight to safety benefiting the USD, CHF, and potentially JPY.

Daily analysis 10/08/2024

8. 10. 2024 - Josef Brynda

Latest news
  • China stocks are poised to reopen with markets fixated on fiscal stimulus.
  • The S&P 500 closed lower as a spike in Treasury yields weighed on markets.
  • Oil prices extended gains on Middle East tensions.
  • Retail sales in the Euro Area rose by 0.2% in August 2024, meeting market expectations.
  • Halifax House Price Index in the UK rose by 4.7% year-on-year in September 2024, the highest increase since November 2022.
  • Germany's Factory Orders fell by 5.8% mom in August, exceeding the forecasted 2.0% decline.
  • The probability of a 0.50% rate cut in November has decreased, with an 84% chance of a smaller 0.25% cut.
  • Key inflation data and earnings reports from major banks are anticipated this week.
  • Goldman Sachs upgraded its outlook on Chinese stocks to overweight, predicting a 15%-20% rise if Beijing implements promised policy measures.
  • The front end of the Treasuries curve led losses, extending Friday's post-payrolls decline.
  • U.S. 10-year yields ended at 4.025%, up 5.5 basis points after briefly exceeding 4.03%.
  • Japanese funds bought a record amount of U.S. sovereign bonds in August.
  • WTI and Brent crude oil futures both surged by 3.7%, reaching a six-week high.
  • Concerns about a broader regional conflict are heightened as Israel continues its military actions in Gaza and Lebanon.
  • Gold prices dipped by 0.4% to $2,642, and silver prices fell by 1.6% to $31.69.
  • USD stalled near a seven-week high on Monday.
  • The September jobs report showed significant payroll growth, a lower unemployment rate, and solid wage increases.
  • Markets now expect a 25-basis point rate cut by the Federal Reserve in November instead of 50 bps.
  • Against the Japanese yen, the dollar weakened after Japan's top currency diplomat warned against speculative moves.
  • The dollar index recorded a weekly gain of over 2%, its largest in two years.
  • NZD/USD fell to around $0.615 ahead of the Reserve Bank of New Zealand's policy meeting.
  • Investors fully expect a 50bps reduction from the RBNZ.
  • The Kiwi remains under pressure due to the strong U.S. dollar.
  • China is expected to hold a media briefing Tuesday to discuss economic stimulus.
  • The curve flattened but ended above session lows, with significant activity in SOFR futures and options.
  • Gilts underperformed, with 10-year UK yields closing nearly 8 basis points higher.
  • Buyers preferred the six-month bill auction over the three-month offering.
  • Iran's oil production, currently near full capacity, faces potential risks.
  • Wheat futures rose to $5.9 per bushel due to adverse weather conditions in Russia.
  • The CME's FedWatch tool now indicates an 85% chance of a quarter-point cut, up from 47% a week ago.
News summary
  • In the U.S., Treasury yields rose, with the 10-year Treasury yield reaching 4.025%. This increase was driven by strong jobs data and speculation that the Federal Reserve will only cut interest rates by 25 basis points instead of 50. The stronger U.S. dollar, fueled by higher bond yields, continues to exert downward pressure on other currencies, particularly the NZD and AUD.
  • The New Zealand dollar (NZD) has been notably weak, falling to around $0.615, as markets fully anticipate a 50-basis point rate cut from the Reserve Bank of New Zealand (RBNZ). The kiwi is facing further pressure from the stronger U.S. dollar, which has recorded its largest weekly gain in two years. The Reserve Bank of New Zealand’s decision is likely to push the NZD lower, especially against the USD
  • In the United States, the focus is on the upcoming earnings reports from major companies like PepsiCo, JPMorgan Chase, and Wells Fargo, marking the beginning of the Q3 earnings season. Strong earnings reports could bolster the US dollar, potentially putting pressure on currency pairs like EUR/USD
  • The Australian dollar (AUD) is similarly pressured by the strong U.S. dollar and weakening global risk sentiment. The increase in oil prices, driven by Middle East tensions, adds to concerns about inflationary pressures globally, which could further weigh on the AUD, especially against the USD. The AUD and its performance will be highly dependent on developments in China, which has so far failed to meet expectations with its stimulus package. However, there is speculation about another package, and this will need to be closely monitored.
  • In Europe, retail sales in the Euro Area met expectations with a modest rise of 0.2% in August, but concerns over weaker factory orders in Germany, which fell by 5.8%, are adding pressure on the euro (EUR). The euro is likely to remain weak against the USD, with investors looking for signs of further economic weakness in the Eurozone.
  • In New Zealand, the Reserve Bank of New Zealand (RBNZ) is expected to cut rates by 50 basis points. This anticipated move could significantly weaken the New Zealand dollar, potentially leading to a sharp decline in the NZD/USD pair. This decision might also have spillover effects on the AUD/USD pair due to the close economic ties between Australia and New Zealand.
  • The British pound (GBP) is facing mixed signals. While house prices in the UK showed a significant increase of 4.7% year-on-year in September, the rising UK gilt yields and concerns over economic growth continue to weigh on the currency. The pound is expected to underperform against the USD as well, especially with the U.S. dollar remaining strong.
  • The Canadian dollar (CAD) remains linked to oil price movements, and with crude prices surging by 3.7%, the CAD could see some support. However, this support might be limited as the overall global economic outlook remains uncertain, particularly with tensions in the Middle East and the potential for broader regional conflict, which could lead to further volatility in oil markets.