Daily Forex News

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Second quarter GDP figures are expected to be strong recession signal

Second quarter GDP figures are expected to be strong. Economy is expected to regain the positive momentum and expectations of analysists are of 4.5% compared to 3.1% registered in the first quarter of the year. The monthly reading for June is also expected to show a negligible improvement, inching to 0.1% from no growth previously.

Consumption was contributive too on the demand side. With the unemployment rate pinned at record lows, retail sales marked six months in the expansion area from March onwards .

Read More : https://www.xtreamforex.com/second-quarter-gdp-figures-are-expected-to-be-strong-recession-signal/

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Eurozone Consumer Price Index (CPI) YoY

The ECB is expected to raise the interest rate on their next meeting on 7th Sep. The discussion is that if the rates will be increased by 50bps or 75bps ? ECB members have been preparing the markets for what could be a potential 75bps hike, despite the possibility of the Eurozone falling into a recession:

ECB’s Schnabel said that both the likelihood and cost of current high inflation becoming entrenched in expectations are uncomfortably high.

ECB’s Villeroy said that the ECB needs to get rates to neutral by the end of this year, which is somewhere between 1% and 2%.

ECB’s Rehn said a significant hike in interest rates is needed in September.
ECB’s Knot said frontloading should not be excluded and that he is leaning towards a 75bps hike.

These comments came right before the Eurozone CPI Flash, which will be released on Wednesday. Expectations are for a slight uptick to 9% YoY in August vs a July reading on 8.9% YoY. Germany released it preliminary inflation data for July. The headline was Inflation rate of 8.8% YoY and expectation of 8.8% YoY and a July reading on 8.5% YoY.

Read More : https://www.xtreamforex.com/eurozone-consumer-price-index-cpi-yoy/

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RBA to Raise the Cash Rate by 50 bps, AUD

Reserve Bank meeting is on 6th September. It is expected that the cash rate will be raised by 50 basis points to 2.35%.

The best approach will be to strengthen the statement we saw last month, not on a pre set path and following Chair Powell, at some point it will be appropriate to slow the pace of tightening while emphasizing that the cycle may have considerably further to run. Raising the cash rate by 50 bps will move the cash rate into the neutral zone.

The 2.5% estimate from the RBA assumes a zero real rate and a nominal component equal to long term inflationary expectations which are judged to be 2.5%. The challenge contain inflationary expectations in this cycle will be formidable given the current evidence that both businesses and households are becoming accustomed to rising prices and short-term inflationary expectations are rising quickly.

Holding the cash rate at 3.35% through 2023, the neutral setting of 2.0% is a necessary condition for the Bank to bring inflation down close to the 3% target-the top of 2-3% range. But there will be a price to pay for such success-the economy to grow by only 1% in 2023-well below the trend rate of growth of around 2.5%.

Read More : https://www.xtreamforex.com/rba-to-raise-the-cash-rate-by-50-bps-aud/

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What’s next for AUD/USD

RBA board meeting will take place next week and an increase in Cash rate is expected, How much ? It’s a question. RBA discussion in June brought a hawkish element to the RBA’s monetary policy, noting that the current level of the cash rate is well below the estimated neutral rate, thought to be at least 2.5%. The neutral real interest rate is the real interest rate that is neither stimulatory nor contractionary.

Based on the RBA’s forecasts for inflation to rise to around 7 percent and for the unemployment rate to decline further in the months ahead, the RBA needs to continue tightening interest rates past the neutral rate to fulfil its pledge that the Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.

Read More : https://www.xtreamforex.com/whats-next-for-aud-usd/

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Inflation rate of 8.8% expected in August 2022

The statistics released from 30th August turned out to be quite close to market expectations. The harmonized consumer price index in Germany, was 8.8% with the forecast of 8.8%. The consumer price index in the Eurozone amounted to 9.1% instead of expected 9.0%.The index of business activity in the US manufacturing sector did not change at all over the month and amounted to 52.8, and the number of new jobs created outside the American agriculture sector did not go far from the expected either, 315k against 300k. As a result EUR/USD was moving along the equality line of 1.0000 whole week, fluctuating in the range of 0.9910-1.0078, and completed the five day period at the level of 0.9955.

The key day will be 8th September when the ECB will decide on the deposit rate and make a statement and comments on its monetary policy. Inflation in the Eurozone rose even more in August: from 8.9% to 9.1%. Many experts believe that the European regulator will raise the rate by 75 basis points at once.

Read More : https://www.xtreamforex.com/inflation-rate-of-8-8-expected-in-august-2022/

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Liz Truss Defeats Rishi Sunak To Become New UK PM

Liz Truss will become the new UK prime minister on Tuesday after defeating Rishi Sunak in the Tory leadership contest today. The result was closer thank many people had expected, with Truss taking 57% of votes cast. The markets hardly reacted to the news, not least because the outcome was expected.

While we now know who the new PM will be, the economy will still face significant challenges with several quarters of negative growth upon us amid the energy crisis and soaring inflation. Will the market put its trust on Truss to deliver the goods the economy badly needs ?

Truss pledged to deliver a bold plan to tackle soaring energy costs and is understood to be considering a freeze on energy bills. But this will by no means be a walk in the park for Truss. She will have to keep a tight fiscal line while trying to tackle the energy and cost-of-living crisis. Truss’s supposed 100bn pound scheme to limit energy price rises might provide some relief in the short-term, but someone will have to pay for it. Unfortunately, it will be the taxpayers.

Read More : https://www.xtreamforex.com/liz-truss-defeats-rishi-sunak-to-become-new-uk-pm/

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Australia’s economy grew strongly earlier this year

The national accounts released today showed the Australian economy in the second quarter expanded by a solid 0.9% and 3.6% YoY. It’s the third consecutive quarter of economic expansion for the Australian economy.

First quarter of re-opened domestic and international borders was behind a substantial rise in consumer spending and net export growth, offsetting weakness in housing and inventories. Exports of goods and services contributed 1.1% points to GDP growth. The rises were broad-based across rural and mining goods and services exports. Exports of services rose 13.7%, reflecting education-related travel as international students returned to Australia.

Today’s figures coincided with the start of RBA’s rate hiking cycle in May and come just one day after the RBA raised rates by 50bps to 2.35%, leaving Q3 as the one that should reveal the impact of the RBA’s 225bps of rate hikes to date.

Read More : https://www.xtreamforex.com/australias-economy-grew-strongly-earlier-this-year/

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USD/CNH – US Dollar Chinese Yuan Offshore News

Another news from China which is not good. It is nation’s trade disappointing figures expectation. The yuan fell further, USD/CNH to almost 7.0000. The poor imports figure in particular raised concerns about how weak the Chinese economy has become as it faces troubles. These include the ongoing COVID-related lockdowns and a property sector which has collapsed under the weight of debt. When China sneezes, the world usually catches a cold- and that’s precisely how the markets have reacted so far.

China’s exports and imports figures were well short of expectations, pointing to weakening domestic and foreign demand. Imports were up just 0.3% on the year in August, a sharp fall from the +2.3% annul reading recorded the month before. Exports were +7.1% y/y again sharply lower compared to 18.0% recorded in July.

USD/CHN has been rising steadily as monetary policy divergence between the US and China continues to grow. Whereas the Fed is tightening its belt with aggressive rate increases, the PBOC was recently been forced to cut interest rates as data showed the economy was losing steam due to renewed Covid lockdowns and a deepening property downturn. But with the yuan weakening so significantly, the PBOC has tried to stem its decline by using other tools including stronger fixings for the yuan and this week it trimmed forex reserve ratio to 6% from 8% in a bid to support its currency.

Read More : https://www.xtreamforex.com/usd-cnh-us-dollar-chinese-yuan-offshore-news/

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Unease Market on Inflation Expectations

Second quarter GDP for Australia met the market’s expectation at 0.9%, 3.6%yr. As expected, household consumption drove growth in the quarter, consumption’s strong 2.2% gain in the 3 months to June coming as a result of the economy’s progressive re-opening and as spending was supported by both robust nominal income gains and a further reduction in the savings rate. In coming months households will feel the full effect of the rapid rise in interest rates and the hit to real incomes from historic inflation, limiting further upside. We continue to expect from historic inflation, limiting further upside. We continue to expect consumption growth to decelerate to a pace well below trend form fourth quarter 2022 through end of 2023, taking GDP growth with it. At December 2023, annual GDP growth is expected to have slowed to just 1.0%yr.

Over in the US, this week’s mixed data highlights the variable conditions faced by businesses across the nation. The ISM services PMI edged higher in August; however respondents seemed cautions on the outlook, with the production and new order indexes printing above 60 as employment held around 50- the divide between expansion and contraction.

Read More : https://www.xtreamforex.com/unease-market-on-inflation-expectations/

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EUR/USD faces barricades around 0.9863, focus shifts to US Inflation data

The past week was marked by two important events. The EUR/USD pair updated its 20-year low on Tuesday, September 6th once again, falling to 0.9863. And then the European Central Bank raised its key interest rate for the first time in its history by 75 bps to 1.25% on Thursday, September the 8th, accompanying this act with very hawkish comments.

Both the events did not come as a surprise to the market and on the whole, were in line with the forecasts that we voiced in the previous review. The pair’s rebound to the upside following the ECB’s decision was not surprising either. Having risen by about 250 points, it peaked at 1.0113 on September 9. This was followed by a correction to the north, and the pair finished at 1.0045 .

Read More :https://www.xtreamforex.com/eur-usd-faces-barricades-around-0-9863-focus-shifts-to-us-inflation-data/