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A survey by the Central Bank of Russia predicts that the average benchmark interest rate will be 14.5% in 2026 (unchanged from previous forecasts).On September 2nd, Federal Reserve Chairman Williams stated that bond yields are an important indicator for the Feds assessment of the economic situation. The recent rise in yields was primarily driven by strong economic performance, an optimistic economic outlook, and robust investment demand, with some correlation to the Middle East conflict. However, yields currently do not appear to be significantly affected by the inflation outlook. Williams emphasized that the Fed will consider all economic data comprehensively, and its ultimate responsibility remains price stability, with reducing the inflation rate to 2% being the top priority. Tariffs and the Middle East war are the main factors contributing to current inflation exceeding the target, but a second-degree inflation effect from tariffs has not yet been observed. Inflation expectations remain under control, and recent inflation data is encouraging, showing an overall downward trend, although inflation in the services sector remains significantly high. He stated that the labor market is stable and remains robust, and it is necessary to push inflation back to 2% in the foreseeable future. He hopes to further observe and analyze economic data before making the next policy decision and will continue to gather information for the next FOMC meeting. Williams expressed support for the decisions of the July FOMC meeting, believing that the current interest rate level is appropriate and monetary policy is progressing smoothly.Tensions in the Middle East remain high, with Brent crude oil prices nearing the $96 mark during trading. A chart provides a quick overview of the pre-market conversion prices of crude oil between domestic and international markets.The US August ADP employment figures were released, showing the smallest increase since January and falling short of market expectations. A quick chart provides a view of the converted prices of gold and silver in the pre-market session.Syria has confirmed to the International Atomic Energy Agency that it will participate in a briefing on nuclear issues from September 7 to 11.

EUR/USD Expects Fourth Weekly Gains Above 1.0900 Despite The US Dollar's Rebound Advance Ahead Of US NFP

Daniel Rogers

Apr 07, 2023 11:42

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Despite a recent retreat, the EUR/USD bulls maintain control around 1.0920. This reflects the typical Good Friday inactivity and apprehension ahead of the US Nonfarm Payrolls (NFP) report released early in the day. The major currency pair was volatile on Thursday as a result of the US Dollar's initial rebound on fears of a recession, but ended the day unchanged as disappointing US data contrasted with stronger Eurozone data.

 

Fears of a recession in the world's largest economy were prompted by consecutive lackluster US data and falling US Treasury bond yields, giving USD bears a reprieve on Thursday morning. As traders prepared for the all-important NFP, the dollar's subsequent gains were reversed by another disappointing US employment report.

 

Despite this, US Initial Jobless Claims for the week ending March 31 rose to 228K from 200K anticipated and an upwardly revised 246K the prior week. Notable is the increase in Challenger Job Cuts from 77,77K to 89,703K in the given month.

 

Notably, Reuters fanned fears of a recession by citing the most recent decline in the preferred bond market indicator of Federal Reserve (Fed) Chairman Jerome Powell. The most reliable bond market indicator of an imminent economic contraction, according to Federal Reserve research, is the "near-term forward spread" between the forward rate on Treasury bills 18 months from now and the current yield on three-month Treasury bills.

 

According to Reuters, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated in prepared remarks on Thursday that the global economy is projected to expand by less than 3% in 2023, a decrease from 3.4% in 2022.

 

In other news, Germany's Industrial Production (IP) increased 0.6% year-over-year in February, versus market predictions of -2.7% and previous readings of -1.7%. Additionally, the monthly figures exceeded expectations by 0.1%, coming in at 2.0% compared to 3.7% previously. On Wednesday, Germany Factory Orders for February improved to -5.7% YoY from -12.0% previously revised down and -10.5% market expectations, while MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings.

 

Wall Street and US Treasury bond yields have both reduced weekly losses as a result of these strategies, but investors remain skeptical.

 

In the context of less liquidity surrounding the March US employment report, sporadic activity on the major markets can keep the EUR/USD inactive and prone to abrupt price swings. Notable is the fact that recent dovish Fed forecasts and disappointing US data generate expectations for a positive surprise and enormous price volatility thereafter.


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