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On August 21, analysts at Daiwa Capital Markets noted in a report that European Central Bank policymakers may have been somewhat relieved so far by the relatively limited indirect impact of the energy shock on other commodity prices. "Of course, the pressure is mainly concentrated in the early stages of the production chain and in industries most vulnerable to oil and gas prices," they stated. However, with wholesale oil and gas prices rising again in recent weeks, the risk of further exacerbation of the indirect transmission effect and a second round of price impacts lasting longer is also increasing.On August 21st, economists at Sumitomo Mitsui Nikko Securities stated that the Bank of Japan (BOJ) is likely to raise its policy rate from the current 1% to 1.25% at its next meeting in September. They noted that the BOJ is expected to raise rates again in January and June 2027, eventually reaching a policy rate of 1.75%. They added, "After next summer, import-driven inflationary pressures are expected to ease, making it unlikely that the BOJ will raise the policy rate to 2%—a level higher than the markets average estimate of the neutral rate." The overnight index swap market currently indicates an 84% probability of a BOJ rate hike in September, with two more hikes expected by early 2027.Russian Deputy Foreign Minister Ryabkov: Whats important now is how Washington can influence decision-making in Kyiv and Europe.Indias preliminary composite PMI for August was 54.6, below the expected 54.4 and the previous reading of 54.3.Indias preliminary services PMI for August was 54.5, below the expected 53.8 and the previous reading of 53.3.

The EUR/USD rise is getting close to 1.0200 as investors await US inflation data

Daniel Rogers

Aug 09, 2022 14:58

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The EUR/USD moves in the 1.0200 range during Tuesday's Asian session after falling from 1.0221 as traders look for fresh data. The major currency pair gained over the first part of the week but lost some of those gains by Monday's close. Recent price fluctuations, however, seem to be constrained by a lack of noteworthy data or events and a cautious attitude ahead of Wednesday's release of the US Consumer Price Index (CPI) for July.

 

Gains in the EUR/USD the day before are shown by higher readings of the Eurozone Sentix Investor Confidence Index and a drop in US Treasury yields. The primary sentiment indicator Index, however, increased in August from -26.4 to -25.2, which was projected to be the value. According to specifics, the eurozone's present state has improved from this month's lowest position since March 2021, when it was -16.5, to -16.3. The expectations index is at its lowest level since December 2008, despite a little increase to -33.8. It is still very close to that level. The US Dollar Index (DXY), in contrast, saw a daily decrease of 0.19 percent to 106.37.

 

The moderate Azione's resignation from the newly formed alliance ahead of the September elections looks to have put negative pressure on the Euro elsewhere due to Italian political worries.

 

The moderate Azione has backed out of its coalition with the Democratic Party and the +Europe party after only agreeing to do so last week. According to party leader Carlo Calendar, "the parts didn't fit." According to Reuters and Market News Publishing US, the alliance was formed in an effort to stop a more conservative government from taking office after the election on September 25.

 

Notably, gains in the EUR/USD the day before appeared to have been constrained by US President Joe Biden's displeasure of China's efforts to retake Taiwan and his censure of House Speaker Nancy Pelosi's trip to Taipei.

 

These actions caused the 10-year US Treasury rates, which had increased by 14 basis points (bps) the day before, to fall by around seven basis points (bps) to 2.75 percent. Wall Street also started Monday's trading day on a positive one before ending on a mixed note, albeit as of press time, S&P 500 Futures are showing minor gains.

 

Participants in the EUR/USD market may be interested in the second quarter's (Q2) US Nonfarm Productivity and Unit Labor Costs data. Forecasts suggest that US Nonfarm Productivity may rise to -4.6% from -7.3%, while Unit Labor Costs may decrease to 9.5% from 12.6%. The news regarding Taiwan and Russia will also be important for determining direction.


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