In the early trading of the Asian market on Friday (September 30), Beijing time, the dollar index fell slightly, and the current trading is around 111.92. The dollar index continued to decline on Thursday, closing down 0.65% at 111.97. The market gradually digests the expectation of the Federal Reserve's interest rate hike in November 2, and the US dollar index rose higher this week and fell back.
According to CME's "Feder Observation": The probability of the Federal Reserve hike of interest rates by 50 basis points to the range of 3.50%-3.75% in November is 41.2%, the probability of 75 basis points is 58.8% , and the probability of 100 basis points is 0%; the probability of 100 basis points is 44.2% by December is 44.9%, the probability of 125 basis points is 54.9%, and the probability of 150 basis points is 0%
pounds rose sharply in the fluctuating trading on Thursday, after the Bank of England purchased British bonds for the second consecutive day to stabilize the financial market.
After reports that British Prime Minister Tras will meet with the head of the UK Budget Responsibility Office (OBR) on Friday, the pound expanded its gains against the US dollar and finally closed up 2.1% to 1.1117, the largest single-day percentage increase since March 2020. The pound has rebounded more than 7% against the dollar after hitting an all-time low of 1.0356 three days ago.
pound rebounded partly because of the action taken by the Bank of England . On Thursday, the Bank of England purchased 1.415 billion pounds ($1.55 billion) of British Treasury bonds with a maturity of more than 20 years, and the plan to stabilize the market has been in place for two days. "The Bank of England is showing creativity and willingness to deal with crazy markets," said Greg Anderson, head of global foreign exchange strategy at BMO Capital Markets. But he noted: "The pound rise brought by the Bank of England's move is unsustainable. Any time central bank is in a temporary intervention plan, the market will definitely test this to see if the central bank will continue to do so. But I don't expect the pound to fall below par with the dollar." Anderson added that he will sell the pound at 1.10 and the pound may fall back to 1.05.
Euro closed down 0.83% against the US dollar on Wednesday at 0.9814. Although the euro has rebounded recently, the economic outlook for the euro zone is dark, which may limit the extent of the euro's rebound.
data shows that the euro zone's economic prosperity fell sharply in September, and the decline exceeded expectations, as corporate and consumer confidence declined, and analysts were also pessimistic about inflation trends in the coming months.
However, the biggest focus is Germany's inflation rate, which jumped to 10.9% this month, far exceeding expectations of 10%. This suggests that the broader euro zone 19 numbers to be released on Friday could also exceed the forecast of 9.6%, strengthening the justification for an additional 75 basis points hike at the next ECB policy meeting.
Nevertheless, some analysts believe that the potential actions of the ECB are likely to be just a short-term boost to the euro . Stephen Gallo, head of Forex Strategy at BMO in London, said: "Rate hikes can support a currency...but the process of inflation has never been a good thing for a currency, especially when inflation is not properly suppressed by the central bank. I don't want to hold the euro just because the ECB is raising interest rates. When the dollar peaks, when inflation in the euro zone is significantly eased, and when the euro zone clearly gets rid of a massive recession, I want to hold the euro."
The dollar closed up 0.20% against the yen on Thursday to 144.40.
Japan intervened last week to support the struggling yen. Japanese Finance Minister Suzuki Shunichi said on Thursday that Japan's recent monetary intervention was to correct market distortions caused by speculative foreign exchange market fluctuations. He said he was ready to intervene again if the speculation persisted.
AUD closed down 0.34% against the US dollar on Thursday at 0.6499. Australia's inflation slowed slightly in August from a slight month-on-month basis, bringing hope that cost pressures could approach peak, a new indicator of consumer prices showed.
Friday key data and major events ahead
Big events that need to be paid attention to on Friday: Richmond Fed Chairman Barkin delivered a speech, EU Energy Minister met to discuss the issue of soaring energy prices.
institutional opinion summary
1. TD warns that the pound may be overvalued by more than 20%, and there is room for further decline
① On September 28, TD Securities foreign exchange analyst McCallmeek warned that the current pound sterling exchange rate exchange rate level may be overvalued by more than 20%, which means that the pound still has room for further decline;
② He said that according to the budget forecast, UK loans will account for ht in the next two years according to the budget forecast. ml1GDP 6.5%, plus 7% in the next three years, which means that the pound needs to fall by about 20% to reach a new balance
2.CityIndex: Although the euro rebounded against the dollar, the amplitude is still limited
① The euro against the dollar has risen from its years low of 0.9535 for two consecutive days, but CityIndex analyst Fawad Razaqzada questioned whether the eurozone economic recovery is supported or is doomed to fail again.
②The problem with the euro is that the euro zone economy is very weak compared to the United States, which is why Razak Zada does not expect to see a major recovery in the euro
3. Credit Suisse: To restore market confidence in the pound, one way for the Bank of England is to raise interest rates sharply in November
① Credit Suisse economist Sonali Punhani said: "We The Bank of England is expected to significantly increase interest rates in early 2023, from 2.25% to 4.5%, and turn to hawkish in November;
② She added: "If a positive response to the fiscal plan in November, the confidence problems facing the UK may worsen and may lead to further weakening of the pound, rising inflation, rising risk premium and rising terminal interest rates;"
③ The analyst said that to restore people's confidence in the pound, two things must be done: a reliable fiscal plan that can stabilize public finance, which can be achieved by cutting expenditures; the Bank of England needs to raise interest rates significantly in November to restore the credibility of the financial system.
4. Jiasheng Group: The intervention of the British Bank may be unsustainable, and the pound and the United States may eventually fall to parity or fall below parity
① Jiasheng Group's senior points Analyst Joe Perry said that under the unexpected intervention of the Bank of England, the yield on 30-year gold-edged bonds fell by more than 100BP, and the pound closed higher than 150 points against the US dollar. Therefore, the central bank's move may work in the short term;
② However, he pointed out that in the long run, the Bank of England's intervention may be unsustainable, and the pound may eventually fall to parity or fall below parity against the US dollar.
This article is from Huitong.com
