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Text of the US-Iran Memorandum of Understanding: Following the signing of the memorandum of understanding, the United States will soon grant waivers for Iranian oil exports.On June 18th, the Bank of England held its fourth consecutive meeting, keeping interest rates unchanged at 3.75%, believing that a rate hike was premature given the unclear strength of rising inflationary pressures. The Monetary Policy Committee voted 7-2 to maintain the rate, in line with market expectations. Monetary Policy Committee member Green and Chief Economist Peale advocated a 25 basis point hike. Most other members largely maintained Governor Baileys stance of "actively maintaining the status quo." Bailey argued that this stance itself constituted an effective tightening compared to market expectations of a rate cut before the conflict. Both Peale and Green stated that a rate hike now would help curb household expectations of future inflation. According to the banks quarterly survey, household inflation expectations have risen to their highest level since at least 2009. The preliminary ceasefire agreement reached between the US and Iran is expected to reopen the Strait of Hormuz and lower oil prices. Given the UKs heavy reliance on imported natural gas, maintaining the agreement would be beneficial to the UK. However, Governor Bailey stated, "Regardless of what the future holds, the higher energy prices of the past four months already indicate that some inflationary pressures are building." The Bank of England expects inflation to rise above 3.25% in the fourth quarter, up from 2.8% in May, but down from the 3.6% to 3.7% forecast in April under two of the three main scenarios. The outlook for economic growth is also slightly more optimistic, with potential growth projected at 0.2% per quarter, up from 0.1% in the previous forecast.Text of the US-Iran Memorandum of Understanding: Iran will maintain the status quo of its nuclear program.The yield on UK two-year government bonds rose 7 basis points to 4.22%.Traders maintained their bets on Bank of England interest rates, expecting a 35 basis point increase this year.

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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