In this article, we have covered the highlights of global market news about the GBP/USD, EUR/USD, XAU/USD and USD/TRY.
GBP/USD: A break below 1.1730 is likely due to the USD’s strength, according to ING.
GBP/USD has changed course from Thursday when it saw modest daily gains. If the dollar gains strength after today’s speech by Jerome Powell in Jackson Hole, a break under 1.1730 is possible.
“Cable should mostly follow the dollar’s response to Jackson Hole. The USD strengthening may easily lead to a break below this week’s lows of 1.1730 since 1.1500 (the bottom of the 2020 flash crash) is no longer seen as a distant possibility.
“It will be fascinating to observe how the EUR/GBP trades in response to Powell’s remarks today. Given that GBP is often more sensitive to global risk swings, we may see a slight rebound in the pair in a hawkish scenario where risk sentiment is damaged, but for the time being, the low demand for EUR longs should put a lid on the team.
EUR/USD may re-challenge the 0.9900 support – ING
Over 0.9950, the EUR/USD moves in a narrow range. Following statements made at the annual Jackson Hole Symposium by FOMC Chairman Jerome Powell, according to experts at ING, the pair may challenge the 0.99 level once again.
Is fair value approaching a point?
If no new information about the gas crisis narrative emerges, the dollar’s response to Powell’s speech should be the only factor influencing today’s EUR/USD price movement.
Powell is expected to have a mildly favorable influence on the dollar. Hence we believe that the EUR/USD pair may re-challenge the 0.9900 support level.
“The ongoing short-term undervaluation in the EUR/USD is quite substantial (around 5%), but a shrinking of the risk premium seems unlikely given the major threats to the eurozone’s economic outlook and may instead be triggered by a re-widening of the Fed-ECB rate expectations differential – that is, with the fair value converging to spot and not the other way around.”
Gold price forecast: XAU/USD bulls capitulate ahead of the Jackson Hole confrontation.
The price of gold is gradually declining towards $1,750 after a three-day rally. According to Dhwani Mehta of FXStreet, a hawkish Powell might make the XAU/USD slump resume toward the $1,729 level.
A wall of significant resistance levels stands in the way of XAU/USD before Powell’s address. Investors are still uneasy ahead of Friday’s Fed Chair Jerome Powell’s speech at 1400 GMT. Concerning the scale of the Fed’s rate rise move, Powell could drop some hawkish beans. As threats to GDP increase, the Fed President is also anticipated to tamp down talk about cutting rates in 2019.
“Bulls might find immediate support at the $1,750 low from the previous day, below which the $1,744 50% Fibo level will be tested. Below the latter, there may be increased selling pressure, creating opportunities for $1,729, the golden ratio, and the 61.8% Fibo level.
“To prolong the uptrend, a daily close above the $1,728 monthly low is required.”
The 38.2% Fibonacci Retracement (Fibo) level of the rebound from the annual lows of $1,681 to the high of $1,80 on August 10 was $1,760, and gold was unable to maintain above this level. The 21 and 50-Daily Moving Averages (DMA) stand at around $1,769; this area is the next significant upward hurdle. Acceptance over that supply zone necessitates a try of the same ascent’s 23.6% Fibo resistance at $1,778.
USD/TRY: Lira faces new challenges as CBRT penalizes excessive lending rates – Commerzbank
According to the Central Bank of the Republic of Turkey (CRBT), high-interest rates on loans are punishable. Commerzbank economists anticipate that this action will put more pressure on the lira.
A negative influence on banks’ macroprudential perspective.
The annual compound reference rate for commercial loans has decreased by 100 basis points (bps) to 15.34% by CBRT. According to the most recent statistics, the weighted average commercial loan rate for the banking industry is about 21%. Hence the penalty will not generally apply. The issue is that the sentence would penalize adding a risk premium for riskier loans, which is where the problem resides. This will make it challenging to hazardous price loans safely.
“In any case, the method adds inefficiencies into the way banks would ordinarily price risk and will have a detrimental effect on the macro-prudential outlook for the industry. The exchange rate for the lira will suffer as a result.
Please click here for the Market News Updates from 25 Aug, 2022.