In the early trading of the Asian market on Tuesday (October 11), Beijing time, the dollar index fell slightly, and it is currently trading around 113.10. The dollar rose for the fourth consecutive trading day on Monday, with investors looking forward to the September inflation data released by the United States this Thursday, The data may show that price pressure in the world's largest economy remains high, making the aggressive monetary policy of the Federal Reserve's Federal Reserve trend until next year .
markets are expected to release U.S. data on Thursday show that overall inflation in September was 8.1%, down from 8.3% in August. Core inflation is expected to rise to 6.5% from 6.3% in August.
Chicago Federal Reserve Chairman Evans said on Monday that inflation is much longer than the Fed initially thought. But he pointed out that the Fed still has the possibility of reducing inflation without a sharp rise in unemployment and not pushing the economy into recession.
Last Friday's U.S. data showed that the U.S. unemployment rate fell unexpectedly in September, and the economy increased its jobs exceeded expectations. This pushed up Treasury yields as traders increased their bet on the Fed's fourth straight rate hike 75 basis points at its November meeting. "Last Friday's non-farm jobs report showed that the labor market was still strong, giving the Fed full confidence to continue hikes," said Karl Schamotta, chief market strategist at Corpay, Toronto. He added that the minutes of the last Fed meeting, to be released on Wednesday, "may show that policymakers are still willing to bring serious pain to the U.S. and global economies in their efforts to lower inflation."
Geopolitical tensions and rising oil prices have also rekindled uneasiness about economic growth, pushing investors to switch to the U.S. dollar . Russia attacked Kiev and other Ukrainian cities on Monday with missile in response to the bombing of its only bridge to Crimea . The
dollar index hit a low of around 110 last week and then rebounded, closing up 0.36% on Monday at 113.18.
In the UK, the Bank of England is trying to ease concerns about the end of its emergency bond purchase plan. The UK market fell into chaos in late September after the government unveiled a plan to cut taxes and increase borrowing. The pound plummeted and the Bank of England was forced to intervene to support the bond market.
The Bank of England said it is preparing to buy up to 10 billion pounds ($11.07 billion) of UK Treasury bonds on Monday, double the previous limit. The central bank has also created a new plan to help banks get cash more easily.
Despite the Bank of England's moves, the pound fell for the fourth consecutive trading day. The pound closed down 0.28% against the dollar on Monday at 1.1054, but is still far higher than the all-time low of 1.0356 hit on September 26.
The euro continued to decline on Monday, with the euro closing down 0.43% against the dollar at 0.9696.
Commerzbank economists say that any measure that may suppress the economic effect of high energy costs this winter can support the euro. For the euro, what is important is not the decision of effective aid measures by a single member state, but the support measures in place throughout the currency zone.
In this context, at the level of EU , there seems to be a problem as to what measures to implement. Economists at Commerzbank warned that the threat of energy crisis could continue to put pressure on the euro.
, the Australian dollar fell to its lowest level in two and a half years on Monday as the dollar rose. New York was late in , the Australian dollar fell more than 1%, and finally closed down 0.96% to 0.6299.
RBA rate hikes last week were lower than expected, increasing pressure on the Australian dollar.
Tuesday key data and major events
Big events that need to be paid attention to on Tuesday: the EU held an informal meeting of energy ministers , and the European Central Bank chief economist Lian En delivered a speech; the Bank of Japan Governor Kuroda Haruhiko visited Washington from October 11 to 16 to attend the G20 summit and the IMF meeting.
Summary of institutional views
1. Deutsche Bank: There is no resistance to the strengthening of the US dollar
① Economists of Commerzbank expect that the US dollar will remain strong as the Federal Reserve will maintain a hawkish stance.Currently, the market expects the Federal Reserve to raise interest rates sharply in the next few months, and then it will keep the federal funds at this level in the long run;
② The US economy or US inflation may have to weaken significantly in a short period of time before the Federal Reserve softens its hawkish stance, and the chances of this happening are very low. This means there is nothing to stop the dollar from strengthening at the moment
2. NAB: Don't think the dollar has peaked
NAB: Ray Attrill, head of foreign exchange strategy at NAB: "We don't think the dollar has peaked because the Fed is still hawkish, the risk of a global recession is rising, and we don't believe that the risk asset market has fully reflected this. Given the risk sensitivity/procyclical nature of the Australian dollar and its high correlation with global economic growth, this is a persistent threat to the Australian dollar."
3. Mitsubishi UF: The euro may fall to a level close to 0.90 by the end of the year
① Mitsubishi UF economists expect that the euro will slowly approach 0.90 against the dollar before the Fed suspends the interest rate hike cycle . In the short term, the downside risk is certain. It is expected that as asset prices further decline and financial market conditions will deteriorate, the US dollar will further strengthen over a period of time. This will help further lower inflation expectations. The key to the full reversal of the dollar's rise must be the suspension of the tightening cycle;
② We doubt whether the Fed will suspend interest rate hikes after interest rate hikes in December, which should cause some adjustments to the euro against the dollar from the level of close to 0.9 Euro USD
4. RBC : As the Bank of England may lower the expectation of interest rate hikes , it is recommended to buy the euro against pound
① RBC Capital Markets analysts said that the Bank of England's speech this week may prompt the market to lower its expectations for its interest rate hikes, and the pound may fall in the future. The Bank of England's emergency bond purchase plan will also end on Friday. RBC foreign exchange strategist Adam Cole said that the current market pricing will be close to 100 basis points at the next three monetary policy committee meetings. Although this "seems to be acceptable data" for the November meeting, a Bank of England spokesman is unlikely to endorse the market's long-term pricing;
② recommends a target price of 0.9100 against pounds and a stop loss of 0.8660. The euro against the pound has nothing to do with risk appetite . Considering the volatility of stock markets and the approaching third-quarter performance, buying the euro against the pound is desirable
5. Netherlands International: The pound against the US dollar may easily fall below the support level 1.1
① The UK fiscal situation is still the key to the pound trend. Dutch international economists expect that the pound will fall slightly to 1.1 against the dollar as the downside risk remains high. The bank said that British Prime Minister Tras will try to reconcile with different factions of the Conservative Party . The market will closely monitor whether this will lead Tras to abandon her other financial views (such as a huge profit tax on energy companies). Unless there is really encouraging news in this regard, the pound looks to remain lower;
② Combined with the view on the strengthening of the dollar, it is expected that the pound will quickly and easily fall below the 1.1 support level and maintain a downward trend next year. Tomorrow's UK employment data will be the focus of this week. Unemployment is expected to rise slightly again, but for now, the Bank of England will continue to look at the issue from a labor shortage perspective. The market expects the Bank of England to raise interest rates by 100 basis points in November
6. Standard Chartered Bank : The slowdown in the U.S. economy will support the Canadian dollar
① The Canadian dollar has fallen to a level that has never been seen since the COVID-19 pandemic, but the slowdown in the U.S. economy may cause the Canadian dollar to rebound. The Bank of Canada is expected to raise interest rates by 50 basis points in October and 25 basis points in December, bringing the policy rate to 4% by the end of 2022 (previously 3.5%). We also expect a 25 basis point rate hike in January 2023, a 25 basis point rate cut in the fourth quarter, and a 4% ending in 2023 (previously 3.5%);
② We expect another 50 basis points rate cut in 2024, while the policy interest rate will remain unchanged at 3.5% by the end of the year.In our opinion, the main reason for the weakening of the Canadian dollar is the intensified market risk aversion sentiment, but any sign of the slowdown in the US economy may improve the risk-taking environment and support the Canadian dollar, although the Canadian economy is affected by the US recession
7. Rabobank : Maintain the forecast of the euro falling to 0.95 against the US dollar within a month, while not ruled out the possibility of falling below this level
① A major European regulator said that Europe may face "serious risks of financial stability." A series of reports have previously emphasized the impact of high energy costs on German industry. In our opinion, the price of the euro has not yet fully reflected the impact of the European energy crisis. Therefore, the forecast for the euro to fall to 0.95 against the dollar in the next month, and the pair is expected to remain at this level or lower in the coming months;
② Further interest rate hikes in the European Central Bank will not be enough to prevent the euro from falling further against the strong dollar. Because despite the fragility of the global economy, the Fed appears to announce further sharp interest rates, which will support the dollar's strength.
This article is from Huitong.com
