Daily Forex News

[xtreamforex]

Gold Price Vulnerable to Persistent US Inflation

The cost of gold might organize further endeavors to test the 2022 high ($2071) as it moves to a new week-after-week high ($1984), however new information print emerging from the US might prompt a pullback in bullion as the Individual Utilization Use (PCE) cost file is supposed to show tenacious expansion.

Late improvements in the cost of gold raise the extension for a move towards the month-to-month high ($2010) as it cleans the reach bound cost activity off of recently, and the valuable metal might follow the positive slant in the 50-Day SMA ($1892) as the Central bank gives off an impression of being on target to change gears.

Notwithstanding, the update to the US PCE, the Federal Reserve’s favored measure for expansion, may create headwinds for bullion as the center rate is supposed to hold consistent at 4.7% per annum in February. Indications of tacky value development might push the Government Open Market Panel (FOMC) to seek after a more prohibitive strategy as expansion stays well over the national bank’s 2% objective, and Executive Jerome Powell and Co. may convey another 25bp rate climb at the following loan fee choice on May 3 particularly as ‘financial pointers have commonly come in more grounded than anticipated.’

So, tenacity in the center US PCE might delay the cost of gold as it comes down on the Fed to execute higher loan fees, however, the valuable metal might organize further endeavors to test the 2022 high ($2071) as it returns quickly in front of last week’s low ($1934).

The cost of gold is minimally transformed from the outset of the week as it returns in front of last week’s low ($1934), and the valuable metal might follow the positive slant in the 50-Day SMA ($1892) as it clears the reach bound cost activity extended from the week before.

The move over the $1973 (78.6% Fibonacci retracement) to $1977 (half Fibonacci expansion) locale raises the degree for a run at the month-to-month high ($2010), with a break/close over the $2018 (61.8% Fibonacci expansion) to $2020 (78.6% Fibonacci augmentation) region opening up 2022 high ($2071).

In any case, the inability to clear the month-to-month high ($2010) may prompt a bigger pullback in the cost of gold, with a move beneath the $1928 (23.6% Fibonacci retracement) to $1937 (38.2% Fibonacci expansion) locale opening up the $1886 (23.6% Fibonacci expansion) to $1987 (61.8% Fibonacci retracement) region.

[xtreamforex]

US Takes Center Stage in this Holiday-Shorted Week

The steep decline in strength costs over the previous few months prompted March headline inflation in Europe to decline considerably year-over-year (from 8.5% to 6.9%). Rising core inflation and excessive m/m readings on the other hand confirmed that this is solely the effortless phase in the lengthy experience again in the direction of the 2% target. But with US (core) PCE inflation for February later on Friday additionally cooling barely greater than expected, the market center of attention lied elsewhere. The downleg in core bond yields accelerated, main to losses in the US between 8.1 and 11.4 bps throughout the curve. German yields slid 6.6 to 9.6 bps.

Equities ended the quarter on a fine note. The Euro Stoxx 50 rallied 0.69%. It even set a new YtD excessive intraday at 4325. US bourses rose between 1.26% (DJI) and 1.74% (Nasdaq). The euro on forex markets hit the March excessive at 1.0926 earlier than technical resistance (and possibly some euro fatigue) kicked in. EUR/USD sooner or later completed at 1.0839, down from 1.0905 at the open. The US greenback in well-known traded strong, gaining in opposition to most peers.

The trade-weighted index moved greater from 102.19 to 102.50. Sterling stays an ocean of calm. EUR/GBP for most of the day held function simply south of 0.88. Gold misplaced some territory however held easily above $1950/ounce. Brent oil closed in on the $80/b stage for the first time given that mid-March and soared previous that at some stage in Asian dealings this morning after OPEC the day past introduced a shock manufacturing reduce (cfr. infra). Brent rallied extra than 8% paring beneficial properties partially.

It’s a two-sided story for yields. It should re-light the inflationary fireplace (supporting yields thru greater inflation expectations) however at the equal time weigh on financial recreation and in the quit require a much less aggressive economic response (keeping a lid on actual yields). The former outweighs for the time being although we are no longer satisfied it will final all day. US money yields bounce up to eight bps at the the front stop of the curve. Equities in the area change more often than not in the green.

News go with the flow aside from oil is skinny otherwise. Japanese (see headline) and Chinese (Caixin man. PMI from 51.6 to 50 vs 51.4 expected) sentiment indications disappointed. The dollar beneficial properties at the begin of the new quarter. EUR/USD eases returned under 1.08 and technical buying and selling may want to take it again to 1.0735 in a first instance. The kiwi greenback underperforms this morning.

The US takes core stage is this holiday-shorted week (markets in the place closed on Good Friday). The eco calendar kicks off with the US manufacturing ISM today. If anything, we see some dangers for a downward shock given the current turmoil. But we wouldn’t draw any conclusions from it as calm has again in the meantime.

If what occurred to the likes of SVB is a one-off, then today’s doable undershoot would possibly simply as nicely reverse already subsequent month. To that end, the market response these days won’t inform us a whole lot either. More necessary facts are due later this week with the US offerings ISM and the ADP job file on Wednesday and payrolls on Friday.

[xtreamforex]

Australian Dollar Dips After RBA Leave Rates Unchanged

The Australian Dollar slipped slightly in the aftermath of the RBA standing still on rates for the first time since May 2022.

The RBA maintained some flexibility and didn’t rule out future hikes. In the accompanying statement on monetary policy, they said, “The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.”

Interest rate markets are currently pricing no more hikes and a better-than-even chance of a 25 basis point cut by the end of the year.

Today’s price action comes after a massive rally for the Aussie yesterday. Markets were rattled by the huge surge in crude oil prices after OPEC+ cut its crude oil production target by 1.1 million barrels per day. The move compounded existing tightening supply issues.

This saw Treasury yields slide lower, taking the US Dollar with it. AUD/USD was the largest beneficiary in the aftermath. The yield spread between Treasuries and Australian Commonwealth Government bonds (ACGB) moved back toward favoring AUD which may have played a role in the rally.

The RBA has raised the cash rate by 350 basis points since May 2022. In October 2021 the Australian Prudential Regulation Authority (APRA) released this statement.

“APRA has told lenders it expects they will assess new borrowers’ ability to meet their loan repayments at an interest rate that is at least 3.0 percentage points above the loan product rate.”

Previously, the hurdle was 2.5%. Much has been made of the so-called ‘mortgage cliff’ where borrowers will need to refinance their debt of the last few years at current levels. These debts might be near or exceed the upper end of APRA’s expectation of appropriate lending.

This might go some way to explain why the RBA is hesitating to tighten monetary policy while CPI remains much higher than its target of 2–3% over the business cycle.

Quarterly CPI will be released later this month and it will be only the second time that it can be compared to the new monthly CPI figure that the Australian Bureau of Statistics (ABS) introduced last October.

This new monthly gauge only covers around two-thirds of the basket of goods and services that is counted in the quarterly figure.

The RBA has previously cited the softening in the monthly CPI number as a reason to be less hawkish. Another disparity of 0.6% the wrong way could be a headache for the central bank and could see the monthly read defenestrated.

Looking ahead and across the Tasman Sea, the Reserve Bank of New Zealand (RBNZ) is anticipated to raise its official cash rate (OCR) by 25 basis points to 5.0% tomorrow. The Kiwi made a 7-week high above 63 cents against the US Dollar today.

[xtreamforex]

First Impressions: RBNZ Monetary Policy Review

The RBNZ raised the policy rate by an unexpectedly large 50 basis points, and another 25 basis point hike appears to be scheduled for the May Monetary Policy Statement.

RBNZ Monetary Policy Report, April 2023

The Reserve Bank surprisingly raised the OCR by 50 basis points to 5.25% at today’s review, rather than 25 basis points as most expected.

Overall, the RBNZ sees the overall profile for inflation pressures as relatively unchanged since February, when its projections showed that the OCR should rise to 5.5% in the first half of 2023.

The RBNZ acknowledged the weaker starting point for GDP. However, the downward impact on its projections was offset by upward shocks to prices from the recent floods and Cyclone Gabrielle. The RBNZ remntains concerned about the potential for inflation expectations to be unanchored by the current high levels of core and headline inflation.

The RBNZ acknowledged that financial stability abroad has recently come under pressure, but did not see this as having a significant impact on financial conditions or financial stability in New Zealand. In any case, the RBNZ reiterated that it had tools other than the OCR to deal with financial stability pressures should they arise.

The bottom line is that the RBNZ appears intent on moving the OCR to the level it deemed sufficiently contractionary back in February, i.e., an OCR of 5.50%. Any moves in the OCR beyond that will depend on the data, but it seems likely that the basis for another 25 basis point increase will be at the May Monetary Policy Statement .

[xtreamforex]

Asia Shows its Strength as US Growth Prospects Dwindle

In Australia, the RBA was the focus of market participants’ attention. Outside the country, the RBNZ reaffirmed its hawkish resolve, while U.S. data weakened noticeably.

The RBA decided to leave the key interest rate unchanged at 3.60% in April, a decision that was in line with Westpac’s forecast. In line with the decision, the Governor’s statement included a subtle change to the guidance, indicating that further tightening “may be required” in March, rather than “will be required.” While this certainly still qualifies as a tightening bias, after 350 rate hikes in the past decade, the central bank board is increasingly concerned about the need to assess the full spectrum of risk.

In our view, the evolution of underlying inflationary pressures is critical to the near-term stance of monetary policy. Westpac projects that inflation will average 6.6% for the year in the first quarter, an outcome that the RBA is likely to find uncomfortably high against the backdrop of a historically tight labour market, thus warranting a policy response. As a result, we continue to expect a final 25 basis point rate hike in May, taking the policy rate to a peak of 3.85%, where we believe it will remain until the end of 2023. If economic momentum continues to slow and inflation risks subside, a series of rate cuts may be implemented in 2024 and 2025 to bring policy back toward neutrality and facilitate a recovery in economic growth.

Turning to domestic data, housing market data released this week was generally mixed. Most notably, the CoreLogic home value index seems to point to some stabilization in home prices, which rose 0.8% in March after falling only 0.1% in February. The pace of monthly declines in residential mortgage approvals continued to moderate in February; however, broadly speaking, this indicator continues to point to a further significant slowdown in residential loan growth as interest rate headwinds increase. Meanwhile, monthly housing permit updates remain hostage to their own seasonality: following the extreme volatility in high-rise permits and now emerging issues related to processing delays, February’s modest 4.0% increase appears to mask a fundamental slowdown in the trend, as evidenced by the 30% decline in permits over the past year. All in all, we maintain our view that increasing headwinds, particularly with regard to interest rates and the general economic outlook, will continue to weigh heavily on the housing sector this year, but we are wary of the possibility of a sustained stabilization.

The decision by the Reserve Bank of New Zealand (RBNZ) to raise interest rates by 50 basis points this week surprised the market, as the consensus was 25 basis points. The tone of the statement was also aggressive, as the RBNZ is concerned about the potential impact of post-cyclone reconstruction on inflation given the already strained state of the economy. As our New Zealand team, led by Chief Economist Kelly Eckhold, explained, the RBNZ appears to be focused on quickly achieving the absolute level of policy it believes is needed to bring inflation back to target. The RBNZ also indicated that the recent

decline in wholesale funding costs could lower borrowing costs across the economy; the 50 basis point move was then seen as a way to “maintain current lending rates for businesses and households.” This situation highlights the tension that is building between monetary policy in New Zealand and the rest of the developed world, where policy is seen at or near peak levels. Our New Zealand economics team now anticipates a 25 basis point hike to 5.50% in May and expects the RBNZ to maintain a tighter stance thereafter, pending further information.

As for the U.S., three data releases stood out this week: the ISM and JOLT labour market data.

Both the ISM manufacturing PMI and the ISM services PMI surprised sharply to the downside in March, with the manufacturing contraction accelerating (the overall index was 46.3) and the services index nearly stalling at 51.2. It is also significant that new orders in manufacturing were particularly weak (the index fell to 44.3), while new orders in services fell sharply (the orders index fell 10 points to 52.2).

These results point not only to continued economic weakness, but also to clear risks related to employment, which is expected to decline in the manufacturing sector and to be only marginally positive in the services sector. A sharp drop in JOLTS job openings in February was further evidence of the building downside risks to employment. The number of available jobs fell to 9,931k in February, down from 10,563k in January and the 2022 peak of 12,027k. While highly volatile and often off the mark as a lead for nonfarm payrolls (due Friday night), ADP private payrolls was also soft in March.

We have long highlighted the risks for the US economy from tighter policy and the shock to household finances from high inflation. These concerns led us to remain of the view that the US is likely to experience a lengthy period of stagnation, with an output gap in the order of 3.0% by end-2024. As discussed last week, given recent developments in the US banking sector, the risks to this view are skewing to the downside. Most significant is the potential for US GDP growth to get stuck at a rate below potential beyond 2024. This is why we see need for the FOMC to act aggressively on policy in 2024, once inflation risks have abated; but also why it is necessary banking sector regulatory reform occur with haste to restore confidence amongst both borrowers and lenders. If the latter is delayed, the benefit of 2024’s monetary easing could be offset.

[xtreamforex]

EUR/USD struggles to reach yearly high ahead of NFP report

EUR/USD is struggling to test the yearly high (1.1033) as it fails to continue the series of higher highs and lows from the beginning of the week, and the U.S. labour market data (NFP) report may weigh on the exchange rate as employment is expected to rise further.

The short-term recovery of EUR/USD seems to have stalled as it consolidates below the weekly high (1.0973), and developments in the US could affect the exchange rate as the Federal Reserve officials continue to take a restrictive stance.

In a speech at New York University, Cleveland Fed President Loretta Mester acknowledged that ‘wages are still growing at an annual rate of about 4-1/2 to 5 percent,’ and the official went on to say that ‘inflation remains too high and too persistent,’ as price growth remains well above the central bank’s 2 percent target.

The comments suggest that the Federal Open Market Committee (FOMC) may pursue tighter policy, as Mester reiterated that ‘additional policy tightening may be appropriate,’ and the update to the NFP report may prompt the Fed to implement higher interest rates as the economy is expected to add 240,000 jobs in March.

However, a weaker-than-expected NFP report could boost EUR/USD by fueling speculation about a change in monetary policy, and it remains to be seen whether the FOMC will further alter forward guidance at its next interest rate decision on May 3 amid signs of a weakening economy.

Against this backdrop, the update to the NFP report could impact the near-term outlook for EUR/USD as the Fed appears to be nearing the end of its rate hike cycle. However, the failed attempt to test the yearly high (1.1033) could lead to a short-term setback in the exchange rate if it fails to hold above the monthly low (1.0788).

[xtreamforex]

Bank of Canada to hold rates steady

Bank of Canada (BoC) is widely anticipated to maintain its pause this week, leaving interest rates unchanged at a 15-year high of 4.50%. Governor Macklem has emphasized that there’s no need for additional rate hikes if the economy unfolds according to central bank’s projections, which forecast stalling growth for the rest of the year, subsequently cooling inflation. Macklem also stated that an “accumulation of evidence” would be required before considering resuming tightening.

Consequently, it’s unlikely that BoC’s announcement on Wednesday or Macklem’s speech on Thursday will trigger significant volatility in Canadian Dollar. Instead, Loonie is expected to be more reactive to developments in oil prices, as WTI crude remains stuck around 80 mark. Additionally, the currency could be influenced by US CPI data and the release of FOMC minutes when paired against the greenback.

Read More : https://bit.ly/3A3Rbgh

[xtreamforex]

Fed Minutes Showed Recent Banking Turmoil May Result in Lower

The minutes of the March 21-22, 2023, Federal Open Market Committee (FOMC) meeting reaffirmed that price and financial stability are of paramount importance to the Fed.

Regarding the economy, Committee members noted that “recent indicators point to modest growth in spending and output. At the same time, however, participants noted that employment growth has picked up in recent months and is proceeding at a robust pace; the unemployment rate has remained low. Inflation remained elevated.”

Committee members noted that despite a sound and resilient banking system, “recent developments in the banking sector are likely to tighten credit conditions for households and businesses and weigh on economic activity, hiring, and inflation. “Participants noted, however, that the overall effect on economic activity is uncertain at this time.

Read More : https://bit.ly/3zZZl92

[xtreamforex]

Constructive Developments for the Consumer

Developments in Australia and the US this week were supportive of our views for the RBA and the FOMC.

The Westpac- MI Consumer Confidence Survey provided a positive update on confidence. The RBA’s decision to leave the policy rate unchanged in April proved to be an important support, with the overall index rising 9.4% this month from 78.5 to 85.8. This is underscored not only by the upswing in the housing subindexes of the survey-mortgage borrower confidence rose 12.2%, the index for the timing of home purchases rose 8.2%, and house price expectations rose 16.7%-but also by the general recovery in households’ expectations for the near-term economic outlook and family finances. While these developments represent a marked improvement over the very pessimistic readings of February and March-a situation comparable only to the major economic dislocations of the 1980s and 1990s-the overall index, at 85.8, must still be considered weak.

Read More : https://bit.ly/3obJX7d

[xtreamforex]

US Inflation Expectations Jump, Earnings Season Kicks

Despite the softer-than-expected inflation data released earlier last week, US inflation expectations shocked investors at last Friday’s release; the 1-year expectation jumped from 3.6% to 4.6% due to the surprise surge in energy prices. The expectation was a further easing to 3.5%.

And energy bulls remain in charge of the market, as besides the tighter OPEC supply, the US Energy Secretary Jenifer Granholm said that the US could begin buying oil to refill the strategic reserves and the EIA warned that the global oil demand will rise by 2mbpd to almost 102mbpd. Both helped keeping the price of American crude at around its 200-DMA, a touch below the $83pb level.

Therefore, despite the easing inflation pressures on the CPI figures, the positive pressure building on energy prices and the surging inflation expectations boost the Federal Reserve (Fed) hawks. Combined to waning bank stress, the US 2-year yield – which is a good proxy of what investors think the Fed will do – rose last week, although we are still far below the 5% level before the Silicon Valley Bank (SVB) collapsed. The expectation of a 25bp hike at the next FOMC meeting is given a good 83.5% chance.

Read More : https://bit.ly/41fnTqT