Dollar rise again

The recent financial markets have been driven by sentiments, particularly revolving around the United States debt ceiling issue. Treasury Secretary Janet Yellen has raised concerns about a potential default in June if Congress fails to extend it. President Joe Biden and senior Congress members are actively negotiating to resolve the matter, which mainly centers around spending levels. Opposition Republicans have indicated a willingness to raise the debt ceiling if the Government accepts spending cuts.

Market expectations of a Fed rate hike rose to 65% after positive macroeconomic data and higher inflation figures were reported. According to the CME FedWatch Tool, the Fed is projected to hike at the 13th meeting, with interest rates predicted to rise by 0.25 percent on June 14.

Overall sentiment has turned more hawkish on the Fed, and if the debt ceiling crisis is resolved favorably and next Friday’s NFP prints more than expected, a rate hike in June seems more likely.

The next round of US employment data (NFP) on Friday is very important.

Forecasts for the US non-farm payrolls report added 180,000 jobs in May, which was less than the previous month, but still a significant figure. The unemployment rate is expected to rise to 3.5 percent, but wage growth will pick up slightly over the year.
This week, Investors will be watching the payrolls and UNEMPLOYMENT RATE. the result is Fed’s next moves, as any unexpected changes in policy could lead to significant market volatility. In the meantime, traders are positioning themselves for a potential rate hike, with many betting on a stronger dollar and higher bond yields in the coming months.

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Interest rate expectations rice due to the UK inflation

UK inflation rate has hit single digits anew, though it has not attained the number foreseen by economists. The United Kingdom’s net inflation growth has surged to the same level as ten years ago.

Expectations are high for a Bank of England interest rate hike soon; from 4.5% to a minimum of 5%, and possibly even as high as 5.5% to curb inflation’s swift expansion, according to financial market predictions.

Inflation figures have impacted the British bond market leading to heightened interest rate expectations, resulting in government bond yields rising to a multi-month high and investors anticipating increased bond yields.

We don’t have any important calendar for GBP this week, but the US economic calendar is busy with the full US employment report or NFP on Friday. Continued strong growth in the US labor market will increase the interest rate of the Federal Reserve, favoring the US dollar and harming the GBPUSD currency pair. The US government and parliament are close to a debt agreement, with a deadline of June 1st, and delays will harm the US economy.

Eurozone and failure to grow

Euro had an uneventful week. Euro remained feeble versus USD and struggled against GBP. It has slumped against USD uninterruptedly for four weeks.

ECB officials continue to favor interest rate increases, yet this stance hasn’t visibly impacted the euro. This may be due to the fact that the ECB’s rate hikes have translated into higher prices, rendering the official’s hawkish outlook ineffective in shaping interest rate forecasts.

Next week, Eurozone will release inflation data, but the forecast suggests that significant deviation from expectations in the inflation data of the euro area is unlikely.

The main driver of the EURUSD currency pair is again the US dollar and the news related to the negotiations on the debt ceiling of the US federal government. In the meantime, the US NFP employment report will be very important for the market.

Release of data from China, Canada, and Australia

On Wednesday, the newest purchasing managers’ index (PMI) figures will be disclosed in China. As China’s economy has recently lost strength with the fading of the reopening boom, the results of these surveys will display if the disquieting trend persisted in May. In case it did, the currencies of countries such as Australia and New Zealand, which rely on Chinese demand for their exports, may undergo additional decline.

The fundamental bias of AUD and NZD is Bearish and the forecast is Bearish too.

The release of the latest purchasing managers’ index (PMI) figures in China on Wednesday will be closely watched by investors and analysts alike. With the country’s economy experiencing a slowdown in recent months, the PMI results will reveal whether the trend continued into May. If so, this could have detrimental effects on the currencies of countries heavily reliant on Chinese demand for their exports, such as Australia and New Zealand. As such, many will be keeping a keen eye on the figures to gauge the health of China’s economy and the potential knock-on effects on the global market.

Economic calendar

Important news/events for this week:

Latest post

• Gold Analysis – December 4, 2023
• Australia’s Economic Landscape: A Deep Dive into China’s Key Role
• Trade Idea for GBPUSD
• Navigating the Global Gold Market: Insights and Analysis
• Unlocking Trading Success: Why Fundednext Is Your Ultimate Funding Solution

Everything involved in FED decisions

🇺🇸 More than 82% of market participants do not expect an interest rate hike by the Federal Reserve in the June 14 meeting. (The current interest rate ceiling is 5.25%.)

As it is known, market participants do not only expect interest rates to increase but also to decrease it. But it should be noted that if the stickiness of inflation is high, the Federal Reserve will probably increase the interest rate again, and because the market has predicted a decrease in the interest rate, this issue can put heavy pressure on stocks and indices. be risk-averse. Of course, this analysis is based on the assumption that the US labor market is strong and the unemployment rate is low. If the unemployment rate increases, the Federal Reserve will have to adopt an expansionary policy, and Congress will urgently increase the debt ceiling of the US government.

The US dollar is the foundation of all financial markets. Always one side of the price of commodities (like crude oil, Silver, and gold) or cryptocurrencies like Bitcoin and even the stock market is the US dollar! The US dollar is the main driver of all financial markets in the world. The US economy is the largest economy and the US dollar is the most common currency in the world. This is why all traders of all markets are confused in their decisions. Because the ability to predict the decisions of the Federal Reserve at this point in time has become difficult.

Why is the dollar strong even with the risk of rate hikes ending?

The US dollar index strengthened against most major currencies last week. In fact, the US dollar index has grown by almost 2% over the past two weeks. This is the best 10-day gain in the US dollar index since mid-September. But what happened that the US dollar index strengthened and is it possible to continue the growth of the US dollar?

The US dollar has grown as has the yield on US Treasuries. This means that the interest rate expectations of the market are retreating from the interest rate cut. Since the beginning of the US credit crisis, interest rate expectations quickly moved from interest rate increases to interest rate decreases. The market was worried that with the onset of the credit crisis, the central bank would be forced to lower interest rates to prevent recession and economic crisis. For this reason, traders buy the dollar as a safe asset

Interest rate increase or decrease?

While the market’s interest rate expectations were moving away from a rate cut, the chairman of the US Federal Reserve gave a speech saying that there is no need to raise interest rates. The market is preparing for another rate hike, but the Federal Reserve has not made a decision. This means federal uncertainty and that everything depends on the performance of economic indicators. The performance of the US economic data will determine whether the Federal Reserve will move towards raising interest rates or not.

Traders are focused on the net PCE inflation index.
April’s expectation for this index is 4.6%. This is not a good figure for the central bank. This means that the Federal Reserve may try to raise interest rates to lower it.

📅 Ziwox Calendar

Eurozone

🇪🇺 Even though there has been no change in the possibility of interest rate hikes for the European Central Bank, a batch of recent worrying data for Germany, along with the recovery of the US dollar, have caused the Euro to fall, and as a result, the single currency has reached several levels. Lost a key.

The EURUSD currency pair now trades in a key area of 1.0800. And the reason for that is the fear of recession and global financial problems and the growth of the dollar last week. But at these low levels, can you think of buying Euros?
A key driver of the euro’s attractiveness against the dollar recently has been the perception that the Federal Reserve has reached its interest rate peak while the European Central Bank still has a way to go for contractionary policies. Although the European Central Bank will still be on the path of contractionary policies, markets are already re-betting on an interest rate hike by the US Federal Reserve after Logan’s speech.

Ziwox Terminal (COT report)

You should note that the US debt ceiling problems and the purchase of the EURUSD currency pair were the biggest transactions among the G10 currencies, and since recent developments have ended positively for the dollar, we will probably see a Long Squeeze in this currency pair. According to the COT report, 7667 Long net positions Increased in EUR, and 5933 Long net positions Increased in the last week and these close positions by these holders can be a Long Squeeze situation. There is plenty of room to reprice the hawkish Fed expectations, so finding a floor for the EURUSD pair is risky right now.

The PMI indicators that will be published on Tuesday can play a very important role in stopping the fall of the euro or, as we mentioned above in the (Long Squeeze), fuel a sharp and further fall. The forecasts do not indicate much change in the economic outlook of the Eurozone. The manufacturing sector is expected to contract again, with growth fueled by service industries.

RBNZ, Hike interest rates again?

🇳🇿 The Reserve Bank of New Zealand is holding a policy meeting this week. It is expected to raise interest rates by 0.25% on Wednesday. If it does, it would be the 12th consecutive increase since the contractionary cycle began in October last year and would take interest rates to 5.50 percent, the highest among advanced economies.

The Bank of New Zealand will release updated forecasts in its quarterly monetary policy statement on Wednesday, so the New Zealand dollar could rise if policymakers raise their terminal rate to meet or exceed market expectations.

Next, in this week’s economic calendar, we will have Australia’s preliminary PMI indicators. For Canada, April wage growth will be released on Thursday. And for Japan, we’ll have machinery orders, the manufacturing PMI, and a preview of May inflation with the Tokyo CPI.

Economic calendar

Important news/events for this week:

Latest post

• Gold Analysis – December 4, 2023
• Australia’s Economic Landscape: A Deep Dive into China’s Key Role
• Trade Idea for GBPUSD
• Navigating the Global Gold Market: Insights and Analysis
• Unlocking Trading Success: Why Fundednext Is Your Ultimate Funding Solution