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4 Global Market Updates- 31 August, 2022

by Elena Martin   ·  August 31, 2022  

4 Global Market Updates- 31 August, 2022

by Elena Martin   ·  August 31, 2022  
In this article, we have covered the highlights of global market news about the EUR/USD, USD/CAD, GBP/USD and USD/CNH
EUR/USD loses momentum, putting parity to the test; look at EMU CPI

Alternating trends in the risk complex continue to drive the EUR/USD market action, which is currently exerting some downward pressure on the parity zone.

The risk complex’s improved outlook, which was recently supported by better-than-expected Chinese NBS Manufacturing PMI for the current month, causes the EUR/USD to lose some of its early euphoria (49.4 act).

With recent rumours about the extent of the upcoming interest rate increases by the Federal Reserve and the ECB in September, the continuous selling bias in the dollar has also been contributing to the recent rebound in the pair.

The German labour market report is coming later in the euro zone, and it will be followed by August’s flash inflation data for the Euroland region. Later in the day, investors should also be delighted by the weekly MBA Mortgage Applications, the ADP data, and the speech by L.Mester of the FOMC across the Atlantic.

The increased offered bias in the dollar as well as the general improvement in the risk-linked sector are supporting the further incline of the EUR/USD upward.

The Fed-ECB difference, geopolitical concerns, fragmentation issues, and market activity surrounding the euro are now anticipated to closely follow dollar dynamics. However, the ECB’s policy makers may adopt a more hawkish posture in regards to the bank’s rate path, which might support the euro.

USD/CAD: Canadian GDP numbers disappoint, putting more pressure on the loonie – Commerzbank

The loonie is still having a hard time holding its own versus the USD. If the numbers for Canada’s Gross Domestic Product (GDP) for the second quarter (Q2) disappoint, Commerzbank analysts warn that the Canadian dollar (CAD) may come under more pressure.

On a seasonally adjusted and annualised basis, the Bloomberg consensus forecasts growth of 4.4% QoQ, indicating that the economy’s momentum has further strengthened. The general expectation is for a 0.1% (seasonally adjusted) increase month over month in June.

The forward-looking market often ignores historical data, but given the present situation, poor data might put extra pressure on the Canadian dollar.

GBP/USD prices below 1.10 and EUR/GBP levels around 0.90 appear more plausible – Credit Suisse

Following Powell’s hawkish speech at Jackson Hole last week, the broad USD increased as could be predicted. Unusually, though, the euro outpaced the dollar and the majority of other major currencies. Core goals like EUR/GBP 0.9000 and GBP/USD 1.1500 are doable, according to Credit Suisse analysts.

Given how far behind the curve the Bank of England is seen to be, “pricing in rate rises into the UK curve at this point is a clear example of ‘too little, too late’.”

EUR

“As of right now, we anticipate that the UK CPI will hit 15% in the first quarter of 23. And yet, despite the Jun ’23 Sonia future being priced at 4.35% at the time of writing, we are so concerned about growth risks that we do not anticipate the BoE raising rates above 3.50% in 2023. The repercussions for the GBP are dire if the BoE has waited until now to raise rates in such increments that it will be unable to continue doing so once a recession is underway.

USD/CNH: More gains are yet in store, according to UOB

Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, say that further upward movement in the USD/CNH continues to aim for 6.9400 before 6.9600.

Observation for the next 24 hours: “We said yesterday that the USD “appears to have moved into a consolidation” and that we anticipated it to “trade sideways between 6.9000 and 6.9300. Although USD moved inside a smaller range than anticipated (6.9045–6.2285), our analysis was correct. We continue to anticipate that the USD will trade between 6.9000 and 6.9300 since the price actions still seem to be part of a consolidation.

1-2 weeks from now: “On Monday (29 August, spot at 6.9140), we underlined that the quick increase in momentum suggests that the USD strength might continue to 6.9400, perhaps 6.9600. The US dollar then climbed to 6.9325. Our opinion has not changed as of yet, although USD may initially consolidate for a few days. Overall, the only way to tell whether the USD strength that began two weeks ago has peaked is if it breaks through 6.8700 (a level that remains a “strong support” level from yesterday).

Please click here for the Market News Updates from 30 Aug, 2022.