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4 Global Market Updates- 11 October, 2022

In this article, we have covered the highlights of global market news about the USD/CAD, AUD/USD, EUR/JPY and NZD/USD.

USD/CAD eases off a two-year high and remains firmly above the 1.3800 level.

On Tuesday, several events cause the USD/CAD to reach its highest level since May 2020. The loonie is weakened by falling oil prices and finds support against a rising USD. Fears of a recession and aggressive Fed rate rise bets have continued to support the safe-haven dollar. On Tuesday, the USD/CAD pair gains momentum for the second straight day, reaching its highest point since May 2020. Throughout the early European session, the pair maintains its gains just below the mid-1.38000s and seems ready to extend the current robust surge seen over the previous week or so.

Concerns about a global economic slowdown and an increase of COVID-19 cases in China hurting global fuel consumption have caused crude oil prices to retreat overnight from their highest level since late August. As a result, the commodity-linked loonie is expected to weaken, favoring the USD/CAD pair. Aside from this, the underlying positive attitude around the US dollar supports possibilities for a further near-term appreciating rise.

The likelihood of a more pronounced tightening of monetary policy by the US central bank, together with recession worries and geopolitical risk, continues to support the US dollar. The markets have been pricing in another enormous 75 bps rise in November because they seem confident that the Fed will keep raising interest rates quicker to control inflation. The overnight hawkish remarks from Fed Vice Chair Lael Brainard helped to increase the bets.

AUD/USD: A breach below 0.60 is probable this year, according to ING

A new cycle low was reached by AUD/USD. The decline should persist, according to ING experts.

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We continue to be pessimistic about the AUD/USD currency pair until the end of the year because of the deteriorating risk sentiment, China’s economic (and currency) problems, and the strength of the US dollar.

“At this time, we anticipate a bottom of about 0.60 to 0.61 around year’s end, followed by a recovery that should pick up speed in the second half of 2023. But it’s feasible that this year will see a break below 0.60.

“In October, the Reserve Bank of Australia startled observers by adopting a more dovish stance by announcing a ‘small’ 25 bps increase. In our basic scenario, increases of 25 bps will become the norm. At present, the FX implications should be considered primarily incidental.

EUR/JPY will fall in the following months – ING

The EUR/JPY has been doing well. However, ING experts predict that the pair will decline during the next several months.

“Our bias would be that, in a setting where central banks are actively trying to dampen aggregate demand, EUR/JPY struggles to maintain a break above the 145 level.”

Given that the Japanese have historically been more interventionist than the eurozone, as well as the impending eurozone recession, the risks for the EUR/JPY pair seem to be lower over the next six months.

NZD/USD may go after the 0.50 2009 lows, according to ING.

Around 0.5535, NZD/USD retests at a 31-month low. The 0.50 lows from 2009 are the next important support level, according to experts at ING.

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Looking at 0.50?
“The Reserve Bank of New Zealand increased interest rates by 50 basis points in October and hinted at further tightening. At the November meeting, another 50 bps hike is highly anticipated. In comparison to the dynamics of global risk, monetary policy continues to play a supporting role.

“NZD/USD is aiming for the 0.50 2009 lows as the next major support; however, that would be a 12% decline from the current levels and, in our opinion, is overbought. However, if risk assets continue to decline, a move to the 0.52–0.53 range cannot be completely ruled out.

Please click here for the Market News Updates from 10 October, 2022.

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