In the early trading of the Asian market on August 1, Beijing time, the US dollar index rose slightly, and it is currently trading around 106.00. The dollar index hit a three-week low of 105.53 in volatile trading last Friday, with investors' concerns about the U.S. recession temporarily outweighing inflation after a mixed batch of U.S. economic data was released. Analysts said there were also many position adjustments at the end of the month.
On July 27th local time, the Federal Reserve announced that it would raise the federal funds rate by 75 basis points to the target range of 2.25% to 2.5%, marking its cumulative interest rate hike in two months to 150 basis points, the largest continuous interest rate hike since the early 1980s.
However, compared with the first three interest rate hikes this year, this interest rate meeting has sent some different signals of "slowing interest rate hikes" than before. Federal Reserve Chairman Powell admitted that the Fed may slow down the pace of interest rate hikes after a sharp tightening of policies.
According to CME's "Feder Observation": the probability of the Fed raising interest rates by 50 basis points by September is 73.5%, and the probability of raising interest rates by 75 basis points is 26.5%; the probability of raising interest rates by 75 basis points by November is 73.5%, and the probability of raising interest rates by 100 basis points is 26.5%.
Early, U.S. economic data showed that inflation rate remained high in June, making it possible for the Fed to raise interest rates aggressively when it thinks it is necessary.
U.S. personal consumption expenditure (PCE) price index rose 1.0% in June, the largest increase since September 2005, with a May increase of 0.6%. In the 12 months to June, the PCE price index grew by 6.8%, the largest increase since January 1982. Excluding volatile food and energy, the core PCE price index rose 0.6% in June after climbing 0.3% in May.
USD was initially driven by inflation data, but at the end of the University of Michigan data, consumer inflation expectations took back their gains after falling in July. Federal Reserve Chairman Powell mentioned last month that the University of Michigan consumer confidence data is the key behind the shift to more aggressive interest rate policies. Data from
ActionEconomics shows that the Chicago manufacturing index fell to a 23-month low of 52.1, setting a new record of 56.0, which also partially dragged the US dollar.
The dollar index hit a three-week low of 105.53 earlier last Friday, closing down 0.10% to 108.04. " traders are making some quarterly position adjustments to prepare for a period of inflation and growth decline, which will tilt the spread in a direction that is not conducive to the dollar. ."
The euro closed up 0.30% against the dollar last Friday at 1.0226. Although the initial euro zone's CPI annual rate in July continued to hit a record high of 8.9%, the European energy crisis is expected to limit the European Central Bank's further sharp interest rate hikes, which limits the euro's rebound in .
The ECB has previously made it clear that concerns about inflation outweigh concerns about economic growth, suggesting that policymakers should prevent high inflation from becoming deeply rooted even if it hurts economic growth. Investors had previously expected that by the end of this year, the ECB would raise interest rates by a total of 90 basis points, or all of the remaining three policy meetings.
However, market expectations for the ECB rate hike have been lowered in recent weeks, as the recession (probably due to a shrinking supply of natural gas) is believed to be pushing the ECB to choose a more modest interest rate path. Gazpromium will cut its natural gas flow to Europe through Nord Stream 1 gas pipeline this week to only 20% of total production capacity, raising concerns about a soaring energy price.
Data released last Friday showed that the German economy stagnated in the second quarter, and the conditions for Europe's largest economy to fall into recession seemed ripe. The draft law released the day before showed that Germany will impose taxes on all natural gas consumers from October 1, aiming to help suppliers cope with soaring natural gas import prices. "The tighter the gas supply in Europe, the greater the risk of the eurozone economy falling into recession, which could limit the ECB's room to deal with high inflation by hiking interest rates," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.”
GBP rebounded against the US dollar for the second consecutive week last week, hitting a new high since June 28 to 1.2244 last Friday, benefiting from the continued decline of the US dollar, and finally closed up 0.05% to 1.2181. The Bank of England is unlikely to raise interest rates by more than 25 basis points this week, and the short-term trend of the GBP will continue to look at the dollar's face.
Dutch International Bank said that the Bank of England's interest rate hike pricing will still follow the Federal Reserve. The interest rate resolution will be announced this Thursday (August 4 19:00), and the potential 50 basis point rate hike will depend heavily on the global monetary tightening trend rather than its domestic factors. "The Bank of England is tightening monetary policy as much as the Fed, but the UK's economic outlook is far worse than the US, and it will be difficult for the Bank of England to take a hawkish stance like the Fed," said Francesco Pesole, strategist at London, in Francesco Pesole. ”
YouGov poll of nearly 5,000 British people showed that former Chancellor Sunak had a significant advantage among swinging voters in the race for the future British Prime Minister. Although he and his rival, Foreign Secretary Trass, were quite unpopular across the public.
ING analysts also said that in addition to some campaign commitments made by (official ministers Trass and former Chancellor Sunak), the market has little attention to the domestic drivers of the pound, and the pound is expected to continue to be driven by the dollar.
at one point against the yen on Friday, the dollar fell about 1.2% against the yen to a low of 132.50, and finally closed down 0.75% at 133.21. The dollar closed down against the yen monthly line in July 1.81%, the biggest monthly drop since July 2020.
The yen is the main short target in the expanding spread between the US dollar and other currencies around the world. Although the yen net short positions have recently declined, they are still above the historical average of $5.4 billion.
Asian Development Bank (ADB) President Masatsugu Asakawa said last Friday that it was too far-fetched to blame the main reason for the rise in Japan's prices on the weak yen. He said that the main factors for the rise in Japan's inflation were supply chain disruptions caused by the epidemic and food and energy prices that were greatly pushed up by Russia and Ukraine.
Key data and big events on Monday
Big events to pay attention to on Monday: Russian Central Bank released its monetary policy report . Tuesday (August 2) at 12:30, the RBA will announce the interest rate decision, and investors need to pay attention to it.
Summary of institutional views
1. Mitsubishi UF: The recent pullback of the US dollar is likely to be a temporary
① The recent decline in US Treasury yields, the initial improvement of global investors' risk sentiment, and the intensified risk of the US economic recession have all put pressure on the US dollar, which makes the US dollar easy to soften further in the short term;
② However, analysts still do not believe that the large-scale selling of the US dollar will last longer. The Fed's policy shift is not dovish enough, and the concerns about the global recession will further intensify. It is expected that the recent pullback of the US dollar may be temporary . But the dollar against the yen is an exception, and analysts believe the pair has peaked;
③ Market expectations of policy differences between the Federal Reserve and the Bank of Japan are now starting to narrow, as the U.S. interest rate market expects the Fed to cut more interest rates next year
2. Bank of America: Hot economy and hawkish Fed are expected to support strong USD
① Bank of America strategists Michalis Rousakis and Claudio Piron said that with the overheating economy and the support of hawkish Fed, the U.S. dollar is expected to remain strong for the rest of the year;
② They said in a report: "To make the dollar weak, the Federal Reserve needs to pay more attention to economic growth rather than inflation, which is not the case yet." Cyclic trends “are definitely good for the US dollar, but diversification is not good for the US dollar."Emerging market central banks have sold US dollars to support their currency, but have not yet rebalanced back
3. RBC Capital Markets: Forecasting the pound to continue to perform poorly
① RBC Capital Markets Chief Currency Strategist Adam Cole said that in 2022, the pound has recorded monthly gains against the US dollar for only one month so far - a slight increase in May - but a cumulative decline of 10.1% since January amid the economic slowdown, rising interest rates and domestic political turmoil;
②Cole also said: "For most of the year, the pound has generally performed poorly, and we expect this trend to continue Continue "
4. HSBC recommends customers to sell pound pound pound pound pound pound pound pound pound pound pound pound pound pound pound meter pound meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter meter The appreciation of the US dollar index and the upward trend of US Treasury yields can both become the driving force for the upward trend of the US dollar against the Japanese yen;
② Looking forward to the future market, considering that the US dollar index is expected to maintain a high fluctuation in August, the US dollar against the Japanese yen is expected to continue the volatile market, with the support below 133 and the resistance above 140;
③ Looking forward to a longer-term period, after verification of the third quarter data, the market may recognise the resilience of the US economy and the stubbornness of inflation. At that time, the expectation of interest rate hikes and the yield of US Treasury yields face upward correction, and the US dollar against the Japanese yen will also regain appreciation.
6. Industrial Research: The euro is expected to consolidate at a low level
① Since July, with the economic activities of the euro zone Further cooling, coupled with the threat of Russia's cutoff and the "anti-fragmentation" tool has not been released, the euro continued to fall from above 1.04, and fell below parity twice in mid-July. The ECB raised interest rates strongly at its July meeting by 50bp and launched the "anti-fragmentation" tool - TPI tool, which brought the euro a turning point. However, because the TPI tool still lacks detailed guidance, the euro rebound is limited;
② Looking forward to August, the euro zone economic recession and geopolitical risks are still the main factors suppressing the euro, and the euro against the dollar will continue to be weak overall. However, the probability of inflation in the euro zone peaking is small, and the ECB firm policy stance will stabilize the chassis for the euro.
This article is from Huitong.com
