Daily Forex News

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CPI Hits Another Four-Decade High USD rises

USD rises as CPI hits another four decade high, data shows the headline consumer inflation accelerated once again in June to the highest level since 1981,US consumer inflation hit the high of 41 years and beat the forecast, 9.1% in June against 8.6% one month earlier and expected increase to 8.8%.

The above data resulted in a clear jump of USD and then falling back 100 points. Trader’s speculation increases that the Fed should do more than what is already done and suppress inflation. As mentioned above after the report, markets priced in two more 75 point rate hikes, June’s hike was extraordinary.

Read Full News : https://www.xtreamforex.com/cpi-hits-another-four-decade-high-usd-rises/

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All eyes on Europe – Huge volatility expected in EU equities

The platform is set to start the new week on a positive footing after the solid retail sales last Friday.

The index of US500 closed retail at absolute highs after the Friday gain of 1.9% which brought the loss on the week to 1%- the bulls need the index to break 3950, which could set off the trend and look at the short position in CFTC report, if the rally of Friday continues. If it happens, we can see some systematic players cover short and propelling the market higher. The impact that may have an options market makers too and the need to buy back delta hedges is also there.

The earnings of US in this week with 14% of the US500 market cap reporting could get Netflix and Tesla workout from clients.

Read Full News : https://www.xtreamforex.com/all-eyes-on-europe-huge-volatility-expected-in-eu-equities/

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What is expected in BOJ meeting

Bank Of Japan next meeting on Thursday on interest rate decision. Many countries are aggressively increasing the rates to put brakes on inflation. The BOJ is unlikely to do anything, as inflation rate sits at 2.5%.

EUR/JPY had been moving higher since 7th of March 2022. The pair began moving higher in an upward slop channel as inflation began to rise in Europe. EUR/JPY pulled back because Euro got hit across the board. On the 5th of July, the pair broke below the upward sloping channel and pulled back to 38.2% Fibonacci retracement level from the lows of March 7th to highs of June 28th,as well as horizontal support, near 136.70. The support held on and EUR/JPY has gone bid for the last 5 days.

EUR/Jpy is currently up against resistance of 61.8% Fibonacci retracement level from the June 28th highs to July 8th lows near 141.44. This is also the top trendline of a short-term channel the pair has been in since July 12th . If price breaks above the channel, the next resistance level is at the July 5th highs of 142.37.

EUR/JPY can move up to test the June 28th highs at 144.28. The RSI is in overbought territory, an indication that the pair may be ready for a pullback. If EUR/JPY does move lower, the first support is the bottom of the channel trendline near 140.05. Below there, horizontal support sits at 138.80, then the lows from July 8th near 136.86.

ECB also has a meeting on Thursday and there is possibility of a 50bps rate hike. The interest rate differentials between ECB and BOJ helped EUR/JPY go bid. Will is continue moving higher ? The next direction move for the pair depends on the outcome of these meetings on Thursday.

https://www.xtreamforex.com/what-is-expected-in-boj-meeting/

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Signs of Disinflation Continue

There are some promising signs on the inflation data which is released today for UK and Canada. UK producers lower the prices to 1.8%, which is the disinflation in the third consecutive month. Core CPI also showed to 0.4$ m/m which is also its third straight month on disinflation.

Canada’s producer prices also reduced -1.1% in June, first reduction since Aug 2021 and when it was on fast pace in May 2020. The annual rate peaking in April 2022 at 18.1% could be attributed to basing effects, it is good to see the m/m PPI prints trending their way into contraction. Expectation is lower PPI going forward. As producer prices are an input for consumer prices, it is a good news for consumers.

Read Full News :https://www.xtreamforex.com/signs-of-disinflation-continue/

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European Central Bank Interest Rates

The European Central Bank also joined the global rate hike on yesterdays announcement, announcing a larger then expected 50 bps deposit rate increase, to 0.00%. The ECB said a further normalization of interest rates could be expected at upcoming meetings.

ECB also approved the Transmission Protection Instrument, a tool aimed at supporting orderly conditions across Eurozone, in particular the region’s peripheral makets such as Italy and Spain. Full details are not released yet, and the scale of TPI purchases depends on the severity of the risks facing policy transmission.

Read Full : https://www.xtreamforex.com/european-central-bank-interest-rates/

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EUR/USD – Euro US Dollar

Last week the European currency showed a slight growth to a high of 1.0272. Reason behind this was the most banal corrective rebound of EUR/USD breaking the equality level of 1.0000, the bottom at 0.9951 on 14th of July, the resumption of Russian gas supplies to Europe and the most important expectation of a rise in the euro interest rate of 50bp. This happened in reality for the first time in past 13 years.

The explanation given by ECB of the rate normalization was, obvious and consists of an updated assessment of inflation growth and the announcement from ECB for the launch of a new instrument which is the TPI.

Read Full : https://www.xtreamforex.com/eur-usd-euro-us-dollar/

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This Weeks’s currency pair, EURUSD

The ECB hike of last week is the highest hike in past 11 years which brought the interest rate from -0.50% to 0.00%. Further normalization of interest is appropriate, indicating that there will be another hike from ECM on their next meeting on 8th September. Another new program was introduced by the committee of new bond buying called Transmission Protection Instrument to be used if it is needed. TPI will allow ECB to buy bonds in any country which is in Eurozone whose yields may be surging due to unwarranted financial conditions.

Last weeks poor PMI data to the Eurozone with European PMIs showing that manufacturing was slowing. A number of country’s manufacturing readings fell below the 50 level, indicating manufacturing activity is in contractionary territory. For the Eurozone as a whole, the flash Manufacturing PMI was 49.6 vs 52.1 previously, while the flash Services PMI was 50.6 vs 53 previously. This brought the composite number down to 49.4 from 52 in June. On Monday, Germany released its Ifo Business Climate. The reading was 88.6 vs 90.2 in June. The expectations component fell from 85.5 in June to 80.3 in July, its lowest level since April 2020. This seemly confirmed the PMI data.

This week EU will release its flash CPI for July. Expectations are for 8.6% YoY vs 8.6% YoY previously. The core CPI is expected to go up 3.8% YoY from 3.7% YoY previously. If this print continues higher, the ECB will have some bring decisions to make.

The FOMC meets today and tomorrow to discuss interest rate policy. Expectations are that the committee will raise rates by 75bps, which will bring the Fed Funds rate from 1.75% to 2.50%. The last CPI reading for the US was 9.1% YoY. On Friday, PMI data of US was released. The Manufacturing component was 52.3 vs 52.7 in June.

EUR/USD has been moving in a lower channel since Feb 2022. It began moving aggressively by mid-June when it was at 1.1500 and reached 1.0340 which was the low since Jan 2017 but couldn’t break through. On July 14th it broke the level of 1.0000 since then the pair has been consolidating mid-range near 1.0250 as tomorrow’s FOMC meeting looms.

https://www.xtreamforex.com/this-weekss-currency-pair-eurusd/

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AUD Second Quarter Increase | Xtreamforex

In the second quarter of 2022 Australian inflation data has increased to 6.1%, but below the agreed expectations relaxing the fear of a surprising 75bp rate increase when the RBA has a meeting next week.

CPI rose by 1.8% Quarter On Quarter(QoQ) and 6.1% Year On Year(YoY). This was the highest increase since the introduction of the Goods and Services tax in the beginning of 2000.

The RBA’s preferred measure of inflation, increased by 1.4% Quarter On Quarter and 4.9% Year On Year, which was above the market expectations of 1.2% QoQ and 4.7% YoY.

Necessary inflation is now 190bp above the top of the RBA’s 2-3% target band, and the yearly trimmed means was highest since the ABS first published the series back in 2003.

Read Full :https://www.xtreamforex.com/aud-second-quarter-increase-xtreamforex/

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The FOMC raised rates by 75 bps which was widely expected

As widely expected, the Federal Open Market Committee raised the range of its target for the the federal funds rate by 75 bps, which brings the top end of the range to 2.50%. There was widespread support for another supersized rate increase-the FOMC raised rates by 75 bps at its last meeting in June. The FOMC has now hiked rates by 225 bps since March, this much increase never happened in past 40 years.

In todays decision, the committee again pointed to that fact that inflation remains high. For sure the YoY rate of CPI inflation rose from 8/6% in May to 9.1% in June, which was higher then others, and likely most FOMC members, had expected at the time. The statement also repeated that “the committee is strongly committed to returning inflation to its 2 percent objective”. This sentence, which was used previously in the June statement, in connection with the unanimous vote to raise rates by another 75bps today, indicates that inflation remains forefront in the minds of most FOMC members.

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The US Economy || US rate hike cycle concludes in 2022

Last week was very active for global rebirth in risk appetite despite a run of data which pointed to deteriorating US economic growth. This is because the softer tone of US data and the FOMC’s acceptance of it implies a reducing risk of the rate hikes in excess of those already increased.

Increasing the rate hike for the second time to a mid-point of 2.375%, Chair Powell showed a greater degree of comfort over the outlook for inflation in the July press conference. In part this stems from 2.375% being within the 2.3% interest rate range th FOMC believe to be neutral for their economy. However, the greater comfort of inflation is also a consequence of building apprehension over the outlook for growth. The press conference also made clear that the FOMC wish to undertake “just the right amount of tightening” to bring about below trend growth, not to make mistake by creating the pre conditions for recession.

Read More : https://www.xtreamforex.com/the-us-economy-us-rate-hike-cycle-concludes-in-2022/