In this article, we have covered the highlights of global market news about the USD/CAD, GBP/USD, NZD/USD, and EUR/USD.
The USD/CAD is approaching 1.3000 as yields boost the DXY and oil eases ahead of Canada Retail Sales.
During the first hour of Friday’s European trading session, USD/CAD buyers approach the monthly high while revisiting the daily top around 1.2970. The Loonie pair draws cues from the stronger US dollar and the lower pricing of WTI crude oil, Canada’s principal export.
As a result of market concerns about an economic slowdown in China and Europe, the Sino-American conflict, and aggressive Fed rhetoric, the US Dollar Index (DXY) has risen toward regaining the monthly high of around 107.70. The US 10-year Treasury rates support the greenback’s index by reversing the previous day’s decline from the monthly high to 2.928% by the press, resuming a one-month high.
In other markets, WTI crude oil is under pressure at the intraday low of $89.30 due to concerns of an economic slowdown. The stronger US currency and expectations that OPEC and its partners, often known as OPEC+, may relieve the supply squeeze, as Saudi Arabia recently hinted, are other factors putting downward pressure on the price of black gold.
Initial Jobless Claims for the week fell to 250K, below the market estimate of 265K and 252K revised previously. At the same time, the Philadelphia Fed Manufacturing Survey increased to 6.2 for August, above the -5 predicted and -12.3 recorded in the prior month.
Following the statistics release, San Francisco Fed President Mary Daly signalled a move for the September rate decision by supporting either a 50- or 75-basis-point rise. Still, Minneapolis Federal Reserve Neel Kashkari said that he does not think the US is now in a recession. The ever-hawkish James Bullard, president of the St. Louis Fed, also said that he is inclined to raise interest rates by another 75 basis points in September.
The Canadian Retail Sales for July, predicted to increase by 0.3% MoM from the previous 2.2%, will be crucial for intraday USD/CAD traders. However, the Loonie pair may continue to go north due to market jitters around Fed Chair Jerome Powell’s address at the Jackson Hole Symposium next week.
GBP/USD: Sterling is still brittle, according to ING
On mixed UK retail sales, the GBP/USD declines near 1.1900. The British pound continues to be fragile, according to ING economists.
Consumer trust in the UK has reached an all-time low. July’s retail sales at least provided a ray of optimism. However, the narrative around the cost-of-living problem has not changed. It is unlikely to alter predictions that the Bank of England will increase interest rates by 50 basis points on September 15.
“It’s fair to argue that the pound is still brittle. It seems more fragile when compared to the dollar, as GBP/USD may trade as low as 1.1935/50.
The NZD will lose value against the USD in short to medium term, says HSBC.
The Reserve Bank of New Zealand (RBNZ) increased its benchmark interest rate by 50 basis points to 3.00% and hinted at more rate increases shortly. NZD/USD rose by as much as 0.8% to 0.6383 after the monetary policy announcement was published. The impulsive action had somewhat been forgotten when the news conference was through. HSBC economists predict that the NZD will depreciate versus the USD.
“We see further downside risk in the NZD for several reasons:
i) Growing domestic headwinds pose a downside risk to the projected OCR path.
ii) The NZD stands to benefit less from a hawkish RBNZ as the OCR moves further into the restrictive territory and weighs on the economy.
iii) New Zealand is exposed to the risk of an underfunded current account deficit in the context of a downturn in global growth.”
“We anticipate another rate rise at the RBNZ’s next meeting on October 5, 2022, which is six weeks away. However, suppose there are definite indications that inflation has peaked and the GDP outlook continues to deteriorate. In that case, our economists anticipate that the changing balance of risks will be sufficient to cause a return to normal-sized 25 bps rises.
EUR/USD will weaken as the ECB risks slipping farther behind other central banks – Commerzbank
On Thursday, the EUR/USD rate fell once further. Commerzbank analysts predict that the common currency will continue to be under downward pressure since the European Central Bank (ECB) is trailing behind the Federal Reserve and the Bank of England (BoE).
Winter will bring further obstacles to the European economy.
The debate over whether the ECB will increase its introductory rate by 25 or 50 basis points in September highlights how far behind the Fed and the BoE the ECB is. And as the GDP picture becomes bleak, this is becoming a more significant issue for the euro.
“The eurozone economy will face stronger headwinds this winter. High energy costs and the ongoing risk of gas shortages are particularly threatening the prospects for growth. Demand is being weighed down by this, which will also probably lessen pricing pressure.
“The ECB runs the risk of lagging other central banks even farther. This does not portend well for the euro right now.
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