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4 Global Market Updates- 1 September, 2022

In this article, we have covered the highlights of global market news about the NZD/USD, XAU/USD, USD/JPY and GBP/USD.
NZD/USD recovers from a multi-week low and reclaims 0.6100; upward potential seems restricted.

The NZD/USD pair halts its intraday decline at the 0.6075 area and rises a few points from the Thursday when it reached its lowest point since July 14. Early in the European day, spot prices rise again above the 0.6100 level, but further major gains remain difficult.

The US dollar is unable to gather any real momentum and continues its retracing price movement slightly below this week’s 20-year top. In addition, the NZD/USD pair receives some support from the 1-hour chart’s slightly oversold RSI, which aids in the tiny rebound. Even yet, the USD continues to benefit from hawkish Fed predictions. This should, at least temporarily, prevent the major from seeing any significant rebound because to the general risk-off attitude.

The markets have been pricing in a massive 75 bps rate rise at the September FOMC meeting because they seem to be confident that the Fed will adhere to its aggressive policy tightening path. The recent hawkish comments made by numerous Fed members, which continue to favor a further increase in US Treasury bond rates, confirmed the bets. In reality, the 2-year US government bond yield, which is quite sensitive to predictions of rate hikes, increased to a 15-year high and is in favor of those who are bullish on the USD.

In addition, mounting concerns about a deepening of the global economic slowdown may also help to limit the upside for the risk-averse Kiwi. The Caixin/Markit Chinese Manufacturing PMI, which was released on Thursday and dropped to 49.5 in August, contributed to recession worries and dampened market mood. This in turn implies that the NZD/USD pair’s path of least resistance is to the downside and that any following rise higher may still provide a selling opportunity.

Gold Price Prediction: XAU/USD Bears Approach $1,700 Ahead of US PMI, NFP

Following a brief return to the 1.5-month low during the early hours of Thursday morning in Europe, the price of gold (XAU/USD) is again trading down towards $1,707. The yellow metal seems to be struggling between the fundamentals and the technical signs as a result.

However, the fundamentals indicate that the XAU/USD prices are being pressured by risk aversion, a stronger US dollar, and concerns about China, while the technical analysis points to a short-term comeback amid RSI divergence.

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The US 10-year Treasury rates, which serve as a barometer of sentiment, recently increased to a two-month high of around 3.21%, while the two-year bond coupons increased to their highest levels since 2007, respectively, at the latest levels of 3.20% and 3.50%. The S&P 500 Futures’ intraday drop of 0.56% to 3,930, their lowest level since late July, reflects the pessimistic mood as well.

Hawkish Fedspeak, notwithstanding the weaker US ADP Employment Change, was one of the main drivers since it encouraged market speculation about the Fed’s fast rate rises in September. The CME’s FedWatch Tool predicts a 74.0% likelihood of a 75 basis point Fed rate rise in September, up from a 73.0% chance the day before, underscoring the hawkish tendency. Furthermore, according to Reuters, the probability of a 75 basis-point ECB rate rise next week has increased from slightly over 50% on Wednesday to about 80% today.

The USD/JPY declines from a 24-year high but remains solidly bid in the 139.35-139.40 range.

The USD/JPY pair falls to the 139.35-139.40 range in the early European session after trimming some of its intraday advances to a new 24-year high achieved on Thursday. The pair, however, stays in the green, gaining more than 0.30% for the day, and seems ready to continue on its current bullish trajectory.

The rates on US Treasury bonds are rising in line with growing expectations that the Fed would adhere to its more aggressive course of tightening monetary policy. As a consequence, the US-Japan rate divergence continues to widen, which is seen to be weighing on the Japanese yen given the Bank of Japan’s unwillingness to tighten monetary policy.

The probability of a massive 75 bps Fed rate rise at the September policy meeting has been included into the markets’ price. The recent hawkish comments made by numerous Fed members confirmed the wagers. As a result, on Thursday, the yield on the rate-sensitive 2-year US government bond reached a 15-year high.

This is a significant departure from the Japanese central bank’s previously chosen more dovish position. In reality, the BoJ has said time and time again that it would maintain its easing policy position until wages and prices start to grow steadily and sustainably. This in turn boosts the USD/JPY pair’s chances of continuing to rise.

However, the upside was limited by rumours that the government would intervene and take more drastic measures to stop the current slide in the JPY. Investors were hesitant as well, preferring to wait until Friday’s release of the US monthly employment data (NFP). However, the basic landscape seems to be heavily in favour of bulls.

GBP/USD may revisit the 1.1415 flash crash low from March 2020, according to ING

It’s becoming serious now. The GBP/USD pair may fall to retest the March 2020 bottom of 1.1415, according to economists at ING.

“We observe some unsettling developments in the Gilt market, where underperformance of Gilts versus GBP swaps suggests some independent concerns mounting over Gilts, be it quantitative tightening plans from the BoE or possibly even some fears over what Britain’s next prime minister plans to do with the country’s balance sheet.”

“Cable retesting the 1.1415 low from the March 2020 flash collapse seems to be the easiest course of action. The bias for EUR/GBP is 0.8720.

Please click here for the Market News Updates from 31 August 2022.

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