Forex News

News source: FXStreet
Jun 14, 21:57 HKT
BoJ likely to raise policy rate in September – Societe Generale

As expected, the Bank of Japan (BoJ) kept the policy rate unchanged at Friday's meeting. However, it announced that it would start reducing its Japanese Government Bond (JGB) purchases after its July monetary policy meeting and that it would lay out the details of its reduction plan for the next one to two years at that meeting, says Jin Kenzaki, Head of Research for Japan at Societe Generale.

BoJ is set to reduce its monthly JGB purchases to zero in 1-2 years

"Given the BoJ’s announcement that it will lay out the details of its reduction plan for the next one to two years, there is a possibility that the BoJ will reduce its monthly JGB purchases to zero over the next one to two years."

"Until this announcement, we had predicted that the purchase amount would decrease to JPY4tn by the end of this year and JPY3tn by next spring, but given the pressure from the government to address the weak yen, we now think the most likely scenario will be a reduction starting in August, with purchases declining by JPY1tn every three months and reaching zero by November of next year."

"On the other hand, considering that the BoJ will announce a specific policy for reducing its JGB purchases at the July meeting, its potential impact on the market may reduce, in our view, the likelihood of a rate hike at the July meeting. We continue to expect a rate hike at the September meeting."

Jun 14, 15:53 HKT
Gold trades in a range following mixed signals from US economy
  • Gold continues to trade in a range established in spring as traders respond to mixed macroeconomic signals. 
  • Whilst the data points to a fall in inflation, Fed officials are more cautious.
  • XAU/USD has probably formed a bearish Head-and-Shoulders pattern on the daily chart. 

Gold (XAU/USD) trades marginally higher, exchanging hands in the $2,330s on Friday. Asian bourses lacked directionality overnight and mixed signals from the US regarding the future path of interest rates – a key driver for Gold – are doing little to help establish directionality for the precious metal.  

Gold stuck in a range during period of uncertainty 

Gold yo-yos in familiar territory as conflicting signals leave traders guessing. This is especially true about the future course of interest rates in the US. 

Whilst the country’s economic data points to a disinflationary trend, which would be expected to lead to lower interest rates, the central bankers tasked with making the cuts are acting more cautious. Lower interest rates would be a positive catalyst for Gold as they would reduce the opportunity cost of holding the non-yielding asset. However, it is unclear when and by how much rates will fall.  

The release of disinflationary US Producer Price Index (PPI) data on Thursday, the market’s gauge of “factory gate” price growth, provided more evidence of a reduction in inflationary pressures, suggesting the Federal Reserve (Fed) could move to cut interest rates in the near-term. 

Yet the data came after the Fed on Wednesday revised down – from three to one – the number of interest-rate cuts it expects to make in 2024 In addition, Fed Chairman Jerome Powell dismissed the importance of the cooler-than-expected Consumer Price Index (CPI) data in May, released only a few hours earlier, saying it was only one data point, and endorsing a data-dependent approach going forward.   

Gold price itself rose over half a percent to a peak of $2,342 after the disinflationary CPI release, before backtracking on the Fed’s more cautious stance. 

The CPI data balanced out robust US Nonfarm Payrolls (NFP) figures on Friday, which reflected a buoyant labor market and rising wages in the US. These factors would be expected to put upside pressure on inflation, keeping interest rates high. 

Gold has also been left reeling after the People’s Bank of China (PBoC) revealed they had stopped buying the precious metal between the end of April and May. It was the first time in 18-months the PBoC had not added to their Gold reserves and suggested a price cap might have been reached. At the same, analysts at Citibank point to continued strong demand from consumers in China, which they say will push Gold higher.  

Thus the overall picture remains mixed for Gold traders as they await the next main data release from the US on Friday, the preliminary Michigan Consumer Sentiment Index for June.    

Technical Analysis: Gold forms Head-and-Shoulders top

Gold continues to form what looks like a bearish Head-and-Shoulders (H&S) price pattern. H&Ss tend to occur at market tops and signal a change of trend. 

XAU/USD Daily Chart


 

The H&S on Gold has completed a left and right shoulder (labeled “S”) and a “head” (labeled “H”). The so-called “neckline” of the pattern appears to be at the $2,279 support level (red line). 

Declining trade volume during its development corroborates the pattern.

A decisive break below the neckline would validate the H&S pattern and activate downside targets. The first, more conservative, target would be $2,171, calculated by taking the 0.618 Fibonacci ratio of the height of the pattern and extrapolating it lower from the neckline. The second target would be at $2,106, the full height of the pattern extrapolated lower. 

A break above $2,345, however, would bring the H&S into doubt and could signal a continuation higher, to an initial target at the $2,450 peak. 

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

 

Jun 14, 18:34 HKT
US Dollar stretches higher ahead of Michigan numbers
  • The US Dollar trades higher and overpowers other currencies such as the Japanese Yen and the Euro weaken. 
  • The BoJ said it is set to ease its bond-buying program in a very slow grind, while European sovereign bond yields increase due to political uncertainty in France.. 
  • The US Dollar index trades above 105.50 and could head towards year-to-date highs.

The US Dollar (USD) cuts through markets on Friday as traders flee out of the Japanese Yen (JPY) and the Euro (EUR). The renewed strength in the Greenback comes as sovereign bond yields in some countries in the Eurozone, particularly France, are spiking on the back of political uncertainty. In Asia, the weaker Japanese Yen is the result of the Bank of Japan (BoJ) monetary policy meeting, which concluded with Governor Kazuo Ueda’s announcement that the bank is set to relax its bond-buying program. 

On the economic data front, markets seem to be ignoring the recent soft inflation figures and focusing on a still hawkish Federal Reserve (Fed). On Friday, the calendar offers import-export data price data and the University of Michigan Consumer Sentiment and Inflation Expectations survey. Federal Reserve Bank of Chicago President Austan Goolsbee and Federal Reserve Governor Lisa Cook will drop some comments during the US session. 

Daily digest market movers: Disinflation is being ignored

  • Two non-USD drivers triggered ample US Dollar strength across the board on Friday:the Eurozone bond crunch – with sovereign yields rising in countries like Italy and France – and the outcome of the Bank of Japan monetary policy meeting. 
  • The USD/JPY pair climbs back to nearly 158.00 after the BoJ announced it will ease its bond-buying program. This might trigger a freefall in bond prices and a rise in yields, triggering further Yen weakness. 
  • At 12:30 GMT, US Import and Export prices for May got released. Monthly Import prices dropped from 0.9% to -0.4%. Monthly Export prices dropped from 0.6% to -0.6%. 
  • At 14:00 GMT, the University of Michigan will release its preliminary report for June:
    • Consumer Sentiment is expected to jump back to 72.0 from 69.1.
    • The five-year inflation expectations rate stood at 3% at the end of April. 
  • Near 18:00 GMT, Federal Reserve Bank of Chicago President Austan Goolsbee participates in a fireside chat at the Iowa Farm Bureau Economic Summit.
  • At 23:00 GMT, Federal Reserve Governor Lisa Cook delivers a speech at the 50 Years celebration of the American Economic Association Summer Program in Washington D.C.
  • Equity markets are painting a not bright picture for this Friday with red numbers across the board in Europe and US. 
  • The CME FedWatch Tool shows a 31.5% chance of Fed interest rate remaining at the current level in September. Odds for a 25-basis-points rate cut stand at 60.5%, while a very slim 7.9% chance is priced in for a 50-basis-points rate cut.
  • The benchmark 10-year US Treasury Note slides to the lowest level for this month, near 4.22%, flirting with the lows seen in March. 

US Dollar Index Technical Analysis: Fresh high

The US Dollar Index (DXY) is getting help from both the Japanese Yen and the Euro this Friday. With both currencies accounting for nearly 70% of the basket forming the US Dollar Index, when both weaken, the Greenback gains without doing anything. With still a few weeks to go before the French elections and the BoJ taking it very slowly, the Greenback could get some further support in the coming weeks. 

On the upside, no big changes to the levels traders need to watch out for. The first is 105.52 where the DXY is trading around at this moment, a level that held during most of April. The next level to watch is 105.88, which triggered a rejection at the start of May and will likely play its role as resistance again. Further up, the biggest challenge remains at 106.51, the year-to-date high from April 16. 

On the downside, the trifecta of Simple Moving Averages (SMA) is still playing support. First is the 55-day SMA at 105.07. A touch lower, near 104.48, both the 100-day and the 200-day SMA are forming a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation. 

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

Jun 14, 17:54 HKT
Mexican Peso recovery falters after traders shrug off Banxico’s intervention warning
  • The Mexican Peso briefly recovered on Thursday after the President of the Banxico warned she will prop up the Peso if volatility persists. 
  • The recovery falters on Friday, however, as traders continue beating MXN lower following the outcome of the June elections. 
  • USD/MXN appears to end its correction and resume its bullish trend. 

The Mexican Peso (MXN) trades between half a percent and over one percent lower in its most traded pairs on Friday as markets continue to fret about the proposed policies of Mexico’s newly elected left-wing government. The Peso is additionally pressured by a squeeze on overweight long positions that have built up after a multi-year period of appreciation for the Mexican currency.  

At the time of writing, a single US Dollar (USD) buys 18.62 Mexican Pesos, EUR/MXN is trading at 19.92 and GBP/MXN at 23.67.

Mexican Peso temporarily recovers after intervention, then sinks

The Mexican Peso backs and fills on Friday after the previous day’s steep rally, which came on the back of verbal intervention by the President of the Banco de Mexico (Banxico), Victoria Rodriguez Ceja, who said Banxico would step in to prop up the Peso if volatility became too “extreme”.

On Friday, however, traders continue to apply pressure in line with the downturn since the results of the Mexican elections on June 2. These led to a victory for President-elect Claudia Sheinbaum and her left-wing coalition Sigamos Haciendo Historia (SHH). SHH won a supermajority in the Mexican house of deputies and came two seats away in the senate. This will make it easier for incumbent President Andres Manuel Lopez Obrador (AMLO) to push through radical amendments to the constitution that have set markets on edge. 

The raft of 20 proposed amendments and reforms range from rights to higher minimum wages and an increase in state-sector pensions, to the abolition of independent regulators and reforms to the judiciary – particularly the controversial idea of replacing the current system of appointing judges with one that would see them elected by popular vote. 

“The main concerns around these amendments is that (i) there will be an erosion of checks and balances and (ii) they would start to take Mexico down the path of wage indexation, which would clearly undermine Banxico’s efforts to get inflation under control,” Jason Tuvey, Deputy Chief Emerging Markets Economist at Capital Economics told FXStreet

On Wednesday during his daily broadcast to the masses, AMLO hit back at critics of his reforms, saying the current depreciation of the Peso, which has lost 10% of its value since the election, has been driven by “speculators” not “investors” and is part of a conspiracy of the right to “blackmail” the government into ditching the proposed reforms. 

He further argued that the current system of appointing judges was too open to corruption by elites, politicians and organized crime, resulting in a judiciary that was compromised. In comparison his reforms “would make the appointment of judges more democratic, improving the rule of law and actually attracting more not less foreign investment,” he said. AMLO also pointed to the fact that under his administration the Peso had appreciated whereas under all five previous Presidents it had depreciated, sometimes considerably. Critics of AMLO say he is punishing the Supreme court for obstructing some of his reforms. 

The large decline in the Mexican Peso since the June 2 elections could be seen as an overdue correction from overvalued extremes. The Peso has been in a long-term uptrend since April 2020, partly due to the extraordinarily high interest rates set by the Bank of Mexico (Banxico), which have made the currency attractive to carry traders. Carry traders borrow in currencies with low interest rates like the Japanese Yen (Apr circa 0.0% -0.1%) and invest in currencies like the Mexican Peso that offer higher returns (Apr circa 11.00%), pocketing the difference. 

It seems unlikely that the prospect of judicial reforms are primarily to blame for the sudden steep correction in MXN. Rather the elections may have acted as a kind of tinder stick to a bonfire of long positions that had built up in the Peso. 

“Before the election, we’d been arguing for some time that the Peso appeared increasingly overvalued and was vulnerable to a sharp fall – the declines over the past couple of weeks have taken it within touching distance of our long-standing year-end forecast of 19.00 (USD/MXN),” said Tuvey. 

Technical Analysis: USD/MXN probably resumes short-term uptrend 

USD/MXN rebounds after its recent correction on Friday, resuming its short and intermediate term uptrend. 

USD/MXN Daily Chart 

Given “the trend is your friend,” the odds favor a continuation of the uptrend, with the next target potentially situated at 19.22 (March 2023 high).

The Relative Strength Index (RSI) has just exited the overbought zone. However, the correction could still go deeper – although the established uptrend is likely to eventually resume.

The direction of the long-term trend is in doubt after the break above the October 2023 high. Previous to that, it was down.

Banxico FAQs

The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.

The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.

Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.

 

Jun 14, 21:47 HKT
WTI Oil Price Analysis: Closing in on cluster of resistance in the $79.00s
  • Oil is rising up to a cluster of daily major moving averages in the $79.00s. 
  • These will probably present a tough level of resistance for the commodity. 
  • The persistence of the short-term uptrend will depend on a decisive break of this resistance barrier. 

WTI Oil is trading in the $78.50s during the US session on Friday. 

On the 4-hour chart used to assess the short-term trend Oil has decisively broken out a falling channel and reached the conservative target for the breakout at $78.17 (Fibonacci 0.618 extension of the width of the channel extrapolated higher).  

Oil 4-Hour Chart 

Since breaking out of the channel, Oil is probably now in a short-term uptrend with the odds favoring more upside in the short-term, given “the trend is your friend”. However, it has now reached its initial target so is vulnerable to a pullback. 

A breakout above the last lower high of the prior downtrend at $80.36 (May 29 high) would provide added bullish confirmation and extend the uptrend higher. Such a move might be expected to reach the next key target at $83.50 (April 29 high and top of chart gap). 

The direction of Oil is less clear on the daily chart used to assess the intermediate term trend. 

Oil Daily Chart

The key feature on the daily chart is the cluster of resistance in the $79s from all three major Simple Moving Averages (SMA) – the 50, 100 and 200-day SMAs. This is likely to present a considerable barrier to more upside and could be an inflection point for Oil price. 

It would require a close on a daily basis above $80.36 (May 29 high) to confirm a successful break above resistance from the three SMAs and a continuation up to a target at $83.50. 

WTI Oil appears to be trading within a broad long-term range between $64.00 and $93.00 on the weekly chart. This suggests the long-term trend is probably sideways. 

Oil Weekly Chart

Last week’s red club-shaped candlestick could be a sign the move down has completed and Oil price may be reversing. Similarly-shaped candlesticks often punctuate the end of down moves in asset prices. It is possible Oil price could be about to begin a bullish sequence higher. 

The 200-week SMA has acted as reliable support on multiple occasions in 2023-24 and is providing support again at the current week’s lows. The reliability of the 200-week SMA further enhances the case for a bullish reversal. 

 

Jun 14, 15:35 HKT
Pound Sterling plunges against US Dollar on Fed’s hawkish outlook
  • The Pound Sterling declines to 1.2660 against the USD as the Fed signals only one rate cut this year.
  • Fed policymakers said they want to see inflation declining for months before considering rate cuts.
  • UK’s steady wage growth has raised concerns of persistent inflation in the services sector.

The Pound Sterling (GBP) weakens further to near 1.2660 against the US Dollar (USD) in Friday’s American session as the latter rallies. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its upside to 105.75. The USD Index rises for a second consecutive day, as the hawkish stance of the Federal Reserve (Fed) on the interest rate outlook has outweighed the impact of the soft United States (US) Consumer Price Index (CPI) and Producer Price Index (PPI) reports for May. 

The US PPI report, released on Thursday, showed that the monthly headline PPI declined by 0.2% due to weak gasoline prices, and the core producer inflation, which excludes volatile food and energy prices, was flat.

Cooler consumer and producer inflation reports suggest that the core Personal Consumption Expenditure Price Index (PCE) reading, which is the Fed’s preferred inflation measure, would also exhibit softening inflationary pressures. This has boosted expectations of early rate cuts by the Fed. 30-day Fed Funds futures pricing data shows that traders see a 65% chance that there will be a rate-cut decision in September, according to the CME FedWatch Tool. The probability has significantly increased from the 50.5% recorded a week ago.

On Wednesday, the Fed signaled only one rate cut this year against a prior projection of three after leaving interest rates unchanged in the range of 5.25%-5.50%. Policymakers scaled back a number of rate cuts in the latest projections amid concerns that progress in the disinflation progress has slowed. In the press conference after the interest rate decision, Fed Chair Jerome Powell said the soft inflation report for May is encouraging but also that officials want to see price pressures decline for months to build confidence for rate cuts. Powell added that policymakers would respond quickly to rate cuts if labor market conditions start easing.

Meanwhile, investors have got a fresh outlook on interest rates from Cleveland Fed Bank President Loretta Mester in an interview with CNBC after the blackout period. Mester said inflation has resumed its journey towards the 2% target after stalling. However, inflation needs to soften further from here for them to consider rate cuts.

Daily digest market movers: Pound Sterling slides further amid uncertainty ahead of BoE's policy decision

  • The Pound Sterling exhibits a weak performance against North American and other European currencies but is upbeat against most Asia-Pacific peers in Friday’s London session. The near-term outlook of the GBP is expected to remain uncertain as investors shift focus to the Bank of England’s (BoE) monetary policy meeting, which is scheduled for Thursday.
  • The BoE is widely anticipated to keep interest rates steady at 5.25%. Therefore, investors will majorly focus on the number of policymakers who will vote in favor of a rate-cut decision. In the May meeting, BoE Deputy Governor Dave Ramsden joined policymaker Swati Dhingra and voted for lowering interest rates by 25 basis points (bps) to 5.0%. In the press conference, BoE Governor Andrew Bailey acknowledged significant progress in inflation declining to 2% but remarked, “We are not yet at a point where we can cut the base rate," EuroNews reported.
  • Currently, financial markets are split between August or September meetings regarding when the BoE could start reducing interest rates. Before the BoE outcome, investors will focus on the CPI report for May, which will be published on Wednesday. UK headline inflation appears to be on course to return to the desired rate of 2%. However, service inflation that is driven by wage growth continues to be a major concern for policymakers.
  • The latest UK Employment report showed that Average Earnings, which is a wage inflation measure, grew steadily in the three months ending April. The pace at which wages are growing is significantly higher than what is needed to bring inflation down to BoE’s target.

Pound Sterling Price Today:

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.

  GBP USD EUR JPY CAD AUD NZD CHF
GBP   -0.77% -0.19% -0.60% -0.52% -0.20% -0.02% -1.05%
USD 0.77%   0.57% 0.16% 0.24% 0.58% 0.79% -0.29%
EUR 0.19% -0.57%   -0.39% -0.35% 0.00% 0.21% -0.85%
JPY 0.60% -0.16% 0.39%   0.07% 0.41% 0.61% -0.43%
CAD 0.52% -0.24% 0.35% -0.07%   0.35% 0.54% -0.52%
AUD 0.20% -0.58% 0.00% -0.41% -0.35%   0.21% -0.87%
NZD 0.02% -0.79% -0.21% -0.61% -0.54% -0.21%   -1.05%
CHF 1.05% 0.29% 0.85% 0.43% 0.52% 0.87% 1.05%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Technical Analysis: Pound Sterling drops to near 61.8% Fibo support

 

The Pound Sterling falls to a three-week low near 1.2660 against the US Dollar. The GBP/USD pair faces selling pressure while attempting to establish above the 78.6% Fibonacci retracement support (plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300) at 1.2770 and has now declined to near 61.8% Fibo support at 1.2667.

The Cable has declined to near the 50-day Exponential Moving Average (EMA), which trades around 1.2730, suggesting that near-term outlook is uncertain

The 14-period Relative Strength Index (RSI) falls back into the 40.00-60.00 range, indicating that the upside momentum has faded.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

Read more.

Next release: Thu Jun 20, 2024 11:00

Frequency: Irregular

Consensus: 5.25%

Previous: 5.25%

Source: Bank of England

 

Jun 14, 21:24 HKT
USD/CAD extends upside to near 1.3770 on hawkish Fed improves US Dollar’s outlook
  • USD/CAD rises further to 1.3770 as the Fed’s hawkish policy update dampens market sentiment.
  • Fed Mester agreed that the disinflation process has resumed.
  • Canada’s Manufacturing Sales grew by 1.1% in April on month, missing estimates of 1.2%.

The USD/CAD pair extends its upside to near 1.3770 in Friday’s American session. The Loonie asset strengthens as the US Dollar (USD) rises further due to a hawkish interest rate update by the Federal Reserve (Fed). Latest interest rate projections from Fed policymakers indicate that there will be only one rate-cut instead of three forecasted in March.

Fed’s hawkish policy has weakened the risk appetite of market participants. Considering bearish overnight futures, the S&P 500 is expected to open on a bearish note. The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, jumps to 105.70. While 10-year US Treasury yields have declined to 4.22% as financial markets expect that the Fed will deliver two rate cuts.

According to the CME FedWatch tool, 30-day Fed Funds futures pricing data shows that traders see a 65% chance that there will be a rate-cut decision in the September. The probability has significantly improved from 50.5% recorded a week ago.

Market expectations for Fed rate cuts in September increased after the United States (US) consumer and producer inflation data for May turned out softer than expected.

Meanwhile, Cleveland Fed Bank President Loretta Mester appeared in an interview with CNBC after the completion of the blackout period due to the Fed’s monetary policy meeting. Mester acknowledged that the disinflation process has resumed after stalling, however, policymakers want to see price pressures cooling further from their current levels to gain confidence for rate cuts. She also cautioned that the current monetary policy is impacting the economy and it is important not to wait too long to cut interest rates.

On the Canadian Dollar front, Statistics Canada showed that Manufacturing Sales grew at a slightly slower pace of 1.1% than expectations of 1.2% in April. The economic data contracted by 1.8% in March, downwardly revised from 2.1%.

USD/CAD

Overview
Today last price 1.3769
Today Daily Change 0.0026
Today Daily Change % 0.19
Today daily open 1.3743
 
Trends
Daily SMA20 1.3685
Daily SMA50 1.3689
Daily SMA100 1.3601
Daily SMA200 1.358
 
Levels
Previous Daily High 1.3764
Previous Daily Low 1.3715
Previous Weekly High 1.3768
Previous Weekly Low 1.3603
Previous Monthly High 1.3783
Previous Monthly Low 1.359
Daily Fibonacci 38.2% 1.3745
Daily Fibonacci 61.8% 1.3734
Daily Pivot Point S1 1.3717
Daily Pivot Point S2 1.3692
Daily Pivot Point S3 1.3669
Daily Pivot Point R1 1.3766
Daily Pivot Point R2 1.3789
Daily Pivot Point R3 1.3815

 

 

Jun 14, 20:50 HKT
Fed's Mester: Important not to wait too long to cut rates

In an interview with CNBC on Friday, Cleveland Federal President Loretta Mester said that it is important not to wait too long to cut interest rates, per Reuters.

Key takeaways

"Latest inflation data has been welcome news."

"We are starting to see inflation move down again after stalling."

"We need to see inflation fall more from current levels."

"It is clear monetary policy is affecting economy."

"Neutral interest rate moves around all the time."

"Want to see a few more months of ebbing inflation data."

"We are in a good position with monetary policy."

The labor market is still very strong."

"FOMC is doing good work understanding, forecasting economy."

"Politics does not come into FOMC debates."

Market reaction

The US Dollar preserves its strength following these comments. At the time of press, the USD Index was up 0.35% on the day at 105.60.