Daily Market Analysis By Z Forex

[Z Forex]

Recession in New Zealand, Market Moves in Asia, and Monetary Policy Expectations in Europe and the US​

In the Asia-Pacific region, New Zealand experienced a technical recession as its first-quarter gross domestic product (GDP) dropped by 0.1% compared to the previous year. This decline follows a revised 0.7% contraction in the final quarter of 2022. Meanwhile, in Japan, both the Nikkei 225 and the Topix experienced marginal falls, breaking their four-day winning streak. The Nikkei 225 closed at 33,485.49, and the Topix closed at 2,293.97 as the Bank of Japan commenced its two-day monetary policy meeting. In China, the central bank reduced its key medium-term lending rates, and the country released various economic data, including industrial output, retail sales, and house prices.

As European markets prepare for the latest monetary policy decision from the European Central Bank (ECB), they are expected to open with a negative outlook. The ECB is anticipated to raise its benchmark policy rate by 25 basis points during its meeting on Thursday. Moreover, the ECB is likely to emphasize that future rate decisions will be influenced by data, given the prevailing uncertainties affecting inflation and growth prospects.

On the other hand, the Federal Reserve, in its recent announcement, maintained its key borrowing rate within the target range of 5%-5.25%. However, it was the release of the dot plot, representing Fed members' rate projections, that caused market fluctuations. The dot plot revealed the central bank's projection of two more rate hikes, assuming they continue at quarter-point increments. Fed Chairman Jerome Powell indicated that the committee's next meeting in July remains significant, suggesting that a quarter-point hike is not predetermined.

EURUSD

The EUR/USD continued its upward trajectory, achieving its highest daily close in a month above 1.0800, despite the US Dollar's rebound following the hawkish stance of the Federal Open Market Committee (FOMC). Market attention now shifts towards the upcoming European Central Bank (ECB) meeting and forthcoming US data, which have gained significance in light of Fed Chair Powell's statement that the July meeting will be a 'live' one.

On Thursday, the ECB's Governing Council will convene, with expectations of a 25 basis points interest rate hike. The crucial factors for the Euro's performance will be the language used in the statement and the comments made by ECB President Lagarde during the subsequent press conference. It is likely that President Lagarde will reiterate their intention to continue raising rates. However, if the meeting adopts a 'dovish' tone, hinting at a potential pause in rate hikes, the Euro may face downward pressure.

After the Fed meeting, the US dollar staged a recovery as the central bank chose to keep interest rates unchanged but signaled a willingness to pursue further rate hikes. The hawkish stance had an impact on Treasury bonds, leading to their decline, and bolstered the strength of the greenback. Fed Chair Jerome Powell's remark that the July meeting would be a "live meeting" indicated that additional rate hikes remained a possibility. According to the projections released by the FOMC, a majority of its members foresee a total tightening of 50 basis points by the end of the year.

GBPUSD

The Pound Sterling is experiencing a pullback due to the US Treasury bond yields and the possibility of a July rate hike by the Federal Reserve. Mixed data from the previous day is also contributing to the decline. Meanwhile, the UK's GDP grew by 0.2% in April, but industrial production and the Index of Services slumped. The US Federal Open Market Committee has kept the benchmark interest rate unchanged, but the hawkish Fed bias remains due to the upbeat FOMC Economic Projections and Powell's speech. The Fed dot plot indicates two more rate increases in 2023, and July is considered a "live" meeting for a possible rate hike. Soft China data and fears of a slower global economic recovery are weighing on the S&P500 Futures and USD. US Retail Sales for May and other important mid-tier activity data will be crucial for the Fed's decision-making.

GBP/USD performed higher while breaking all the potential resistance levels and now testing the historical level of 1.2680. If the breakout happens then the 1.2760followed by the 1.2800.

JPYUSD

The Japanese yen is facing downward pressure against other currencies due to several factors. The US Federal Reserve's decision to keep interest rates unchanged but hint at future hikes contributes to the bearish sentiment. Additionally, the recent interest rate increases by the Reserve Bank of Australia and the Bank of Canada further strengthen the yen's bearish outlook. Market attention now turns to the upcoming meeting of the Bank of Japan, where it is anticipated that the central bank will maintain its loose monetary policy and yield-curve control without making any changes. BoJ Governor Kazuo Ueda has emphasized the need to sustainably achieve the 2% inflation target, indicating a patient approach to monetary policy. Recent economic data revealed better-than-expected growth in Japan's economy during the January-March quarter, driven by domestic spending and inventory buildup.A recent Reuters poll indicates that over half of the economists surveyed believe the Japanese government and central bank will take action to prevent further decline of the yen if it weakens beyond 145 per U.S. dollar. While the Bank of Japan (BOJ) is expected to maintain its current policy at the upcoming meeting, there is speculation of a possible rollback of easing measures in the future. The impact of a weak yen on BOJ policy is also a concern, as economists suggest that a depreciation beyond 145 per dollar could influence the central bank's decisions. From a technical analysis perspective, the USD/JPY pair is currently trading within a price range as market participants await the Federal Reserve (Fed) meeting and its decision. The pair maintains a significant correlation with the US 10-year Treasury yield, and yesterday's positive movement had an impact on the pair's dynamics. However, it's important to note that upcoming events scheduled for this week could influence the market outlook and potentially lead to changes in the current analysis.

XAUUSD

The Federal Reserve held its monetary policy meeting on Wednesday and maintained the Fed funds rate at 5.0%-5.25%, signaling a pause to its interest-rate hiking cycle for the first time since early 2022 . However, the Fed's Dot Plot chart showed a hawkish outlook, with the terminal rate projection for end-2023 revised upwards to 5.6% from 5.1% in March. This led to the US Dollar and US Treasury bond yields rebounding . Chairman Jerome Powell stated that the Fed will continue to watch how the labor market moves and that the July meeting will be a "live" one, with odds for a 25 bps rate hike next month increasing to around 70% . The Gold price reversed its early bounce and settled near daily lows, with markets closely scrutinizing incoming US economic data to reprice Fed expectations . The European Central Bank is expected to raise key rates by 25 bps, with markets predicting a pause in September .

The gold price is currently showing signs of a potential bearish breakout below the 100-day moving average (100MA) on the daily chart, which has acted as a significant level of support in the past. If the ongoing selling pressure persists and confirms the breakout, the next key support levels to watch are around 1900, followed by a stronger support area in the range of 1870-1860. These levels could serve as the final target for the downward movement.

DAX40

European shares started the day with a decline as the European Central Bank (ECB) was expected to raise borrowing costs later in the day, following the U.S. Federal Reserve's indication of more rate hikes. However, losses were partially offset by an increase in H&M shares, which boosted the overall performance of retailer stocks after reporting positive sales in June, the beginning of its third quarter.

The STOXX 600 index, representing the European market, fell by 0.3%. European retailers experienced a gain of 0.9%, primarily driven by a 5.3% rise in the shares of H&M from Sweden.Later today, the ECB is anticipated to raise the deposit rate by 25 basis points to 3.5%, reaching the highest level in 22 years. The ECB is also expected to leave room for further rate hikes as it continues its efforts to combat persistent inflation, despite the sluggish performance of the eurozone economy.

On Wednesday, the U.S. Federal Reserve chose to keep interest rates unchanged, but signaled the likelihood of at least a 0.5% increase in borrowing costs by the end of this year.

The DAX index price waiting at the 16330 level for the ECB meeting Today for more direction. Investors should closely monitor the next resistance level at 16,800, as it could pose a significant challenge for further upward momentum. On the other hand, if the index experiences a decline, support is expected around the 15,900 level.

 

[Z Forex]

"Global Markets React: Japan Rebounds, European Equities Rise, and Central Banks Maintain Policies"​

In Japan, stocks initially declined but later rebounded, resulting in the Nikkei 225 gaining 0.18% and the Topix making slight advancements. These indexes had previously ended a five-day winning streak on Thursday. Meanwhile, Hong Kong's Hang Seng index continued its upward trend, rising by 0.69% after a 2% surge the previous day. Mainland Chinese stocks also experienced gains, with the Shanghai Composite increasing by 0.37% and the Shenzhen Component rising by 0.55%.On Friday, the Bank of Japan opted to maintain its ultra-loose monetary policy, aiming to support fragile economic growth amidst global uncertainty. As anticipated by economists, the central bank kept its short-term interest rate target at -0.1% and made no adjustments to its yield curve control policy.

In Europe, equity markets were poised to open positively on Friday, following the upward trend of global markets. This was driven by speculation that US interest rates might be approaching their peak due to a slowdown in the American economy and the Federal Reserve's decision to pause its tightening campaign in June.

Contrary to the ECB's decision to raise its benchmark policy rate by an additional 25 basis points, ECB President Christine Lagarde emphasized during a press briefing that they were not considering pausing. She stated, "We are not thinking about pausing," and hinted at the possibility of another rate increase in July.

While the ECB chose to tighten fiscal policies, the Federal Reserve, on the other hand, decided on Wednesday to refrain from raising interest rates. However, they announced plans for two quarter-percentage point increases by the end of the year.

EURUSD

On Thursday, the EUR/USD experienced a significant surge, reaching its highest level in a month at 1.0952. The pair is maintaining its gains, indicating that the rally may not be over yet. This strong performance can be attributed to the European Central Bank's (ECB) hawkish stance and the overall weakness of the US Dollar.As anticipated, the ECB raised its interest rates by 25 basis points while keeping the forward guidance unchanged. ECB President Lagarde emphasized that there is still work to be done and expressed that another rate hike in July is the most likely scenario. Inflation forecasts were revised upwards, and the market has already priced in a 25 basis point increase at the next meeting.The rise in German bond yields coupled with a decline in Treasury yields has contributed to the strengthening of the EUR/USD. Despite Federal Reserve Chair Powell's hawkish tone on Wednesday, it did not have a lasting impact on the US Dollar. While inflation data from the Eurozone is scheduled for release on Friday, it is not expected to have a significant impact as these figures are final estimates. On the other hand, market participants will be focusing on the University of Michigan Consumer Sentiment Index from the US. The recent central bank meetings will continue to be analyzed and digested by market participants.In terms of technical analysis, the EUR/USD pair made a bullish movement we didn’t saw from more than 4 Months and found resistance at 1.0960 level. A possible correction can happen and the level to watch is 1.0912 but the CPI data today may surprise. In case of a breakout to the upper side the 1.1000 is a good level to watch followed by the 1.1050.

GBPUSD

The GBP/USD pair is currently stabilizing near its highest level in 14 months, hovering around the 1.2780-70 range in the early morning of Friday in London. The Pound Sterling, having experienced its most substantial gain in a week, has been rising for three consecutive days, reaching a multi-month high. This upward movement can be attributed to the general weakness of the US Dollar and concerns regarding a potentially hawkish stance from the Bank of England (BoE).

Despite a mixed set of UK economic data earlier in the week, the bullish momentum of GBP/USD remained intact due to worries about a more hawkish BoE, primarily driven by previously positive inflation figures. In April, the UK's Gross Domestic Product (GDP) showed a growth of 0.2%, matching expectations and recovering from the previous -0.3% contraction. However, industrial production declined during the same period, and both manufacturing production and the Index of Services for the three months leading up to April fell short of expectations.

 

[Z Forex]

"Asia-Pacific Markets React to China's Rate Cuts and European Markets Remain Cautious"

The Asia-Pacific markets experienced mixed trading on Tuesday as investors analyzed the decision made by China's central bank to reduce the one-year and five-year loan prime rates by 10 basis points each to 3.55% and 4.20% respectively. This move caused concern about Chinese economic growth and the absence of fresh stimulus measures from Beijing. The lending rate cuts implemented by banks were deemed insufficient, resulting in a decline in Chinese property companies' stocks. During the June meeting, the Reserve Bank of Australia (RBA) released minutes indicating that it decided to raise its benchmark interest rate to 4.1%. This decision was prompted by an observation that inflation data had shifted upward and that it would take longer for domestic inflation to reach its target. In Japan, the Nikkei 225 index initially experienced losses but later rebounded, gaining 0.17%. However, the Topix index ended the day with a decrease of 0.36%.

European markets opened the new trading week with a decline, reflecting investor unease regarding the economic outlook. The Stoxx 600 index, a benchmark for European markets, closed 1% lower on Monday, with nearly all sectors experiencing negative performance. The remarks made by policymakers are expected to garner significant attention. Scheduled speakers include European Central Bank Vice-President Luis de Guindos, Bank of Spain Governor Pablo Hernandez de Cos, and Bank of Finland Governor Olli Rehn. German producer prices rose at their slowest pace in more than two years in May, according to data released on Tuesday, in a further sign inflation in Europe's largest economy is easing

EURUSD

According to recently released data on Tuesday, German producer prices experienced their slowest increase in more than two years in May, indicating a further decrease in inflation within Europe's largest economy.

The lineup of scheduled speakers for the upcoming events includes prominent figures such as European Central Bank Vice-President Luis de Guindos, Bank of Spain Governor Pablo Hernandez de Cos, and Bank of Finland Governor Olli Rehn.

On Wednesday, Fed Chair Jerome Powell is set to present his semi-annual report to Congress. Additionally, Federal Reserve Bank of St. Louis President James Bullard, along with his counterparts from New York and Chicago, are also among the speakers scheduled for this week.

The price action of the EURUSD is finding support at the 1.0912 level also the DXY correcting from the 100MA on the 4H after this level played the same role for the last 4 times. The next support level is around 1.0880, followed by 1.0860 for EURUSD if a breakout happens, while the next resistance level will be again the 1.0950 level.

GBPUSD

The Bank of England (BoE) is expected to raise interest rates by 25 basis points due to high inflation, which is four times its target. This decision follows improved growth numbers and economic activity, contrasting with the Federal Reserve's recent meeting, where rate hikes may end. The current rate of 5-5.25% is deemed high enough to impact inflation and labor market pressure. Confidence in central bank projections has waned due to their inability to address inflation, leading to persistent inflationary pressures.Economists warn of a severe recession and job losses if interest rates reach the predicted 6% level, causing mortgage costs to rise and businesses, especially smaller ones, to struggle with borrowing costs. The BoE aims to curb inflation, but this raises concerns of a recession, with potential consequences such as increased mortgage payments, insolvencies, unemployment, and reduced consumer spending, possibly leading to a housing market crash. Prime Minister Rishi Sunak faces a challenging position as he balances price control with the risk of a recession before an upcoming election. Higher borrowing costs also limit government support for distressed borrowers and increase the cost of servicing government debt.Even without a recession, the UK's long-term growth prospects are expected to be sluggish, with living standards falling behind other G-7 nations. The corporate sector's struggles with interest costs and rising insolvencies pose a potential trigger for a recession, which could have a catastrophic impact on the overall economy through widespread job losses and declining consumer demand. The BoE is under pressure to strike the right balance between curbing inflation and avoiding a crash due to persistently high prices and wages, which increase the risk of a "policy error."GBP/USD experienced a minor correction yesterday, primarily due to the strength observed in the Dollar. However, the market is currently exhibiting positive sentiment, with a solid bullish trend expected.

 

[Z Forex]

"Asia-Pacific Markets Lower as Inflation Data and Manufacturing Activity Awaited; European Equities Head for Lower Open"
Asia-Pacific markets declined on Friday as investors awaited inflation data from Japan and Singapore, along with flash estimates on Japan's manufacturing and services activity from the au Jibun Bank. Despite paring some losses, the Nikkei 225 still fell 1.45% to 32,781.54, ending an eight-day run above the 33,000 mark. The Topix, driven primarily by industrials, also dropped 1.38% and closed at 2,264.73.
Japan’s core inflation rate in May eased slightly to 3.2% year-on-year, lower than April’s 3.4% but still above the BOJ’s 2% target. The May core inflation rate was slightly above the 3.1% expected by economists polled by Reuters.
Japan’s business activity expanded at a slower rate in June, according to flash estimates by the au Jibun bank. The composite purchasing managers index fell to 52.3 in June, compared to 54.3 in May.
European equity markets were headed for a lower open on Friday, with benchmark indexes in the region set to end the week sharply lower as aggressive monetary tightening by major central banks threatened the outlook for global economic growth, hurting investor sentiment. Both the Bank of England and the Norges Bank delivered a larger-than-anticipated 50 basis point rate hike on Thursday, while the Swiss National Bank lifted rates by 25 bps. The downbeat sentiment has been reflected globally, with Wall Street heading for a losing week and Asia-Pacific markets largely lower.
In terms of data on Friday, the GfK survey showed that U.K. consumer confidence increased for a fifth consecutive month, surpassing expectations, despite significant cost-of-living pressures.

The dollar received support on Friday due to increased risk aversion, caused by hawkish comments from global central banks, including the Federal Reserve. These comments raised concerns that their aggressive monetary tightening could lead to a deeper economic downturn. Federal Reserve Chair Jerome Powell stated on Thursday that the central bank would proceed with interest rate adjustments at a cautious pace. A majority of the Federal Open Market Committee members anticipate more rate hikes in the future.
While higher interest rates typically strengthen currencies, the risk of triggering an economic downturn has prompted some investors to seek safe-haven assets such as the U.S. dollar. The market's next significant concern will revolve around the possibility of a recession and the level of aggressiveness policymakers will adopt.

 

[Z Forex]

"Asia-Pacific Markets Decline as Investors Digest Private Surveys on Services Activity"

Asia-Pacific markets experienced a significant decline as investors responded to newly released private surveys on services activity in the region. The Caixin services purchasing managers index for China dropped to 53.9 in June, indicating a slower rate of expansion compared to May's 57.1. Similarly, Japan's final au Jibun Bank Services purchasing managers' index (PMI) decreased from a record high of 55.9 in May to 54 in June, though both remained comfortably above the 50-mark, which separates contraction from growth.

Despite the decline, services activity in both Japan and China remained in the expansion territory for the month, albeit with a softer pace of growth. The Nikkei 225 in Japan fell 0.25% to close at 33,338.7, and the Topix also experienced a slight decline to 2,306.03. South Korea's Kospi index lost 0.53%, while the Kosdaq managed a modest 0.16% increase.
Greater China markets also faced losses, with the Shanghai Composite down 0.45% and the Shenzhen Component decreasing by 0.7%. Hong Kong's Hang Seng index dropped 1.41%, and the Hang Seng Tech index saw a decline of 1.6%.
Looking at the European markets, they were expected to open lower on Wednesday. Investors were cautious due to the signs of China's economic rebound slowing down, coupled with global economic uncertainties and the possibility of further monetary tightening. Additionally, investors were closely monitoring the upcoming Federal Reserve policy meeting minutes and the US monthly jobs report, as they could influence the outlook for US interest rates.
The European and UK calendar Today is dominated by final services and composite PMIs for June, also expected to confirm a slowing in what has been a consumption-led economic recovery.

 

[Z Forex]

EURUSD Daily Analysis EURUSD - 6 July 2023
GBPUSD Daily Analysis GBPUSD - 6 July 2023
USDJPY Daily Analysis USDJPY - 6 July 2023
XAUUSD Daily Analysis XAUUSD - 6 July 2023
DAX40 Daily Analysis DAX40 - 6 July 2023

 

[Z Forex]

EURUSD https://zforex.com/analysis/3216/
GBPUSD https://zforex.com/analysis/3213/
USDJPY https://zforex.com/analysis/3214/
XAUUSD https://zforex.com/analysis/3215/
DAX40 https://zforex.com/analysis/3216/

 

[Z Forex]

"Strong Job Growth Exceeds Expectations, Fed Signals Rate Increases, and US-China Relations Improve"
According to Thursday's report by payroll processing firm ADP, companies outperformed expectations by creating a significantly higher number of jobs. The private sector experienced a surge of 497,000 jobs in the month, surpassing the Dow Jones consensus estimate of 220,000. This substantial increase marks the largest monthly rise since July 2022.
The release of the Federal Reserve's June meeting minutes on Wednesday revealed that a majority of officials would support further rate increases in the future. This information aligns with the positive job growth data.
Janet Yellen, the U.S. Secretary of the Treasury, is currently in Beijing for a four-day trip to meet with Chinese officials. This visit signifies a noteworthy improvement in relations between the United States and China.
The major indexes in the Asia-Pacific region followed Wall Street's downward trend, declining for the second consecutive day. Japan's Nikkei 225 fell by 1.13% and the Topix shed 1.1%. South Korea's Kospi slid 1.14% as Samsung Electronics projected a 96% likely drop in its second-quarter operating profit. Hong Kong's Hang Seng index fell 1.06%, and the Hang Seng Tech index dropped nearly 2%. In mainland China, the Shanghai Composite fell 0.25%, and the Shenzhen Component fell 0.55%.
In May, Japan's nominal average wages experienced a year-on-year increase of 2.5%, surpassing the revised 0.8% rise in the previous month. This marks the third consecutive month of accelerating wage hikes.
Christine Lagarde, the President of the European Central Bank, stated that if there is a simultaneous increase in company margins and wages, the bank will not hesitate to take action.
Swap contracts tied to the Federal Reserve's future policy decisions currently reflect nearly full pricing of a quarter-point interest rate hike by July 26. Moreover, they indicate a growing likelihood of an additional hike by the end of the year. This expectation of higher rates reinforces the belief in tighter monetary policies globally as central banks strive to control inflation.
Lorie Logan, the President of the Dallas Fed, expressed her concerns on Thursday about the persistently high inflation and the need for further tightening. Stocks have been declining in July after a strong first half of the year, as the hawkish stance of central banks dampens hopes of a smooth landing for the global economy.

 

[Z Forex]

"Central Bank Calls for Rate Hikes to Tackle Inflation as Global Markets React"

Fed officials, stressed the importance of implementing additional rate hikes to tackle inflation and achieve the central bank's targets in their speeches on Monday. Mary Daly, President of the Federal Reserve Bank of San Francisco, expressed the likelihood of needing "a couple more rate hikes over the course of this year." Similarly, Loretta Mester, Cleveland Fed President, emphasized the significance of higher rates to maintain sustainable inflation and suggested that the funds rate should rise further and stabilize to gather more economic information. Fed Vice Chair for Supervision Michael Barr highlighted the need for caution and resilience by advocating for increased capital for large U.S. banks.
Meanwhile, in Asia, investors await concrete measures from Beijing to strengthen the country's sluggish recovery, as China's struggling economy continues to impact markets. Chinese state-run financial newspapers have indicated potential property support policies and initiatives to improve business confidence.
In the UK, wage growth data, which Bank of England Governor Andrew Bailey noted is contributing to inflation, underscores the pressure for higher interest rates. This data will play a crucial role in shaping the central bank's decision on rates in August, and the pound has reached its highest level against the dollar since April 2022.
Additionally, Germany's annual inflation rate for June 2023 was confirmed at 6.4%, rebounding from May's low of 6.1%. After three months of deceleration, inflation has slightly risen again, primarily driven by food prices. This data suggests that inflation in the EU may remain persistent, potentially leading the European Central Bank to consider further rate increases.
Market anticipation is centered on tomorrow's U.S. Consumer Price Index (CPI) data, which will provide insights into the direction of inflation and influence the Federal Reserve's decisions in upcoming meetings, given that the possibility of two rate hikes remains.

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[Z Forex]

" US Inflation Expectations, RBA and RBNZ Policies, and Japan's Wholesale Inflation Slowdown"
Economists expect the U.S. inflation rate for June to fall slightly to 5%, down from 5.3% in May, based on a Reuters poll. The inflation print, along with producer prices data on Thursday, will give clues to the Federal Reserve’s path for rate hikes.
In Japan, the Nikkei 225 slid 0.81% to end at 31,943.93 —the first time in over a month that it finished lower than 32,000 points, while the Topix was down 0.67% and closed at 2,221.48.
The country saw wholesale inflation slow to its lowest pace in six months, with the corporate goods price index rising just 4.1% year on year, official data showed.
Reserve Bank of Australia (RBA) governor Philip Lowe has stated that although the bank has maintained interest rates at 4.1% in its recent meeting, it might be necessary to tighten monetary policy further in order to bring inflation back to its target level in a reasonable timeframe. Lowe mentioned that any future actions taken by the RBA would depend on the evolving state of the economy and inflation. The RBA's board will review updated economic forecasts and reassess the balance of risks in its next meeting on August 1. By that time, new data on inflation, the global economy, the labor market, and household spending will have been released, providing crucial information for the bank's decision-making process.
The Reserve Bank of New Zealand (RBNZ) has decided to keep its benchmark interest rate unchanged at 5.5%, making it the first time the bank has paused since October 2021. The RBNZ stated that the current interest rate level is effectively limiting spending and inflationary pressure as expected. However, the central bank emphasized that interest rates should continue to remain at a restrictive level in the foreseeable future to ensure that consumer inflation returns to the desired target range of 1-3%.
Japan's corporate goods price index, which serves as a wholesale inflation indicator, experienced a slower year-on-year growth rate of 4.1% in June. This marks the sixth consecutive month of decelerating growth. The figure is lower than May's revised rate of 5.2% and represents the slowest inflation rate observed since April 2021. The index measures the prices that companies charge each other for their goods and services.
The Bank of England on Wednesday said British banks are strong enough to support households and businesses through the squeeze of higher borrowing costs and the rising cost of living.
In its Financial Stability Report, the central bank noted that U.K. households and businesses are in a safer position than they were before the financial crisis, with a lower proportion of household income spent on mortgage payments and a lower proportion of business spend used to service debt.

 

[Z Forex]

" US Inflation Expectations, RBA and RBNZ Policies, and Japan's Wholesale Inflation Slowdown"

Asia-Pacific markets rose across the board Thursday after the U.S. inflation rate for June came in lower than expected at 3%, the smallest year-over-year increase in two years.
This figure fell below economists' expectations, who had forecasted it to be 3.1% in a poll conducted by Dow Jones.
Month over month, the inflation rate rose 0.2%, less than forecast. Core CPI — which strips out volatile food and energy prices — also rose less than expected.
In Asia, Hong Kong’s Hang Seng index surged 2.46% and led gains in the region, while the Hang Seng Tech index surged over 3%.
Mainland Chinese markets were also all up, with the Shanghai Composite gaining 1.26% and the Shenzhen Component seeing a larger gain of 1.63%. China’s June trade data came in below expectations in June, with exports recording its biggest decline in more than three years. China’s trade surplus for June came in at $70.62 billion in June, higher than the $65.81 billion recorded in May, but lower than the $74.8 billion expected by economists polled by Reuters. Exports and imports also fell more than expected, with exports dropping 12.4% from a year ago and imports 6.8% lower compared with the same period last year.
The U.K. economy contracted 0.1% in May, official figures showed, though this was less than the 0.3% month-on-month contraction forecast in a Reuters poll of economists. It comes amid intense focus on the country’s ongoing inflation battle, particularly after this week’s strong wage growth data.
While markets are still pricing in a more than 92% probability of a 25 basis point rate rise from the Federal Reserve this month, according to CME’s FedWatch tool, the slowdown in inflation boosted economic sentiment and raised hopes of a less aggressive path ahead.

 

[Z Forex]

"Asia-Pacific Markets Rise on Softer US Inflation Data, Global Stocks Gain Amid Signs of Inflation Slowdown"

Asia-Pacific markets experienced gains on Friday as new inflation data from the U.S. turned out to be softer than expected. This development has raised optimism that inflation may decrease without negatively impacting the labor market. Globally, stocks rose throughout the week due to the lower-than-expected U.S. consumer price index and producer price index, signaling a significant deceleration in inflation within the world's largest economy.

In June, the U.S. producer price index increased by a smaller margin than predicted, rising 0.1% year on year. The core PPI, which excludes volatile food and energy prices, also climbed by 0.1%, falling short of expectations.

Christopher Waller, a Governor of the Federal Reserve Board, expressed the belief that two more interest rate hikes are necessary to bring inflation down to the desired level. During a speaking engagement at New York University, he welcomed the recent reading of the consumer price index, which indicated a moderation in the inflation rate. However, he emphasized the importance of sustained improvement before expressing confidence in the deceleration of inflation.

The International Monetary Fund stated that China's growth is slowing due to weakened private investment, declining exports, and reduced domestic demand.

The Reserve Bank of Australia announced on Friday that Michele Bullock, the deputy governor, has been appointed as the new chief of the central bank, as revealed by the country's Treasury.

Investors have also been evaluating data from the U.K. this week. Wage growth in the country has been significant, raising concerns for the Bank of England as it grapples with the highest inflation among the Group of Seven nations. Meanwhile, the economy experienced a 0.1% contraction in May, slightly better than the consensus estimate of a 0.2% contraction.​

 

[Z Forex]

"Global Markets Respond to Lower Inflation and Speculations on Federal Reserve's Approach, while Asia-Pacific Markets React to China's GDP Miss"

The global markets experienced a boost from lower-than-expected inflation figures in the United States, alongside growing speculation of a less aggressive approach by the Federal Reserve in the future.
In Asia-Pacific, market performance on Monday was negative as investors analyzed important economic data from China. China's gross domestic product (GDP) for the second quarter grew by 6.3% compared to the previous year, falling short of the 7.3% forecast by analysts surveyed by Reuters.
The second quarter's GDP growth rate of 6.3% signifies a slower pace of expansion in comparison to the 2.2% growth recorded in the first three months of the year.
Additionally, the unemployment rate for young individuals aged 16 to 24 reached a new record of 21.3% in June.
Significantly, China, the world's second-largest economy, reported a second-quarter GDP growth of 6.3%, which was lower than economists' expectations. Furthermore, the People's Bank of China maintained its medium-term loan rates at 2.65% after providing 103 billion yuan ($14.43 billion) of one-year medium-term lending facility loans at that rate.
The upcoming week will witness a rise in earnings announcements, featuring results from Novartis, Ocado, and ASML in Europe, alongside major U.S. companies like Bank of America, Morgan Stanley, Tesla, Netflix, United Airlines, and IBM.
According to the International Monetary Fund, headline inflation appears to have reached its peak among the group of 20 nations. However, core inflation, particularly in advanced economies, remains significantly higher than the targets set by central banks.

 

[Z Forex]

Mixed Performance in Asia-Pacific Markets, Hong Kong Stocks Lead Losses, RBA Maintains Interest Rates, and China Evergrande Group Reports Steep Losses
The Asia-Pacific markets experienced a mixed performance, with Hong Kong stocks leading the region's losses, plummeting by 2%. This decline was primarily influenced by the real estate and technology sectors. Meanwhile, the Nikkei 225 saw a marginal increase, and the Topix rose by 0.32%. Japanese investors are preparing for significant economic data to be released later this week, including trade balance and consumer price index figures for June.
The meeting minutes reveal that the Reserve Bank of Australia (RBA) recently deliberated on whether to maintain or raise interest rates by 25 basis points during its July meeting. Ultimately, the central bank decided to keep the existing rates, citing the current monetary policy as already restrictive due to the prevailing cash rate of 4.1%. The RBA acknowledged the historically high level of mortgage interest payments in May and recognized a decline in inflation, which was expected to help mitigate the risk of medium-term inflation expectations rising. Furthermore, the RBA expressed concerns that increasing rates could lead to a more significant-than-expected slowdown in output growth, highlighting the substantial uncertainty surrounding household consumption.
China Evergrande Group, a Chinese property developer, reported substantial losses in its long-delayed results for 2021 and 2022. The company recorded a total net loss of 686.2 billion yuan ($95.68 billion) in 2021 and a 125.8 billion yuan total net loss in 202
On Wednesday, the U.K. inflation figures will be released as the Bank of England prepares for its upcoming monetary policy meeting on August 1. Following strong wage growth in the three months leading up to May, there remains a possibility of a consecutive 50 basis point hike.
Additionally, U.S. retail sales data is set to be released, and a strong performance indicated by the numbers could lead to a reassessment of whether the Federal Reserve has almost concluded its interest rate hikes.

 

[Z Forex]

On Wednesday, Asia-Pacific markets experienced mostly positive gains as investors digested the better-than-expected results from Wall Street. The earnings season had a strong start, with 84% of S&P 500 companies surpassing profit estimates, according to FactSet.

In Japan, the Nikkei 225 rose by 1.07%, and the Topix increased by 0.96%. However, business sentiment among manufacturers in Japan declined for the first time in six months in July, according to the Reuters Tankan survey, which measures confidence among large Japanese companies. The survey also indicated a decrease in confidence among large Japanese manufacturers. This decline is significant as it is the first time in six months that the index has recorded a negative change, with the manufacturing index dropping from +8 in June to +3.

Meanwhile, New Zealand's consumer price index showed a year-on-year growth of 6%, marking the second consecutive quarter of slowing inflation. This figure is lower than the 6.7% recorded in the first quarter and the 7.2% in the fourth quarter of 2022.

Futures saw an increase following the release of the U.K. consumer price index figures, which showed an annual headline inflation rate of 7.9%. This rate was lower than the consensus forecast of 8.2% and a decrease from May's 8.7%. The core consumer price index was 6.9%, also below the estimated 7.1% stability.

ASML, a Netherlands-based semiconductor equipment producer, reported a net profit of 1.9 billion euros ($2.131 billion) in the second quarter. This figure was higher than the previous year's 1.4 billion euros and exceeded analyst expectations of 1.82 billion euros. Additionally, the company raised its full-year sales growth forecast from 25% to 30%.

In the U.S., Goldman Sachs will report earnings before the market opens, while Netflix, Tesla, IBM, and United Airlines will announce their earnings after the market closes.

Investors will closely monitor the inflation data for the eurozone, which is expected to be released later on Wednesday. European bonds experienced gains after Klaas Knot, a member of the European Central Bank Governing Council, stated that monetary tightening beyond the upcoming meeting is uncertain.

 

[Z Forex]

Japan Surprises with Trade Surplus, China Maintains Rates, Property Sector Sees Respite

Asia-Pacific markets were mixed on Thursday as investors digested a slew of economic data across the region.

Japan’s Nikkei 225 was down 0.97%, while the Topix was 0.5% lower as the country posted a surprise trade surplus of 43 billion yen ($308 million), its first surplus in 23 months.

China kept its one and five-year loan prime rates unchanged, days after China’s second quarter GDP came in below expectations. China’s major state-owned banks were seen selling dollars to buy yuan in the offshore spot market in early trades on Thursday.

China’s efforts to revive growth, from cutting rates to closing out a regulatory crackdown on tech firms, have so far done little to support growth in the world’s second-largest economy. However, some relief surfaced for the property sector as Chinese authorities reportedly considered easing home buying restrictions in major cities, leading to a rise in shares of developers.

Australia’s seasonally adjusted unemployment rate remained unchanged at 3.5% in June, slightly lower than the 3.6% expected by economists polled by Reuters.

European markets are set for a muted open on Thursday as investors assess the implications of some big U.S. corporate results and the start of earnings season at home.

German producer prices rose by 0.1% year on year in June, the federal statistics office said Thursday, slightly exceeding analyst expectations of no annual change.

Today, economic data for the US will be released, including the Initial Jobless Claims and the Philadelphia Fed Manufacturing PMI.

 

[Z Forex]

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Asia-Pacific Markets Slide on Japan's Inflation Data, TSMC's Net Income Decline; European Markets Await Spanish Election​

Asia-Pacific markets experienced a decline on Friday as investors analyzed Japan's consumer price index figures for June. According to official data, the country's core inflation rate, excluding fresh food costs, was reported at 3.3%, aligning with economists' expectations polled by Reuters. This figure is slightly higher than May's rate of 3.2% and surpasses the Bank of Japan's 2% target. Additionally, Japan's headline inflation rate for June also stood at 3.3%, up from the previous month's 3.2%.

On the same day, Taiwan Semiconductor Manufacturing Company, the world's largest chipmaker, faced a 3.11% drop in morning trade after reporting its first quarterly net income decline in four years. In the second quarter, the company's revenue decreased by 10% compared to the same period last year, amounting to NT$480.84 billion, while net income fell by 23.3% year-on-year to NT$181.8 billion.

As European markets prepared to open on Friday, investor enthusiasm was tempered due to the upcoming Spanish election and anticipation for a significant week of corporate earnings. The U.K. Prime Minister Rishi Sunak's Conservative Party faced setbacks in a series of by-elections, losing two seats in parliament to the main opposition Labour Party and centrist Liberal Democrats. These results signal potential challenges for Sunak's party in the forthcoming general election in 2024.

Spain was also gearing up for a pivotal snap general election on Sunday that could potentially lead to a shift in power from left-wing Prime Minister Pedro Sanchez's four-year tenure to a more right-leaning government in Europe's sixth-largest economy.

In other news, U.K. retail sales experienced a boost of 0.7% month on month in June, attributed to unusually warm weather, as reported by the Office for National Statistics on Friday. Economists polled by Reuters had projected a more modest monthly rise of 0.2%.

Meanwhile, the Bloomberg Commodity Index was on track to record its third consecutive weekly gain, mainly driven by surging wheat prices following escalated tensions between Russia and Ukraine in the Black Sea region.

 

[Z Forex]

Chinese Property Stocks Tumble on Debt Fears, Japan's Business Activity Holds Steady, Australia's Private Sector Contracts​

On Monday, Chinese property stocks experienced a significant decline, with Country Garden's shares leading the way by reaching their lowest point in over eight months. This was triggered by renewed concerns about the debt situation of Chinese real estate developers. In response, China is implementing a series of measures to bolster its economy, especially ahead of a crucial Politburo meeting scheduled for this week, which will assess the country's economic performance for the first half of the year.
In the past week, the authorities made several pledges aimed at specific sectors and intended to reassure private and foreign investors about a more favorable investment environment. However, many of these measures were broad and lacked specific details.
Meanwhile, Japan's business activity showed growth for the seventh consecutive month, according to preliminary estimates by au Jibun Bank. The country's composite purchasing managers index (PMI) remained at 52.1 for July, unchanged from the previous month. However, the services PMI slightly decreased from 54 in June to 53.9, while manufacturing activity continued to contract, with the PMI declining from 49.8 to 49.4.
In Australia, private sector business activity declined for the first time since March, mainly due to a contraction in the services sector. Juno Bank's flash estimates showed a drop in the composite purchasing managers index to 48.3 from 50.1 in June. The services PMI fell below the no-change mark of 50, reaching 48, compared to 50.1 in June. On the other hand, manufacturing activity saw a milder contraction at 49.6, improving from 48.2 in June.
It's important to note that a PMI reading above 50 signifies an expansion in the sector, while a reading below 50 indicates a contraction.
Additionally, the HCOB Germany Composite PMI declined to 48.3 in July 2023 from June's 50.6, falling below the forecast of 50.3, as indicated by preliminary estimates. This suggests the first contraction in private sector activity so far this year and the most significant downturn since November. The decline was attributed to manufacturing production falling at the fastest rate since May 2020, mainly due to the rapidly declining demand for goods. Lastly, Spanish equities underperformed following an inconclusive outcome in the recent election held on Sunday, which generated uncertainty and weighed on investor sentiment.​

 

[Z Forex]

Hong Kong Stocks Rebound on China's Pledge, European Markets Cautious Amid Economic Data and Earnings

On Tuesday, Hong Kong stocks experienced a strong rebound, with the Hang Seng index surging over 3%. This surge was triggered by China's Politburo, which pledged to promptly "adjust and optimize policies" to address issues in its struggling property sector. Additionally, Beijing's top decision-making body promised to prioritize stable employment as a strategic goal and introduced other measures to stimulate consumption and tackle debt risks. This commitment came after disappointing economic data surfaced last week, prompting renewed calls for policy support to bolster growth.
Meanwhile, European markets are expected to open cautiously on Tuesday as investors carefully evaluate economic data and corporate earnings from the region. There will be a keen focus on various economic reports, such as the German business climate and British business optimism index data. Notably, companies like LVMH, Unilever, Deutsche Borse, Randstad, and Italgas are slated to report their earnings on the same day.
Recent data indicated a slowdown in business activity in France, Germany, and the U.K. during July, adding to recessionary concerns across Europe. Additionally, investors will be keeping an eye on the Eurozone bank lending survey on Tuesday, which can offer insights into borrowing trends ahead of anticipated rate hikes by both the Federal Reserve and the European Central Bank.
The week remains busy for global investors, with a series of corporate earnings announcements and central bank meetings in focus. The European Central Bank is scheduled to meet on Thursday, where policymakers are expected to announce a 25 basis point rate hike and provide guidance on their efforts to combat inflation in the final stages.

 

[Z Forex]

Global Stocks Decline Ahead of Fed's Rate Decision and Inflation Trends: Earnings Season Remains in Focus


Asian stocks declined, mirroring the drop in European equity futures, as investors adjusted their positions to mitigate risks in anticipation of the Federal Reserve's upcoming rate decision.
During the second quarter, Australia's consumer price index grew by 6% year on year, showing a decrease from the 7% recorded in the first quarter. This marks the second consecutive quarter of a slowdown in the inflation rate, following the 33-year high of 7.8% observed in the fourth quarter of 2022.
The Federal Reserve is anticipated to approve its 11th interest rate increase since March 2022. Markets have fully priced in a quarter percentage point hike, which would bring the benchmark borrowing rate to a target range of 5.25%-5.5%. If implemented, this would be the highest level for the upper boundary of the federal funds rate since January 2001. Investors will closely monitor signals from the Federal Open Market Committee, seeking indications that the members are confident enough in the fight against U.S. inflation to temporarily pause further rate hikes.
Consumer confidence in the US soared to a two-year high in July, reaching a reading of 117.0, attributed to a tight labor market and decreasing inflation. Nonetheless, the economy still faces uncertainties, with the Conference Board's survey providing mixed signals.
International Monetary Fund’s (IMF) upward revision to the global growth forecasts joins the previously released downbeat data from top-tier economies, which in turn flagged concerns of a sooner end to the rate hike cycle.
The focus remains on earnings season, with results from companies such as Deutsche Bank, Stellantis, GSK, Carrefour, and luxury goods giant LVMH. In the United States, investors are digesting an earnings beat from Alphabet and a slowdown in cloud revenue growth from Microsoft, in anticipation of results from Coca-Cola, Boeing, AT&T, Meta, Chipotle, and Mattel.