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Real-time News
July 30th - Foreign media analysis suggests that while US President Trump continues to pressure newly appointed Federal Reserve Chairman Warsh to cut interest rates as soon as possible, Wall Street investors are increasingly betting on the opposite outcome. Recent escalation of the conflict with Iran, the implementation of a new round of global tariffs, the continued data center investment boom, and strong US consumption have collectively exacerbated market and Federal Reserve concerns about inflationary pressures, reinforcing expectations of continued tightening policies or even further interest rate hikes. The market widely expects the Federal Reserve to keep interest rates unchanged at its Wednesday meeting. However, whether Warsh, who took over as chairman at the end of May, can continue to suppress calls for rate hikes within the committee increasingly depends on whether inflation can continue to improve. Current polls show that the American public is not satisfied with Trumps economic performance, and higher interest rates will undoubtedly further dampen the economic performance the White House hopes to see. Trump has consistently called for rate cuts and reiterated this stance this week. However, even if the Federal Reserve ultimately chooses to raise rates, Trumps initial target may not be Warsh, but rather other Federal Reserve officials. Trump has already appointed three members to the seven-member Federal Reserve Board of Governors. Trump previously stated, "Kevin is excellent, but he also has a committee, and the members of that committee are very politicized. He wants to do the right thing, and I know what he wants to do, but he also needs the approval of some people who may have ulterior motives. Interest rates should go down."Bank of Canada meeting minutes: The ongoing conflict in the Middle East has increased the upside risks to inflation.Bank of Canada meeting minutes: The possibility of new tariffs imposed by the United States is a "constant downside risk".Bank of Canada meeting minutes: Some members expressed concern about signs of rising medium-term inflation expectations, but all members agreed that long-term inflation expectations remained solid.Bank of Canada meeting minutes: Nevertheless, members noted that uncertainty remained high, partly due to the unpredictability of the Middle East conflict.

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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