Daily Forex News By XtreamForex

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AUD/USD Steady Above 0.6800 Amid RBA Policies
The Australian dollar to United States dollar (AUD/USD) pair is currently demonstrating a steady performance, maintaining its position above the 0.6800 mark in the Tokyo session. Despite the Reserve Bank of Australia (RBA)’s inclination towards further policy restrictions, the Aussie currency has yet to experience a significant shift.

During the RBA’s monetary policy meeting in July, the board’s preference leaned towards the Australian economic outlook, leading to the decision to keep interest rates steady. This decision comes amidst a backdrop of weak consumer spending in the second quarter and a Gross Domestic Product (GDP) growth rate of approximately 0.2%. These figures illustrate the impact of the aggressive policy-tightening measures that have been implemented.

It’s worth noting that there is a stark contrast between the interest rates raised by the RBA and those of other developed economies. This discrepancy provides ample room for potential future hikes by the RBA, which could potentially influence the performance of the AUD/USD pair.

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GBP/JPY drops 100 pips below 181.00 due to poor UK inflation, yields

The GBP/JPY currency pair saw a considerable drop of 100 pips to below 181.00, driven primarily by disappointing UK inflation data and weaker Treasury bond yields. The pair dipped further to around 180.80 in the early hours of Wednesday morning in London, reflecting the market’s reaction to these economic indicators. This decline has been amplified by cautious market optimism and a dovish perspective on the Bank of Japan (BoJ).

In June, the UK’s Consumer Price Index (CPI) inflation fell short of expectations, dropping to 7.9% Year-on-Year (YoY), compared to the anticipated 8.2% and the previous figure of 8.7%. A similar trend was observed in the Core CPI, which slipped to 6.9% YoY, moving against market predictions and previous readings of 7.1%.

This downturn in inflation rates has thrown into question the previously hawkish sentiment surrounding the Bank of England (BoE). The uncertainty has contributed to the GBP/JPY’s three-day losing streak, highlighting the sensitivity of the currency pair to changes in economic conditions.

Alongside this, BoJ Governor Kazuo Ueda defended the bank’s easy-money policy at a G20 meeting in India. He acknowledged that achieving the 2% inflation target sustainably remains a distant goal for the central bank, thus reinforcing a dovish outlook.

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The GBP/USD pair continues to experience pressure, hovering near the 1.2920 level

The GBP/USD pair is enduring continuous strain, staying close to the critical 1.2920 level as the European session commences. This stress is fueled by the weaker-than-expected inflation data from the UK for June. The monthly Consumer Price Index (CPI) saw a mere increase of 0.1%, failing to meet the anticipated growth of 0.4% and significantly lesser than May’s 0.9% rise. More alarmingly, the yearly CPI fell to 7.9%, not meeting the predicted 8.2% and considerably lower than May’s 8.7% increment. Furthermore, the core CPI, which eliminates the unpredictable food and oil prices, dropped to 6.9%, below the expected market consensus of 7.1%.

Considering this underwhelming inflation data, there is speculation over the Bank of England’s (BoE) approach in its forthcoming policy meeting on August 3. Market analysts suggest that the BoE may lean towards a modest rate hike of 25 basis points (bps) instead of the previously speculated 50 bps increment, in an effort to stimulate economic growth amidst these uncertain times.

In the meantime, the US Dollar Index (DXY), a measure of the Greenback’s strength against other major currencies, has seen a significant surge, reaching the 100.20 mark after initially hitting the 100.00 level during the early Asian market hours. This rise in the DXY contributes further to the downward pressure on GBP/USD, making the Pound Sterling less appealing to investors due to a stronger US Dollar.

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USD/JPY Crosses 140.20 Mark in Surge While Investors Anticipate BoJ Rate Decision

During the European session on Friday, the USD/JPY pair demonstrated strong upward momentum, crossing the 140.20 mark. This surge in the exchange rate can be attributed to the diverging monetary policies pursued by the Bank of Japan (BoJ) and the Federal Reserve (Fed). The BoJ has maintained an ultra-loose monetary policy, while the Fed has resumed its tightening policy, leading to the weakening of the Japanese Yen against major currencies.

Positive signs for the US economy were evident in the latest weekly data released by the US Department of Labour (DOL). Initial Jobless claims for the week ending July 15 totaled 228,000, surpassing market expectations of 242,000 and marking a decline from the previous figure of 237,000. This reading represented the lowest level since mid-May. Furthermore, the Philadelphia Federal Reserve Manufacturing Survey showed a reading of -13, better than the consensus of -10. However, Existing Sales for June were disappointing, revealing a contraction of 3.3% MoM after a marginal 0.2% gain in the previous reading.

Investors are eagerly awaiting the upcoming Federal Reserve meeting, with expectations of a 25-basis-point interest rate hike. Additionally, the possibility of another rate hike before the year’s end has gained traction following the release of the latest economic report. As a result, the US Dollar is displaying broad-based strength in the forex market.

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WTI Oil Holds Steady Above $76.60 as FOMC Meeting Approaches
Western Texas Intermediate (WTI), the benchmark for US crude oil, is maintaining its position above the $76.60 level on Friday, displaying consolidation after achieving its fourth consecutive weekly gain. This upward momentum comes amidst indications of a tightening oil market.

Adding to market dynamics, tensions between Russia and Ukraine have escalated, with Russia attacking Ukrainian food export facilities for the fourth consecutive day and seizing ships in the Black Sea. These geopolitical developments have provided support to WTI prices.

Examining recent data, the Energy Information Administration (EIA) reported a decrease of 708,000 barrels in crude oil stocks for the week ending July 14. This figure contrasted with expectations of a 2.44-million-barrel decline and a 5.946 million barrel gain observed the previous week, further contributing to the positive sentiment surrounding WTI.

Additionally, Baker Hughes disclosed a decline of seven oil rigs in the United States this week, marking the largest drop since early June. With the number of active oil rigs reaching its lowest level since March 2022, at 530, concerns over the supply-side dynamics have emerged, propelling crude oil prices higher.

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AUD/USD Holds Firm to Robust Intraday Advances, Nears Daily Peak at Approximately 0.6770-75 Range

The Australian Dollar (AUD) against the US Dollar (USD) pair, also known as AUD/USD, has been exhibiting strong intraday gains during the early European trading session on Tuesday. For the second consecutive day, it continues to experience fresh buying interest around the 200-day Simple Moving Average (SMA), a key technical indicator that traders use to analyze market trends. The spot prices have reached a new daily high in the 0.6770-75 range, buoyed by multiple supportive factors.

Investor sentiment is primarily being driven by China’s pledge to bolster its fragile economy. This commitment has infused a positive risk tone in the global equity markets, which is beneficial for the risk-sensitive Australian Dollar. This optimism stems from the recent announcements made by China’s Politburo, the ruling Communist Party’s top decision-making body. They have outlined plans to make strategic adjustments to their economic policies with a focus on increasing domestic demand, bolstering confidence, and mitigating risks.

Adding to this, the National Development and Reform Commission (NDRC) of China has introduced measures aimed at stimulating private investment in infrastructure projects. They also aim to strengthen financing mechanisms for private initiatives. These actions are seen as proactive steps towards stabilizing the Chinese economy and have contributed to the upbeat investor sentiment.

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AUD/USD Gains Momentum Above 0.6800 Amid Weakening USD
The AUD/USD currency pair demonstrated considerable strength during Thursday’s Asian trading session, surpassing the key 0.6800 level. This significant surge was largely driven by a weakening US Dollar, pushing the major pair to trade around 0.6807, marking a day’s gain of 0.75%. This movement exhibits the dynamic nature of global currency markets, where fluctuations can be triggered by a multitude of factors ranging from economic data releases to changes in monetary policy.

One of the contributing factors to this movement is the release of key economic data from Australia. The Australian Bureau of Statistics disclosed that the Import Price Index for the second quarter fell by 0.8% on a quarter-over-quarter basis. This figure is considerably less than the market’s expected decline of 7.3%, and it also marks an improvement from the previous reading’s drop of 4.2%. On the other hand, the Export Price Index experienced a steeper fall than anticipated, dropping by 8.5%, which contrasts with a rise of 7.8% in the first quarter.

This recent softening in Australian data has led to speculation about the Reserve Bank of Australia (RBA) potentially pausing additional rate hikes. Earlier in the week, the Australian Consumer Price Index (CPI) increased by 0.8% in the second quarter of 2023, a slower growth compared to the 1.4% increase seen in the first quarter and also below the market consensus of a 1.0% rise.

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EUR/JPY Rebounds from Intraday Low, Remains Steady Around 153.00 Level

The EUR/JPY cross experienced a rollercoaster ride in the financial markets, starting with a brief bullish spike that pushed it towards the 155.00 region. However, this upward momentum was short-lived as the pair swiftly plummeted to its lowest level since mid-June. The culprit behind this sudden downturn was a somewhat hawkish message delivered by the Bank of Japan (BoJ) on a Friday, which caught many traders off guard.

The BoJ’s announcement on that eventful Friday was centered around its Yield Curve Control (YCC) policy. The central bank decided to make the YCC policy more flexible by shifting away from rigid limits for the 10-year Japanese government bond yield cap, opting for “references” instead. This decision had an immediate and profound impact on the financial markets, particularly the Japanese Yen.

As a consequence of the BoJ’s policy shift, the 10-year Japanese government bond yield surged to its highest level since September 2014. This significant boost in yields strengthened the Japanese Yen, prompting aggressive selling around the EUR/JPY cross and leading to a sharp decline in its value.

Despite the initial turmoil, the EUR/JPY pair demonstrated resilience and managed to recover a considerable portion of its intraday losses. During the early European session, spot prices found stability just above the 153.00 mark, with only marginal changes for the day. This recovery was partly supported by a positive sentiment surrounding US equity futures, which diminished the safe-haven appeal of the Japanese Yen.

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GBP/JPY Surges to a Three-Week High of 182.80-182.85 on Broad JPY Weakness
The GBP/JPY pair has seen a significant rise for the second consecutive day on Monday, reaching a three-week high in the early European trading session. The pair is currently hovering around the 182.80-182.85 region, a surge of over 650 pips from Friday’s lowest point since June 13. This upward trend is largely due to the widespread weak performance of the Japanese Yen (JPY).
Indeed, the JPY is one of the worst-performing currencies among the G-10 and is under pressure due to an unexpected operation by the Bank of Japan to purchase ¥300 billion ($2 billion) worth of Japanese government bonds (JGB). This marks the first such operation since February 2022 and comes after a notable increase in the yield of 10-year benchmark JGB to a nine-year high, triggered by the BoJ’s decision to introduce more flexibility into its Yield Curve Control (YCC) policy last Friday. The BoJ stated that the 0.5% cap for the 10-year JGB yield will now be considered “references” rather than “fixed limits”.

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GBP/JPY Surges to a Three-Week High of 182.80-182.85 on Broad JPY

The GBP/JPY pair has seen a significant rise for the second consecutive day on Monday, reaching a three-week high in the early European trading session

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USD/CAD holds above the 1.3200 mark with limited upside potential

During Tuesday’s Asian session, the USD/CAD pair exhibited a modest rebound, managing to recover most of the losses experienced in the previous trading session. Presently, the pair is hovering around the 1.3220 mark, reflecting a modest 0.25% increase for the day. This recent price action places the spot prices in proximity to the three-week high recorded on Monday, generating interest among traders and investors.

The principal driving force behind the recent strength of the US Dollar (USD) can be attributed to the growing likelihood of the Federal Reserve (Fed) implementing further policy tightening measures. Fed Chair Jerome Powell’s statements from the previous week, emphasizing the necessity of an economic slowdown and labor market weakness to achieve a credible 2% inflation target, have significantly contributed to the USD’s surge. Additionally, a positive US GDP report has bolstered market expectations regarding a potential 25 basis points rate hike by the Fed, possibly taking place in either September or November. As a result of these developments, US Treasury bond yields have experienced an upward trajectory, thereby increasing the allure of the Greenback as a safe-haven asset, especially amid lingering concerns surrounding China’s post-COVID recovery slowdown.

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EUR/GBP Stalls Near 0.8600 Ahead of BoE Announcement with Mixed Sentiments
EUR/GBP is currently facing a struggle to maintain its strength near the 0.8600 level, as it enters Wednesday’s London session. The cross-currency pair appears to be brushing off mixed Eurozone data, while at the same time validating concerns over the UK’s economic outlook, resulting in the largest daily surge in two weeks seen in the previous trading session.

The recent release of the UK’s inflation data, which showed a downturn, has given some support to the Bank of England (BoE) hawks, as they try to combat soaring inflation amidst sluggish economic activities and labor market challenges domestically. Adding to the woes of the British Pound (GBP) is the setback faced by the ruling Tory Party in the recent by-elections, where they lost some key seats, further dampening market sentiment towards the currency.

Meanwhile, on the European front, Germany’s Unemployment Rate for June eased to 5.6%, slightly better than the 5.7% forecast and the previous reading. Additionally, the final figures of Germany’s HCOB Manufacturing PMI for July came in as expected at 38.8. Similarly, the Eurozone’s HCOB Manufacturing data also matched the initial forecasts of 42.7.

Supporting the euro, the European Central Bank (ECB) has been taking a “meeting-by-meeting” approach, and their recent decision to implement a 0.25% rate hike has boosted confidence among EUR/GBP bulls.

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USD/CAD settles at 1.3350, a one-month high, as the Oil price and US Dollar weaken

The USD/CAD currency pair has stabilized around the 1.3350 mark, a significant one-month high, in a volatile market landscape where key US economic data is keenly anticipated. This relative steadiness is due to a mix of contributing factors, including the decline in Oil prices and a lukewarm performance by the US Dollar Index (DXY).

The recent fluctuations in WTI crude oil prices have been striking. The commodity rose to its highest point since April 17, before abruptly reversing course and suffering its largest losses in six weeks. This sudden swing was instigated by an increase in risk aversion and rising speculation that Oil producers, especially those in OPEC+, are resistant to further production cuts. As per Reuters’ sources, the Oil cartel is likely to maintain its current output policies in its upcoming meeting on August 4. Consequently, WTI crude oil prices are currently on a two-day downward trend, trading approximately at $79.20 per barrel, indicating a 0.40% intraday drop.

Conversely, the US Dollar Index (DXY) found some resilience amidst the risk-averse market atmosphere. Boosted by robust US Treasury bond yields, the DXY hit a three-week peak. Moreover, encouraging US ADP Employment Change figures for July added to the positive outlook for the US Dollar. However, a persistent resistance line that’s held for nine weeks is limiting the DXY’s gains, keeping the gauge steady against six major currencies at 102.60.

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Euro Hovers Near 1.0950 Ahead of US NFP Data Release
As the week draws to a close, the Euro (EUR) continues to trade in an uncertain manner against the US Dollar (USD), keeping the EUR/USD pair confined within a tight trading bracket around the 1.0950 mark. The uncertainty is mirrored in the USD Index (DXY), which has maintained steady trade within the mid-102.00s range. This lack of clear direction can be attributed to the absence of a definitive trend in US yields, despite their recent surge to nine-month highs across multiple segments of the yield curve.

Investors’ attention is now drawn towards the forthcoming release of the Nonfarm Payrolls report for July. The report is widely anticipated to reflect an increase of approximately 200K jobs. This heightened interest is largely driven by the Federal Reserve’s recent emphasis on the role of economic data in shaping its monetary policy decisions, a point that was underscored during its event held on July 26.

Currently, there is rampant speculation that the rate hike executed by the Fed in July might be the last one we will see in the near-term future. This conjecture has been fuelled by the Federal Reserve’s insistence on basing its decisions on economic data points, suggesting that unless the data indicates a need for further hikes, the current rates could hold steady for some time.

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EUR/USD Stays Defensive Below 1.1000, Vulnerable Amid Modest USD Strength

At the start of the new trading week, the EUR/USD pair encountered notable selling pressure, leading to a retracement from its recent peak near the 1.1040 level. During the Asian session, spot prices slipped below the psychologically significant 1.1000 mark, temporarily disrupting the two-day recovery that had lifted the pair from the 100-day Simple Moving Average (SMA) around 1.0910. The recent rebound in EUR/USD had come after it touched a nearly one-month low last Thursday, signaling underlying weakness in the currency pair.

Driving the market sentiment, the US Dollar (USD) gained traction as investors embraced the hawkish stance of the Federal Reserve (Fed). Despite a somewhat underwhelming US Non-Farm Payrolls (NFP) report released on Friday, which indicated the addition of 187,000 jobs in July with downward revisions for May and June figures, the USD found support due to robust wage growth and a lower unemployment rate, both of which pointed to a tightening labor market. These factors solidified the possibility of the Fed implementing a 25 basis points rate hike in either September or November, bolstering the demand for the greenback.

On the flip side, the euro faced challenges as expectations grew that the European Central Bank (ECB) would halt its streak of nine consecutive interest rate hikes during its September meeting. Concerns escalated as indications arose that inflation in the Euro Zone had likely reached its peak. Notably, Fitch Ratings’ statement on the matter and the ECB’s economic bulletin, both hinting at a potential slowdown in underlying inflation, further weighed on the sentiment surrounding the EUR/USD pair.

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EUR/JPY Bulls Target 157.70 Key Resistance Despite Soft Japan Wages and Lackluster German Inflation
During today’s European session, the EUR/JPY pair is showing a bullish trend, targeting the key resistance level of 157.70. This upward movement is significant as it challenges a long-standing falling resistance line. Interestingly, this bullish drive is happening despite weak economic indicators from both Japan and Germany.

The Euro’s strength in the face of lackluster German inflation data and sluggish Treasury bond yields is noteworthy. Despite the expected inflation figures closely matching the forecasts, with a YoY rate of 6.5% for the Harmonized Index of Consumer Prices (HICP) and 6.2% for the Consumer Price Index (CPI), the EUR/JPY pair continues to rise. This suggests a prevailing bearish sentiment towards the European Central Bank (ECB).

However, the driving force behind the pair’s ascent could be linked to the evolving monetary policy of the Bank of Japan (BoJ), supported by recent wage statistics from Tokyo. While Japan’s Labor Cash Earnings for June exceeded expectations, real wages continued to decline for the 15th consecutive month, dropping by 1.6% YoY. This decline aligns with the dovish stance surrounding the BoJ.

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Asian Shares Fall on Bank Concerns and Chinese Economic Worries

Asian markets experienced declines on Wednesday due to concerns about the U.S. banking system’s performance, which triggered a slide on Wall Street. Simultaneously, worries about Chinese economic growth added to the downward trend in the region’s stock markets.

Japan’s Nikkei 225 dropped 0.2% to 32,323.31 during morning trading, while Australia’s S&P/ASX 200 remained almost unchanged, inching up by less than 0.1% to 7,316.60. South Korea’s Kospi, however, recorded a nearly 1.0% increase to reach 2,598.96. Meanwhile, Hong Kong’s Hang Seng declined by 0.4% to 19,105.19, and the Shanghai Composite also fell by 0.4% to 3,247.64.

Clifford Bennett, the chief economist at ACY Securities, highlighted concerns over China’s export data, which experienced the sharpest decline in three years. He emphasized that this decline reflects not only China’s situation but also the global economy’s challenges.

On Wall Street, the S&P 500 decreased by 0.4% to 4,499.38, marking the fifth loss in the last six days, following strong performance in the initial seven months of the year. The Dow Jones Industrial Average also fell by 0.4% to 35,314.49, recovering slightly from an earlier loss of 465 points. The Nasdaq composite witnessed an 0.8% decrease to 13,884.32.

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GBP/USD on Edge Before US Inflation Data and UK-China Sanctions
GBP/USD remains cautious around 1.2715-20 ahead of Thursday’s London session, as investors tread carefully before the release of US inflation figures for July. Additionally, the Pound faces resistance due to reports of the UK considering restrictions on British investment in Chinese tech firms. Meanwhile, concerns about a potential British recession and looming higher interest rates in London are also testing the Cable pair’s stability.

A recent report by the Financial Times (FT) suggests that UK Prime Minister Rishi Sunak is contemplating measures to limit outbound investment in the Chinese tech sector, including areas like artificial intelligence, chips, and quantum computing. This news gains traction as Sunak seeks support within the political sphere following disappointing by-election results.

Furthermore, the UK’s prominent think tank, the National Institute of Economic and Social Research (NIESR), projects that British economic output won’t recover to pre-pandemic levels until Q3 2024. The NIESR also suggests a 60% chance of the government facing a recession, while anticipating that UK inflation will remain above the Bank of England’s 2.0% target for the next four years. This could drive the Bank of England towards more hawkish actions to defend the British Pound.

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SD/JPY remains below 145.00 as BoJ provides limitless fixed-rate JGBs
The USD/JPY pair is currently trading below the significant level of 145.00, retreating from its year-to-date high during the Asian trading session. At present, the major pair hovers around 144.90, experiencing a marginal decline of 0.05% throughout the day.

On Friday, an important development came from the US Bureau of Labor Statistics, which revealed a substantial increase in the US Producer Price Index (PPI) for final demand on a year-on-year (YoY) basis. In July, the PPI rose by 0.8%, surpassing June’s 0.1% and exceeding market expectations of 0.7%. Additionally, the University of Michigan’s Consumer Confidence Index for July dipped slightly from 71.6 to 71.2, surpassing the anticipated figure of 71. Moreover, the UoM’s 5-year Consumer Inflation Expectations for August declined to 2.9% compared to the previous estimate of 3.0%. This data resulted in a mild increase in buying activity for the USD/JPY pair, driven by heightened expectations of a potential 25 basis points tightening by the Federal Reserve (Fed) by the end of the year. Such expectations could strengthen the US Dollar, providing support for the USD/JPY pair.

In contrast, the Bank of Japan (BoJ) made a notable move by offering limitless Japanese Government Bonds (JGBs) with residual maturities of 5 to 10 years at a fixed rate. This announcement came during the early Asian session on Monday, causing the USD/JPY pair to briefly touch an intraday low near 144.65. Consequently, the pair recorded its first loss in six consecutive days after hitting a fresh yearly high earlier in the same day.

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After UK CPI data release, GBP/JPY surged past 185.00
After the release of UK Consumer Price Index (CPI) data, the GBP/JPY currency pair experienced a surge, surpassing the 185.00 mark. This positive momentum in the cross is due to the encouraging inflation figures from the UK. However, market participants are also closely monitoring the possibility of foreign exchange (FX) intervention by the Bank of Japan.

According to the latest data from the UK’s National Statistics, the CPI for June showed a month-on-month decrease of -0.4%, slightly better than the market consensus of -0.5%. On a yearly basis, British CPI inflation rose to 6.8% in June, in line with expectations. The core CPI, which excludes volatile oil and food prices, increased by 6.9% in July, surpassing the estimated 6.8%. Additionally, the UK Retail Price Index (RPI) for July reported a month-on-month decline of -0.6% and a year-on-year increase of 9.0%.

Meanwhile, Japan’s economic growth data for the second quarter revealed a QoQ increase of 1.5%, higher than the expected 0.8% and the previous 0.7%. On an annual basis, Japan’s GDP rose to 6.0%, exceeding the estimated 3.1% and the previous 2.7%. The Yen’s weakness can be attributed to the monetary policy differential between the US and Japan, with the potential for additional rate hikes by the Bank of England acting as a boost for the Pound Sterling and potentially benefiting the GBP/JPY cross.

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Stocks Dip on Fed Minutes Hinting at Potential Rate Hikes

On Wednesday, the stock market witnessed a noticeable decline in response to the Federal Reserve’s indication of potential rate hikes, prompting a reevaluation of investment strategies among traders and investors. The Dow Jones Industrial Average (^DJI) recorded a decrease of approximately 0.5%, equivalent to a drop of around 180 points. Similarly, the S&P 500 (^GSPC) experienced a decline of nearly 0.8%, while the Nasdaq Composite (^IXIC), dominated by technology-focused companies, suffered its second consecutive day of losses with a drop exceeding 1%.

Amidst this market activity, a prominent occurrence in the retail sector was the stark projection provided by Target (TGT), which adjusted its full-year profit forecast downward. The rationale behind this adjustment was attributed to the combination of escalating interest rates and the prevailing uncertainty surrounding the resumption of student loan repayments. Despite this unfavorable news, Target’s stock exhibited a surprising increase of over 3%, a surge attributed to the company’s robust quarterly profit performance that overshadowed the downward outlook.

The spotlight then turned to the release of minutes from the Federal Reserve’s recent meeting. The minutes divulged that a majority of officials maintained their stance that inflation presented a potential risk, while a select few expressed hesitance toward further rate increases in the month of July. Notably, the central bank had already executed an interest rate hike, elevating rates to their highest point since 2001 during that specific meeting. Investors eagerly sifted through the minutes in search of clues regarding the Fed’s forthcoming strategies. Data from the CME Group’s FedWatch tool demonstrated that almost 90% of traders were anticipating a status quo in terms of rates, a figure that saw a marginal decrease from before the minutes were released.

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