Foreign Exchange Sky Eye APP News: [Weekly Review] The U.S. dollar continued to fall on Friday, with the U.S. dollar index hitting a new low since February 5 to 97.95, as the market's concerns about public health incidents intensified and expectations for the Federal Reserve's in

Foreign Exchange Sky Eye APP News: [Weekly Review]

The U.S. dollar continued to fall on Friday (February 28), with the U.S. dollar index hitting a new low since February 5 to 97.95, as the market's concerns about public health incidents increased and expectations for the Federal Reserve's interest rate cut in March Expectations are heating up; affected by stop-loss orders, fund selling and options demand, the Japanese yen led the gains among G10 currencies, and the US dollar against the Japanese yen fell below the 108 mark, setting a new low since October 10 last year to 107.51, with an intraday drop of 1.9%. , the largest since May 2017. The Australian dollar and New Zealand dollar were among the top losers.

[Review of Important News of the Week]

1, US core PCE data in January, real GDP in the fourth quarter are basically consistent with market expectations

At 21:30 Beijing time on Friday, the US announced the core PCE price index in January, which is basically consistent with market expectations . Commenting on U.S. consumer spending data in January, the

agency said that U.S. personal spending growth in January was less than expected, recording only 0.2%. As warmer weather reduced heating demand, clothing store sales also decreased accordingly. The consumer momentum is likely to be exacerbated by the rapid spread of the coronavirus, triggering a sharp sell-off in stocks and reviving fears of a recession.

Regarding the PCE data released at the same time, financial website Forexlive commented that inflation was slightly lower than expected, income exceeded expectations, and consumer spending was weak in the fourth quarter, which continued into the first quarter, despite an increase in income. Generally speaking, the U.S. economic situation was stable at the beginning of this year, but the new coronavirus is a "black swan" that may change everything.

At 9:30 pm Beijing time on Thursday, the real GDP data of the United States in the fourth quarter was released. The annualized value of real GDP in the fourth quarter was 19.2198 billion US dollars, while the revised value of GDP deflator was 1.3%, which was almost the same as market expectations.

After the GDP report was released, some institutions commented that the U.S. economy grew moderately in the fourth quarter, but faced a crisis in early 2020 due to the rapidly spreading new coronavirus. While there is no firm evidence so far that the coronavirus outbreak is affecting the U.S. economy, economists expect the struggling manufacturing industry to be hit by supply chain disruptions and exports.

2. The 10-year U.S. bond yield fell below the "tipping point" of economic recession. Will the Federal Reserve be forced to cut interest rates early? Dollar bulls should be careful

Jim Caron, fixed-income fund manager at Morgan Stanley Investment Management, said U.S. Treasury yields can continue to slide as long as investors pile into safe assets to offset riskier investments.

Bank of America Corp. strategists Paul Ciana and Bruno Braizinha said the 10-year Treasury yield will definitely fall to 1.25% by the end of June. FHN Financial economist Chris Low believes the worst-case scenario could be below 1% later this year.

Bruno Braizinha said in an interview that the market is at a turning point. If the public health security incident worsens and more weak economic data is released, the 10-year U.S. Treasury bond yield will soon fall to 1.25%.

3. The probability of the Federal Reserve cutting interest rates in March soared to 88%. It may cut interest rates three times this year.

According to FedWatch of the Chicago Mercantile Exchange Group (CME Group), traders on Thursday predicted that the probability of the Federal Reserve starting to cut interest rates as early as next month once exceeded 70%. It is expected that interest rates may be significantly cut by 75 basis points before September. That would bring the short-term target rate below 1% for the first time since 2017. It is worth mentioning that traders on Wednesday believed that the probability of a rate cut in March was only 33%.

According to US federal funds rate futures on Friday, the probability of the Federal Reserve cutting interest rates in March has soared to 88%. Interest rate futures also indicate that the Federal Reserve will cut interest rates three times this year.

Faced with the economic threat posed by public health events, central banks around the world are still basically adopting a wait-and-see attitude.European Central Bank President Christine Lagarde said on Thursday she would need to see a "persistent" shock before taking action, adding that it was "certainly" not yet that level. In South Korea, one of the countries with the worst outbreak outside China, the central bank unexpectedly stopped cutting interest rates.

Unlike many other central banks, the Fed still has room to cut interest rates, although Fed policymakers have said they want to see "substantial changes" in economic data before taking further action after cutting rates three times last year. But at the same time, they warned that with inflation already low, any measures to deal with the economic shock would likely need to be stepped up to be effective.

Chicago Federal Reserve Chairman Evans said at a central bank meeting in Mexico City on Thursday that with limited room for interest rate cuts and falling inflation, "policymakers must commit to providing unusually loose monetary policy to fulfill their responsibilities." When asked about the direct impact of the public health incident, Evans said that the Fed was "paying close attention", but he reiterated the Fed's consensus: the impact on the economy will be temporary

4, the United Kingdom may decide to withdraw from the United Kingdom and the European Union in June The pound fell in response to trade negotiations

The framework document on the future relationship negotiation strategy between the UK and the EU released by the British government on the 27th stated that the UK seeks to reach a "Canadian model" comprehensive free trade agreement (FTA) with the EU and will evaluate the progress of the negotiations in June. Whether to withdraw from trade negotiations. This increased market expectations that Britain and Europe will not be able to reach a trade agreement by the end of this year, and the pound fell in response.

The 30-page government document states that the UK is committed to reaching a zero-tariff, zero-quota comprehensive free trade agreement with the EU, which basically covers all trade activities. Separate agreements will also be reached on technical areas such as fisheries, criminal law enforcement and judicial cooperation, as well as aviation, energy and civil nuclear cooperation. The

document pointed out that the UK seeks to reach a "Canadian model" free trade agreement with the EU, so the framework document draws on the EU's free trade agreements with Canada, Japan, South Korea and other countries. The British government hopes to reach an agreement on the basic framework within the next four months and a formal agreement within the next nine months. If things don't go as expected by June's EU summit, the British government will need to decide whether its attention should shift from negotiations to preparations for an orderly exit from the transition period.

British Cabinet Minister Michael Gove also warned in the House of Commons that day that the UK hopes to reach a "comprehensive free trade agreement" within the next nine months. Unless a "broad framework" agreement is reached, the UK will be in 6 decided to withdraw from trade negotiations in March.

5, Trump "epidemic prevention" press conference frightened Wall Street

US President Trump held a press conference at the White House and talked about the United States' response plan to the new coronavirus epidemic. Trump handed over the specific response work to Vice President Pence and said that if Congress allocates more than 2.5 billion US dollars to respond to the new coronavirus, the government will accept it.

Trump also said that regardless of whether the epidemic will break out on a large scale in the United States or whether the number of confirmed cases remains at a very low level, the United States is ready to deal with everything. Regarding vaccines, Trump said that the United States has many excellent isolation measures, and vaccines are being developed rapidly and are expected to be completed soon.

However, during the question and answer session, Trump bluntly stated that the new coronavirus epidemic may worsen significantly in the United States, but its spread is not inevitable. At some point, the United States may need to restrict travel from Italy and South Korea, but this is not the right time.

On the economic front, Trump believes that the epidemic may affect U.S. GDP, but the extent cannot be determined. There are plans to conduct larger-scale quarantines if necessary in the future. Dow futures fell rapidly during Trump's remarks.

Trump insists that the U.S. economy remains very strong and consumers are doing better than ever. As for the U.S. stock market, which has been volatile in recent days, he said, "The stock market will definitely recover."

6. Four major factors continue to weaken the demand for safe-haven purchases of the yen. The 200-week line is expected to continue to provide support

1. Concerns about economic recession 2. Capital outflows 3. Pneumonia epidemic 4. The Bank of Japan’s easing expectations

In addition, technically, despite the recent The US dollar against the yen has fallen below the 110 mark several times in several trading days, but has never been able to effectively fall below it. The recent long-short stalemate is expected to continue.

Overall, as the U.S. dollar against the yen has recently broken through the 110 mark, the upward momentum of the exchange rate is very obvious. On a weekly basis, the U.S. dollar against the yen remains stable above the 200-week line, and the 200-week line has turned slightly. If the U.S. and Japan remain at high levels in the near future, it is expected that there is a possibility of further gains. Below

, first focus on the 200-week line at 109.70. If it falls below or tests the previous intensive trading point near the 109.45 line. Above

, pay attention to the 110.68 line where the gap was located in May 2019. If the price is higher, the recent downward pressure will be significantly relieved.

7. The real GDP of the United States in the fourth quarter was in line with market expectations

At 9:30 pm Beijing time on Thursday, the real GDP data of the United States in the fourth quarter was released. The annualized value of the real GDP in the fourth quarter was 19.2198 billion U.S. dollars, and the revised GDP deflator was 1.3 %, which is almost the same as market expectations.

After the GDP report was released, some institutions commented that the U.S. economy grew moderately in the fourth quarter, but faced a crisis in early 2020 due to the rapidly spreading new coronavirus. While there is no firm evidence so far that the coronavirus outbreak is affecting the U.S. economy, economists expect the struggling manufacturing industry to be hit by supply chain disruptions and exports.

Before the release of this report, financial website Fxstreet analyst Haresh Menghani once analyzed that the U.S. economic growth rate may record 2.4% this year, and the economy will be on a solid foundation in 2020.

The market is more pessimistic about the current economic conditions. Standard Chartered's head of North American macro strategy said in a report to clients that the Federal Open Market Committee (FOMC) will cut interest rates twice in April and June, bringing the federal funds rate to the next level. The upper end of the target range was lowered to 1.25%, rather than remaining unchanged at 1.75% as previously forecast.

Regarding the monthly rate of durable goods orders in January released at the same time today, the market gave a similar pessimistic opinion: U.S. durable goods orders fell slightly in January due to sluggish weapons orders and declining automobile demand. Business investment has been weak and is likely to remain so given the damage caused to the global economy by the spread of the coronavirus.

[Analysis and Comments on Major Currency Pairs]

Euro

The euro rose 1.68% against the US dollar this week. The main reason is that the policy differences between European and American central banks are gradually narrowing. Under the influence of public health safety issues, the Federal Reserve's interest rate cut expectations continue to rise, while the European Central Bank's space to cut interest rates is very limited. The narrowing difference in interest rate expectations supports the euro against the dollar. In addition, Germany released good employment data for February, which once again gave the euro exchange rate a short-term boost.

Despite the correction on Friday, analysts are still optimistic about the market outlook. Yohay Elam, an analyst at financial website Fxstreet, believes that the euro is showing upward momentum against the dollar. Yohay Elam noted that EURUSD is seeing higher highs and higher lows, which is a signal that prices will rise. Meanwhile, the 4-hour chart shows upward momentum for the pair, making it bullish on the euro. However, EURUSD failed to break above the 100-period moving average. Support is seen at the recent low of 1.0860, with the next support seen at 1.0810. Resistance is at 1.0890, which was the mid-February split. Also the intraday high and the 100-period moving average.

GBP

Selling pressure around the US dollar has pushed GBP/USD to fresh intraday highs this week, near the 1.2950 level. However, it subsequently fell back, falling by nearly 70 points at most, as new news emerged from the trade negotiations between the UK and the EU. According to reports, if the agreement is not clear by June, the UK will start preparing for no deal. The UK is willing to trade with the EU on a no-deal basis if negotiations fail. U.S. Treasury yields extended their recent declines amid growing concerns about the global outbreak of the deadly coronavirus, amid widespread risk aversion.In fact, the U.S. 10-year government bond yield fell to a record low, continuing to put pressure on the dollar.

The continued weakness of the U.S. dollar helped GBP/USD regain some positive momentum on Thursday and recover some of the losses from the previous day's sharp drop of more than 100 points to below the 1.2900 mark. Otherwise, the rise lacks any clear catalyst and risks disappearing quickly amid fears of a no-deal Brexit.

Given the uncertainty about the future UK-EU trade relationship, investors may not make any aggressive bullish bets before Brexit negotiations are authorized. Therefore, it would be prudent to wait for some strong follow-through buying before preparing for further appreciation in GBP/USD.

Japanese yen

The U.S. dollar plunged 3.14% against the yen this week to a new low of 108.51 in nearly four weeks. The shift in focus caused by international public health news has also allowed safe haven funds to return to the Japanese bond market; investors have recently been worried that U.S. President Trump Continuing to take a complacent attitude may cause public health risk events to spiral out of control in the United States. This expectation has caused the U.S. stock market to plummet for days, while U.S. bond yields have also fallen to record lows, which has caused funds to flow back to the Japanese bond market. At the same time, domestic news in Japan has been relatively calm recently, and the Tokyo Olympics in July is still expected to be safe. This has also caused funds that had fled the Japanese market in the previous panic to begin to return.

The market will continue to be affected by the global new crown pneumonia epidemic next week, especially the latest news about the spread of the virus in Europe, North America and the Middle East . The World Health Organization raised its coronavirus threat assessment around the world to "very high" on Friday, noting that the virus has spread to at least 49 countries.

At the same time, as the COVID-19 epidemic spreads, global economic activity has been dragged down, and investors have begun to pay attention to whether major central banks will start a new round of large-scale easing cycle, especially the possibility that the U.S. stock market will plummet and force the Federal Reserve (FED) to cut interest rates. . CME's FedWatch tool currently shows a 52.8% chance of a 25 basis point rate cut on March 18, and a 47.2% chance of a 50 basis point rate cut. Analysts pointed out that if the overall situation of the global epidemic remains unchanged, let alone continues to worsen, it may force the Federal Reserve to cut interest rates.

On the other hand, the US election began to take center stage. There will be Democratic primaries in 15 states next week, and the market is beginning to speculate that Democratic candidate Bernie Sanders is likely to win.

In terms of economic data, next week the United States will release the key February non-farm payrolls report, January durable goods orders and February manufacturing ISM data. As the epidemic triggers global panic, the impact of economic data may be downplayed. In addition, in terms of central bank dynamics, the Reserve Bank of Australia (RBA) will announce an interest rate decision on Tuesday (March 3); the Bank of Canada (BOC) will announce an interest rate decision on Wednesday (March 4). The market expects the March meeting to remain unchanged.

Source: CICC

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