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On March 24th, UBS downgraded its ratings for Indian and Eurozone stocks, warning that these stocks are highly sensitive to rising oil prices and will be more vulnerable if the Middle East conflict continues. Suresh Tantia, UBS Asia equity strategist, stated, "It could be very difficult to draw a final conclusion on the Iran war in the short term." In energy-import-dependent markets such as India and Europe, stock indices have fallen by more than 9% since the outbreak of the Iran war, more than twice the decline in the United States. This reflects concerns that continued high energy prices could dampen economic growth, delay interest rate cuts, and increase fiscal pressure. This shift is reinforcing the strategy adjustments of fund managers, who are reassessing their portfolios and moving towards more defensive and energy-resilient markets.On March 24, Minister of Commerce Wang Wentao met with a delegation of member companies led by Chairman of the Board of Directors of the US-China Business Council, Sir Alex Ferguson, and President, Sen Tan, on March 23. The two sides exchanged views on US-China economic and trade relations and the development of US-funded enterprises in China. Li Chenggang, Vice Minister of Commerce and Chinas International Trade Representative, also attended the meeting. Wang Wentao emphasized that Chinas economic development provides stability and certainty to the turbulent world situation. China will focus on promoting high-quality development, unswervingly advance high-level opening-up, and continue to optimize the business environment. Chinas 15th Five-Year Plan is not only a "new blueprint" for Chinas development but also a "new opportunity" for global development. He welcomed US companies to continue to deepen their presence in the Chinese market and develop and progress together with China.The chart shows that at 22:00 Beijing time on March 24, there will be large foreign exchange option orders for Euro, Japanese Yen, British Pound, Australian Dollar, etc., expiring. There are 6 large orders with strike prices of over 1 billion. Please manage your risks.March 24th - Recent geopolitical tensions have significantly increased gold price volatility. Ren Fei, a fund manager at China Europe Fund, analyzed that the core drivers of gold prices can be divided into two dimensions: long-term and short-term. In the long term, it depends on the US fiscal deficit rate and the scale and creditworthiness of the government debt it reflects; in the short term, it is mainly affected by the degree of monetary policy easing. Regarding the decline in gold prices following the outbreak of the US-Israel-Iran conflict, Ren Fei believes that in the short term, the conflict has significantly pushed up international oil prices, causing previously declining inflation expectations to rise again. Market anxieties have fluctuated, with some even anticipating that the Federal Reserve might restart interest rate hikes in 2026. This directly restricts the scope for monetary policy easing, thus significantly impacting gold prices. Despite short-term adjustments, Ren Fei remains optimistic about the long-term trend of gold, based on two main points: First, the conflict between the US, Israel, and Iran is likely to evolve into a protracted stalemate, ultimately returning to negotiations and bargaining, during which the US will face further debt pressure and its monetary credit will continue to be under pressure; second, regarding the policy choice between raising and lowering interest rates, the US is unlikely to shift to raising rates. To alleviate the pressure of government debt payments and support the development of fields such as AI, monetary policy will need to remain loose, and there may even be a need to lower interest rates, thus making it difficult for the monetary environment to tighten substantially.On March 24th, Pepperstone strategist Michael Brown stated that Trumps claim that negotiations with Iran were "progressing well and productively" indicates his attempt to de-escalate tensions. "While Iran denies this, whether or not dialogue actually took place is less important. This move suggests that Trump has changed his ultimatum issued over the weekend and appears to be seeking de-escalation for the first time since the conflict began. In the ongoing Middle East conflict, we may finally see a glimmer of hope."

GBP/USD hits 1.16 because to Truss' fiscal boost and rising BOE rates

Alina Haynes

Sep 06, 2022 15:27

截屏2022-09-06 上午11.21.16.png 

 

GBP/USD receives bids to retest the intraday high above 1.1590 as bulls embrace Lizz Truss' leadership amid expectations of a large stimulus and a push to the Bank of England (BOE). Consequently, throughout Tuesday's Asian session, the Cable pair led the G10 currency pairs with intraday gains of 0.65%.

 

"Incoming Prime Minister Liz Truss has drafted plans to stabilize annual energy and gas costs for a typical UK residence at or below the current level of £1,971," As a result of Russia's decision to shut off gas supplies to Europe in response to sanctions imposed in response to the invasion of Ukraine, she is under pressure to find a solution to increasing energy prices that are crushing individuals and businesses in the United Kingdom.

 

After the results were revealed, Truss declared, "I will submit a solid proposal to cut taxes and stimulate the economy." According to Reuters, UK prime ministerial candidate Truss stated, "I would resolve the energy crisis by tackling people's energy prices and our long-term energy supply problems."

 

Aside from that, her criticism of the BOE's slow response to the fight against inflation is well-known, which suggests that the "Old Lady," as the UK's central bank is often known, will increase interest rates more quickly.

 

The dollar's loss also contributes to the GBP/USD recovery, it should be noted. Despite this, the US Dollar Index (DXY) fell 0.35 percent to 109.43 at press time, failing to justify higher US Treasury yields. In doing so, the dollar index versus the six major currencies extended its drop from yesterday's 20-year high.

 

The decrease in the DXY may also be attributable to the market's cautious optimism, as indicated by mildly optimistic stock futures, in anticipation that global authorities will be able to address the energy crisis. The recent reduction in hawkish Fed predictions, particularly in the wake of Friday's mixed US employment report, provides additional support for the GBP/USD recovery.

 

Alternatively, according to data released by payments provider Barclaycard on Tuesday, a decrease in Consumer Spending investigates the bears. The Financial Times said that "UK consumers cut spending on clothing, home improvement, and cosmetics in August, while business activity declined, a symptom of "collapsing" demand due to the escalating cost of living crisis" (FT).

 

Amid crowded markets, risk catalysts are likely to occupy pair traders in the future. Also essential will be the ISM Services PMI for August, which is predicted to be 55.5 as opposed to the prior reading of 56.7.

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