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July 9th - A report from Bank of Japan (BOJ) branch governors at Thursdays meeting showed that the Japanese economy remains robust overall despite headwinds including Middle East tensions, rising oil prices, and a weak yen. The BOJ stated that logistical disruptions and raw material shortages caused by geopolitical risks have put pressure on exports and production. The bank added that the risk of a sharp economic downturn has diminished due to the implementation of alternative procurement programs and adjustments to transportation routes. This could strengthen market expectations for further interest rate hikes in the near term. Overnight index swap market pricing currently indicates that the market expects at least one more BOJ rate hike before the end of this year.Yields on UK government bonds of all maturities fell by about 4-6 basis points in early trading.On Thursday, July 9th, the German DAX 30 index opened 247.33 points higher, or 0.99%, at 25113.00; the UK FTSE 100 index opened 30.04 points lower, or 0.29%, at 10459.00; the French CAC 40 index opened 59.35 points higher, or 0.72%, at 8312.01; the Euro Stoxx 50 index opened 56.94 points higher, or 0.92%, at 6261.85; the Spanish IBEX 35 index opened 211.39 points higher, or 1.11%, at 19260.69; and the Italian FTSE MIB index opened 418.25 points higher, or 0.81%, at 52235.50.Gold prices rebounded above $4,100 an ounce on July 9th after Wednesdays sell-off. This rally was supported by a weaker dollar and renewed geopolitical tensions in the Middle East following Wednesdays renewed clashes between the US and Iran. However, rising energy prices could complicate the inflation outlook, reinforcing market expectations that the Federal Reserve will maintain high interest rates for a longer period or raise rates further. The minutes of the Feds mid-June policy meeting highlighted a hawkish shift within the committee, putting pressure on precious metals. Thomas Ryan, an economist at Capital Economics, said, "The minutes reiterated that the door to a September rate hike remains very open."According to Futures News on July 9th, as of 15:00 Beijing time, spot platinum rose 1.86% and spot palladium rose 1.78%.

Despite the Bank of England's less hawkish forecasts, GBP/USD is expected to rise beyond 1.2170

Daniel Rogers

Aug 04, 2022 11:52

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The GBP/USD pair has showed a modest retreat after failing to reclaim the 1.2170 resistance level. As the US dollar index (DXY) is projected to extend losses below 106.30, the upside stays favored. After a good fall to the round-number support around 1.2100, the asset has resumed its general uptrend.

 

As investors await the Bank of England's monetary policy decision, the cable might exhibit some volatility in the near future (BOE). In consideration of market expectations, BOE Governor Andrew Bailey will raise interest rates to 1.75 percent as a second successive 50 basis point (bps) increase is anticipated.

 

No one could dispute the reality that households in the United Kingdom are suffering tremendous pricing pressures. The inflation rate has risen to 9.4 percent, and there have been no indicators of a peak as of yet. The rate of inflation might reach double digits if the rate of price growth continues to accelerate, and families will be forced to pay more for identical quantities.

 

Well, a 50 basis point rate boost is insufficient to battle the inflation monster. However, dismal growth estimates and a decrease in the Labor Cost Index prevent the BOE from sounding excessively hawkish.

 

On the dollar front, the US dollar index (DXY) is experiencing uncertain movement as the visit to Taiwan by US House Speaker Nancy Pelosi has exacerbated protracted Sino-US tensions. The United States has held the global leadership position for a considerable amount of time, and China is keen to take over. Therefore, the United States' backing for Taiwan, a country with enormous technical potential, has exacerbated tensions between the United States and China.