In the early trading of the Asian market on Wednesday (August 10), Beijing time, the dollar index rose slightly, and it is currently trading around 106.34. The dollar index closed down 0.06% at 106.31 on Tuesday. Before the release of key U.S. inflation data in July, risk appetite fell, which could provide clues that Fed will raise interest rates in September at a very aggressive pace.
traders' main focus is the U.S. July CPI report, which will be released at 20:30 on August 10. The report is expected to show that inflation, which was at decades highs, eased in July after the Fed raised interest rates by 75 basis points in succession in June and July.
But last Friday's data showed that U.S. job growth far exceeded expectations and wages were still growing strongly, which drove bets on the Fed's second super-large interest rate hikes at its Sept. 20-21 meeting.
According to CME's "Feder Observation": the probability of the Fed raising interest rates by 50 basis points by September is 32.5%, and the probability of 75 basis points by 67.5%; the probability of 75 basis points by November is 17.8%, the probability of 100 basis points by 51.7%, and the probability of 125 basis points by cumulative interest rates by 30.5%
Ruisui Bank htm "The inversion of the yield curve of U.S. bonds implies that the recession is coming. But U.S. stocks seem to think the Fed will stop hikes soon and start cutting rates in 2023." He believes that the U.S. July CPI will hint that the Fed will not stop hikes, which in his opinion indicates that the stock market will weaken in the future, which will limit any decline in the US dollar in the coming months.
However, the safe-haven asset status makes the US dollar's reaction a little unpredictable, especially when economic growth and geopolitical concerns are intertwined. "We have been seeing more hotter inflation data than expected, and if this happens again, the market is not ready to face it." When talking about the possibility of a further strengthening of the US dollar, he said that if this happens, euro will test parity against the dollar again.
Euro closed up 0.22% against the US dollar on Tuesday at 1.0212. The risk of recession still limits the upward space of the euro .
analysts believe that the euro zone economic recession may be difficult to avoid. Some experts even predict that the eurozone will experience a technical recession in the first quarter of 2023 at the latest. The difficulties faced by the eurozone are not an isolated case. Under the influence of large global inflation and geopolitical factors, central banks in major economies around the world have raised interest rates, and while coping with inflation challenges, they are also avoiding the economy falling into recession. However, it is not easy to take care of both left and right. Industry insiders said that central banks in major economies around the world have lagged behind the economic operation situation. If the subsequent market faces greater fluctuations, the vision of an economic "soft landing" will not be easy to realize.
Singapore UOB said that the euro must break through 1.03 against the US dollar before it can rise further. As the pair falls to a low of 1.0139, the upward momentum that is ready to go disappears quickly.
pound closed down 0.01% against the US dollar on Tuesday to 1.2074. The risk of recession and political instability put pressure on the pound.
Bank of England Governor Bailey said inflationary pressures have increased significantly in the near future and the UK economy is expected to enter a recession later this year.
Recent polls show that British Foreign Secretary Tras leads the election. However, analysts still have questions about her ability to manage a country's economy. For example, she called for tax cuts and stopped tax increases, but did not explain how to cover these costs. She also said that Britain can learn from Japan in dealing with inflation.
analysts remind that market participants need to pay attention to future polls. If Sunak becomes the next prime minister, the pound will strengthen. Conversely, if Tras becomes the next prime minister, the pound is likely to weaken.
AUD is considered a barometer of market risk. The Australian dollar closed down 0.27% against the dollar on Tuesday at 0.6961.
National Bank of Australia Sydney strategist Rodrigo Catril said that although Australia's domestic economic performance is still good and the RBA will continue to raise interest rates, the global economy slowdown, the Federal Reserve is still in the interest rate hike mode, and geopolitical tensions are not conducive to the Australian dollar .
Wednesday key data and major events
big events that investors need to pay attention to: On Wednesday (August 10) 23:00, Chicago Fed Chairman Evans discussed the US economy and monetary policy ; on Thursday (August 11) 02:00, Minneapolis Fed Chairman Kashkali discussed inflation.
Summary of institutional views
1. Scotia Bank of Canada : The US dollar against the Canadian dollar has experienced a technical suspension before another downward trend
2. Societe Generale : The pound against the US dollar may fall below 1.2
3. Mitsubishi UFB Bank: The pound against the US dollar will not be able to stand firm above 1.2
① The pound against the US dollar has gained momentum of recovery and stood above the 1.21 mark, but Mitsubishi UFB economists believe that the currency pair is still fragile and is expected to fall below 1.2. The hot and dry weather in the UK in July drove nominal sales growth, but it also had potential negative impacts; uncertainty over natural gas supply could intensify, after the Norwegian government said it was prioritizing refilling its reservoirs to increase electricity supply, which could limit electricity exports if the energy shortage worsens. In addition, the possibility of a large-scale strike in the UK public sector has also made the outlook for consumer spending still serious
4.Morgan Stanley : The euro is at risk of falling to 0.9700 against the US dollar
①Morgan Stanley analysts believe that the challenges facing the euro zone continue to intensify. The risk of Russia cutting off natural gas supply to Europe continues to rise, which puts pressure on economic growth in euro zone countries and causes the euro to fall, but will be beneficial to the US dollar. For investors increasingly seeking security, the US dollar may still be the best choice, which may even apply to all asset classes;
② If investors tend to choose safe-haven assets, they usually choose directly in the US dollar and US Treasury bonds, both of which are safe-haven assets. However, as most central banks around the world continue to raise the interest rate , the US dollar can give investors a better return compared to US Treasury bonds
5. National Bank of Canada Wealth Management: The euro will further weaken against the US dollar in the short term
① National Bank of Canada analysts believe that the current situation in Europe is unstable and substantial progress in geopolitical conflicts and inflation needs to be made as soon as possible to boost the euro; this year, the next Eurozone economic growth may slow down in the six-year period;
② Therefore, analysts expect the euro to continue to weaken in the short term, but the euro may still appreciate slightly in the future
6. Dutch International Bank: The euro against the US dollar will hover in the range of 1.00-1.02 for the rest of this year
Dutch International Bank economists predict that for the rest of 2022, the euro against the US dollar will hover around 1.00-1.02. Economists say European data is particularly light this week, and the pair's trend will be affected by geopolitical factors, U.S. data and the remarks of the Federal Reserve Commissioner. For the rest of the year, the bank's baseline forecast is that the euro-USD will continue to trade near the 1.00-1.02 area
7. HSBC : The pound will weaken against the US dollar in the short and medium term, and the Bank of England's interest rate hike is not enough to boost the pound
① Market pricing The Bank of England will raise interest rates by a total of 100 basis points in the remaining three meetings this year. The Bank of England may be able to meet market expectations for interest rate hikes, but the possibility of under-cashing is higher than the possibility of over-cashing, thus putting pressure on the pound.The inverted treasury yield curve shows that the market is worried about a possible recession in the UK economy, and the Bank of England's austerity policy may be only temporary, so the pound exchange rate is more difficult to continue to rise after the market price hike;
② The pound still faces cyclical and structural challenges. In the second half of 2022 and next year, the pound pound still faces downward risks against the US dollar
8. British investment bank Liberum: The euro is expected to recover, boosting some stocks
① British investment bank Liberum said that the euro is expected to recover, which will boost the stock prices of British companies that have obtained a large amount of revenue in the euro zone and those European companies whose revenue is settled in the euro. In the next six months, ECB is expected to continue hikes, while the rate of interest rate hikes in the United States and the Bank of England is expected to slow down;
② This means that the current spread between the euro zone and the United States and the United Kingdom may narrow, which may boost the euro. Analysts say this will benefit companies such as mining company Centamin and semiconductor equipment maker BESemiconductor.
This article is from Huitong.com
