On Friday (October 21), Beijing time, the dollar index rose slightly, and it is currently trading around 112.95. The market expects that the Federal Reserve will likely raise interest rates by 275 basis points in 211, and the US dollar index will still receive support, with limited declines. The dollar broke through the symbolic level of 150 for the first time since 1990 on Thursday against the Japanese yen, and the market expects Japanese authorities to intervene again. On Thursday, under heavy pressure, Tras said she would resign from the position of British Prime Minister . The pound rose and fell in volatile trading. The market expects the UK political situation to usher in stability.
The Fed is expected to continue hikes as U.S. inflation remains high, and some predict that its indicator overnight rate target range will peak above 5%. The range is currently between 3.00% and 3.25%.
Philadelphia Fed Chairman Huck said Thursday that the Fed's action to raise the short-term interest rate target range is not over with very high inflation levels, adding that the Fed may find a point in time next year to suspend the tightening process and assess the impact of rate hikes on the economy.
The real estate market is one of the industries that have been most affected by rising interest rates, and even other industries, including employment, remain solid. Data on Thursday showed that U.S. home sales fell for the eighth straight month in September.
According to CME's "Feder Observation": the probability of the Federal Reserve hike of 50 basis points to the range of 3.50%-3.75% in November is 2.5%, and the probability of 75 basis points is 97.5% ; the probability of 100 basis points is 0.5% by December is 0.5%, the probability of 125 basis points is 22.5%, and the probability of 150 basis points is 77.0%.
The dollar hit a 32-year high of 150.28 against the yen on Thursday, ending up 0.16% to 150.13, sparking speculation that the Japanese Ministry of Finance and the Bank of Japan may intervene at a critical level.
Although it is still unknown whether the Japanese authorities will enter the market to intervene, some analysts believe that if the Bank of Japan's extreme dovish policies do not change, the intervention will not prevent the yen from weakening further. "You'll see the Bank of Japan changing its policy, or before we start to see the U.S. economic outlook slows down, prompting the Fed to finally reverse policy, you'll see the bets to short the yen remain the most popular trade in the foreign exchange market," said Edward Moya, senior market analyst at
OANDA. "Highlights of interest rate hikes
OANDA pushing U.S. bond yields and the dollar higher, especially against the yen, as the Bank of Japan is committed to keeping interest rates near zero.
Japanese policy makers issued a new threat to intervene in the foreign exchange market on Thursday. The market believes that if the exchange rate trend becomes more unstable, they are more likely to intervene in the market.
MUFG)Mitsubishi UFF Financial Group (MUFG) Global Market Research Director, Europe, MUFG and Africa, said: "(Ministry of Finance) is very clear that if there is any disorderly trend in the exchange rate, they are ready to intervene, so the market expects intervention to happen some time in the future. Obviously, if it is clear that the US dollar rose above 150 against the yen, we may see disorderly trend in the exchange rate, which may prompt the authorities to take some action." He added, but he emphasized that intervention requires substantial fluctuations in the exchange rate.
The Bank of Japan will hold its next policy meeting from October 27 to 28. The results may affect the future trend of the US dollar against the yen, and investors need to keep a close eye on it.
The pound turned from rising to falling on Thursday after Tras said she would resign as prime minister. He was pulled down by just six weeks in office due to an economic plan that disrupted financial markets, pushed up the cost of living for voters and angered many of her own party colleagues.
pound rebounded before Tras announced his resignation, and later hit an intraday high before reversing the trend lower. The pound closed up 0.16% against the dollar on Thursday to 1.1235.
Speaking of Tras' resignation, Viraj Patel, global macro strategist at Vanda Research, said: "Initially, this may remove market uncertainty in premium , but it depends on who will take over. A firm leader is needed."
BRI Wealth Management CEO Dan Boardman-Weston said that British Prime Minister Tras' resignation marks the end of a "quite chaotic period" of the British government, and a more stable situation should occur afterwards. In this highly uncertain period, the country and market need certainty, stability and confidence. Hopefully, the Conservatives can unite around the candidates, and the government can refocus on how to lead the country through this turbulent period.
Dutch International Bank High Antoine Bouvet, a grade interest rate strategist, said there is a basic assumption that the resignation of British Prime Minister Tras will bring more political stability and is expected to provide some political support for the budget measures announced last week. The UK will complete the campaign of Conservative Party leader next week. A week is a relatively short period of time, so in this sense, this matter is positive because the uncertainty period is shorter.
After British Prime Minister Tras announced his resignation, market data showed that the probability of former Chancellor of the Exchequer Sunak taking over is 47.6%, the probability of Modant taking over by House of Commons leader is 25%, the probability of Defence Secretary Ben Wallace taking over by 12.5%, the probability of current Chancellor of Finance Hunter taking over by 10.2%, and the probability of former Prime Minister Johnson taking over by 7.1%. In addition, investors' bets on the Bank of England's 75 basis points next month rose to 92%.
Euro closed up 0 against the US dollar on Thursday. 14% to 0.9786. The pandemic, high inflation and strikes continue to put pressure on the euro.
French trade unions on Tuesday launched a nationwide strike to raise workers’ wages under high inflation, one of the most severe challenges President Macron has faced since re-election in May.
The strike affected several key industries such as railways and energy, and is the spread of the refining industry strikes that have lasted for weeks. Total and ExxonMobil’s several refineries in France have been forced to close due to strikes recently. Nearly one-third of the country's gas stations have shortage of oil. The general strike of refinery workers, which triggered difficulty in refueling, has not yet subsided, and France ushered in a new round of national strike. In addition to demanding wages to cope with inflation, the French people are also dissatisfied with the recent forced collection order of French government workers.
The situation in Europe continues to deteriorate. Economists interviewed also predicted a month ago that the eurozone economy will grow by 0.3% next year, and now it has lowered its expected growth rate to negative 0.1%.
Except for France, the other side of the shore The UK is not feeling well either. News shows that after multiple strikes in railways, ports and aviation, the British railway system will conduct three strikes in the early next month. Currently, the UK has also set off a "storm" in tax cuts.
economists warn that the euro zone economy will be dragged into the bottom by a country that has repeatedly dragged it out of crisis and recession. is a time when the economy of three large European economies, France, Italy and Spain, is expected to see a slight growth. The country is expected to be the first economy on the mainland to have an economic decline (down to 0.5%).
Friday key data and major events and previews
Big events that need to be paid attention to on Friday: EU holds a leadership summit, US President Biden will speak on debt cuts.
Aggregation of institutional views
1 .VandaResearch: It is difficult to see the pound perform well
①VandaResearch global macro strategist Viraj Patel said it is difficult to see the pound perform well. Tras' resignation may initially eliminate the market uncertainty premium, but it will ultimately depend on who takes over as the next British Prime Minister. The market needs a stable head;
② He said that his views have not changed, and it is difficult to see the pound perform well, and the market may have other reactions.The stock market should rebound, and the interest rate increase should drop slightly, but without strong confidence, the pound may trade sideways because the mini budget has caused damage to a large extent
2. Westpac : The risk of Japanese authorities intervening again is quite high
① Westpac senior foreign exchange strategist Sean Callow said that as the United States and Japan break through the 150 mark, the risk of Japanese authorities intervening again is quite high, because the Ministry of Finance has been stepping into the "river" of intervening in the foreign exchange market. But its purpose is definitely only to limit the scale of speculative positions, rather than to promote the continuous reversal of the US-Japan trend;
② Considering the future policy path differences between the Federal Reserve and the Bank of Japan, it is not clear why the currency pair did not break at least the high of 152.30 in September 1990, and then the next possible breakthrough is 155
3. Saxo Financial : The Bank of Japan may The possibility of adjusting the policy of controlling the yield curve remains
① Saxo Financial Market Strategy Charuchanana said that although many people expect the Japanese authorities to intervene above the psychological threshold of 150, considering that the US dollar against the yen has remained around 149 for a long time due to the sharp surge in US Treasury bond yields on October 20, it is hard to believe that the Bank of Japan has not secretly intervened in the market. ;
② Considering that the impact of any unilateral intervention may be short-lived, the possibility of adjusting the control of the yield curve remains, and should not be ignored
4. Singapore Bank : The next resistance level of the United States and Japan is around 153
① MohSiongSim, a currency strategist at Singapore Bank, said that 150 is a very critical psychological barrier and is likely to trigger another intervention by the Japanese authorities. People have been "expecting" further intervention by the Japanese authorities for some time;
② It is expected that the market will carefully observe whether Japan has any actions for a period of time. If not, they will push the price higher, because this is how the market operates. The strategist believes that the next resistance level between the United States and Japan will be around 153.
This article is from Huitong.com
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