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Forex Daily Market Analysis from ForexMart

Discussion in 'Forex Forum' started by Andrea ForexMart, Oct 4, 2016.

  1. KostiaForexMart

    KostiaForexMart Well-Known Member

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    Pound sterling achieved new records

    As January begins, the British currency decided to keep up with the American one and achieve new records. The pound has now succeeded in its plans, but experts warn about the temporary nature of its growth.

    The pound began the new month of the new year by reaching price highs. On Tuesday, it approached two-year highs against the European currency and slightly fell amid the strengthening of the US dollar (by 0.12%, to 1.3464). This was facilitated by a prolonged rise in the cost of government bond yields amid growing expectations about the Bank of England's rate hike. According to preliminary calculations, the interest rate increase will occur next month.

    The current situation gave impulse to the pound, which it successfully used. On Wednesday morning, the GBP/USD pair was trading at the level of 1.3527, regaining previous losses and heading towards new levels. However, experts are worried that the pound will not be able to hold on to the reached positions in the mid-term and will plunge again.

    Many economists believe that the growth of the pound and the GBP/USD pair will be temporary if inflation in the US and UK accelerates. Currently, the British economy is growing at a slower pace than the American one. The reason for this is the Fed's decisive action on key issues related to stimulus cuts and multiple rate hikes in 2022. As for the Bank of England, it is not planning any radical changes in its monetary policy in the near future. At the moment, the key interest rate of the Fed and the Central Bank of England is at the same level – 0.25%.

    If the British regulator refrains from further tightening monetary policy and raising rates, then the pound's growth will be questionable. On the other hand, the Fed's hawkish actions are helping the US dollar's growth, which will continue in 2022. The multi-directional monetary strategies of the Fed and the Bank of England create prerequisites for a decline in the GBP/USD pair in the coming year.

    The current superiority of the pound is explained by several factors, including the Bank of England's sudden increase in rates recorded in December 2021, and the refusal of the British authorities from new restrictive measures. According to British Prime Minister Boris Johnson, the new mutation of the Omicron coronavirus is much milder than other strains. Market participants expect a two-fold increase in rates by the Bank of England. It is possible that the rate will be increased by 15 basis points (bp) by the March meeting of the regulator. By the end of this year, experts do not exclude an additional increase. According to economists, the Bank of England will continue this strategy in 2023.

    Economic activity in the UK has remained stable for several months. According to the latest PMI reports, production in the country in December 2021 grew at a faster pace than expected. This inspires the markets with optimism and allows them to make positive forecasts. During the reporting period, the number of jobs fell slightly, but this was offset by an increase in the volume of new orders and an increase in production. Analysts' concern was caused by a significant increase in prices, increasing fears about a new round of inflation.

    The current turmoil did not stop the pound's rally, which peaked at the level of 1.4212 in May last year. However, it was brought down by the unexpected decision of the Bank of England in December not to raise interest rates. Against this background, it declined to the lows of 2021 (1.3200), but later recovered. Currency strategists at DBS Bank expect the GBP/USD pair to remain in a low range of 1.2800-1.3300 this year.

    The factors slowing down the rate hike by the regulator may be the problems associated with Brexit, as well as difficulties in the trade negotiations between London and Brussels. It is possible that if the negotiations fail, the British government will apply Article 16 and start a trade war with the EU. The implementation of such a scenario would jeopardize the stability of the British economy and national currency. However, analysts hope to reach a compromise in the course of mutually beneficial trade cooperation.
     
  2. KostiaForexMart

    KostiaForexMart Well-Known Member

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    Dollar still dominates other major currencies

    Europe's single currency cannot outperform the US dollar. This was stated by Steen Jakobsen, chief investment officer at Saxo Bank. One of the main reasons is that the European regulator is the most static central bank in the world. Thus, the European Union's benchmark interest rate has remained at zero for quite some time, i.e. has not changed since March 2016. Furthermore, ECB head Christine Lagarde sees no reason to raise interest rates in 2022.

    According to Eurostat, Euro area annual inflation rose to 4.9% in November, the highest in 25 years. Jakobsen believes that the EU economy can grow faster than the economies of other countries or show a current account surplus. The surplus is falling due to obvious difficulties in the services sector. This also applies to Germany, the eurozone's largest economy.

    As for the US dollar, according to the SWIFT, it was still able to hold onto its position as the main currency in the international settlement ranking in November. Thus, the US dollar gained 39.16%. That means it rose by 1.53% in 12 months. It has strengthened due to the widening interest rate gap as well as inflation dynamics in the US compared to other major markets such as Japan and Europe.

    The euro was clearly underperforming. It gained 37.66%, with a year-on-year increase of only 0.22%. Among the leaders were the British pound, Japanese yen, and Chinese renminbi.

    A monetary tightening by the US Federal Reserve, which is expected by analysts in March, will give the dollar the strongest support, making it extremely difficult for most currencies to rise against the US dollar in the coming months.

    It is the interest rate differential, not the coronavirus, that will determine sentiment in the major currency markets in the near future. The vast majority of analysts polled by Reuters are confident that fluctuations in the currency markets will become noticeably greater over the next three months. Notably, this confidence applies not only to the currencies of the major markets but also to emerging market currencies.

    After an interest rate hike already in the first month of spring, the US regulator is expected to start reducing its assets. The dollar could then feel superior to the other major currencies. By the way, financial markets expect at least three rate hikes in the US this year.
     
  3. KostiaForexMart

    KostiaForexMart Well-Known Member

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    US shares mixed at close of trade; Dow Jones Industrial Average down 0.45%

    At the close in New York, the Dow Jones shed 0.45%, the S&P 500 shed 0.14% and the NASDAQ Composite shed 0.05%.

    In the leaders of growth among the components of the Dow Jones at the end of today's trading were shares of Intel Corporation, which rose in price by 1.77 points (3.31%), to close at 55.21. Merck & Company Inc added 2.58% or 2.07 points to end trade at 82.37. UnitedHealth Group Incorporated rose 1.40% or 6.40 points to end at 465.00.

    The biggest losers were Nike Inc, which fell 4.16% or 6.53 points to end the session at 150.44. Boeing Co shares were up 2.87% or 6.19 points to end at 209.31, while Visa Inc Class A was down 2.30% or 4.99 points to 211. , 97.

    The leaders of growth among the components of the S&P 500 index at the end of today's trading were shares of Moderna Inc, which rose in price by 9.28% to the level of 233.70, Humana Inc, which gained 6.06%, to close at 385.18, as well as shares Hologic Inc, which were up 4.47% to end at 73.45.

    The biggest losers were Take-Two Interactive Software Inc, which fell 13.13% to close at 142.99. Cardinal Health Inc shed 5.92% to end the session at 51.03. Estee Lauder Companies Inc was down 5.36% to 335.89.

    The top gainers among the components of the NASDAQ Composite index at the end of today's trading were shares of Bone Biologics Corp, which rose 57.14% to reach 5.39, Zynga Inc, which gained 40.67% to close at 8.44, and Molecular Partners AG ADR shares rose 30.22% to end at 21.50.

    The biggest losers were TDH Holdings Inc, which fell 81.86% to close at 0.740. Kidpik Corp shares lost 27.47% and ended the session at 4.75. Rapid Micro Biosystems Inc was down 21.23% to 7.20.

    On the New York Stock Exchange, the number of securities that fell in price (2052) exceeded the number of those that closed in positive territory (1186), while the quotes of 158 shares remained practically unchanged. On the NASDAQ stock exchange 2,493 companies fell in price, 1,368 increased, and 206 remained at the level of the previous close.

    Take-Two Interactive Software Inc fell to a 52-week low, down 13.13%, 21.61 points to trade at 142.99. TDH Holdings Inc fell to a 52-week low, down 81.86%, 3.340 points to trade at 0.740. Kidpik Corp's shares fell to historic lows, down 27.47%, 1.80 points, to close at 4.75. Molecular Partners AG ADR rose to all-time highs, up 30.22%, 4.99 points, to close at 21.50. Rapid Micro Biosystems Inc fell to historic lows, down 21.23%, 1.94 points to end at 7.20.

    The CBOE Volatility Index, which measures the value of S&P 500 options trading, was up 3.41% to trade at 19.40.

    Gold Futures for February delivery was up 0.21% or 3.85 to $ 1.801.25 a troy ounce. Elsewhere in commodities, WTI crude for February delivery fell 0.62%, or 0.49, to $ 78.41 a barrel. Futures contracts for Brent oil for delivery in March were unchanged 0.00%, or 0.00, to trade at $ 81.02 a barrel.

    Meanwhile, on the Forex market, EUR / USD was up 0.03% to hit 1.1327, while USD / JPY was flat 0.00% to hit 115.20.

    The US Dollar Index Futures was up 0.23% at 95.938.
     
  4. KostiaForexMart

    KostiaForexMart Well-Known Member

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    Did the Fed cause the US dollar to collapse?

    The US dollar dropped after the Fed's statements about the duration of the normalization of monetary policy. During this process, the indicated currency risks losing its advantages as the main safe-haven currency.

    On Wednesday, the US currency collapsed to its lowest level since November 2021. The main reason for this was the statements of Fed Chairman Jerome Powell, who allowed a gradual increase in interest rates amid the continuous high inflation in the United States. The regulator's management believes that it will take several months to make a decision to cut the central bank's balance sheet by $ 9 trillion.

    In a similar situation, this currency found itself in a slight stupor state, trying to cope with the current losses. Powell's statements that the US economy "does not need aggressive monetary stimulus measures" exerted additional pressure. The central bank is ready to start normalizing monetary policy, but this process will take time. During the speech of the Fed chairman, the markets expected to find signals about the possible timing of the first rate hike. However, the situation remained unclear, as the head of the regulator stressed that the Fed did not focus on the timing of amendments to the monetary policy and did not make decisions on reducing the balance sheet.

    The tension of the general background of the global financial market shocked the US dollar. On Wednesday morning, the EUR/USD pair was in the range of 1.1373-1.1374. At the same time, the Euro currency has slightly risen since the close of the previous session, in which it was trading at the level of 1.1364.

    Experts believe that the key factor influencing the US dollar's dynamics is risk appetite, which currently determines its state and the market. According to analysts, the Fed's "hawkish" position affects the US dollar only if risky sentiment weakens. Against the background of risk aversion, the US dollar usually grows, and with an increase in risk appetite, it falls, which happened this week.

    The fact that the US currency did not react much to Friday's US employment report surprised market participants According to current records, the US economy has nearly full employment. Experts explain the dollar's "detachment" from macro statistics by the fact that it reacts to an increase in profitability only when risk sentiment sharply decreases. The US currency rises only during a liquidity crisis when the shares of borrowed funds in the stock markets are noticeably reduced.

    The main topic for market participants was the Fed's actions related to the upcoming cut of stimulus measures and an increase in interest rates. It can be recalled that the federal funds rate has been increased by 15 basis points (bp) over the past four sessions. According to preliminary forecasts, four or more Fed rate hikes are expected this year. A similar development of events is allowed if inflation accelerates.

    The next steps of the regulator will be more aggressive than expected – quantitative easing (QE) or a rate hike of more than 25 bp. After the rate increase, the Fed's balance sheet will begin to shrink, which will take about two years. The regulator is expected to withdraw $ 1.5 trillion of excess liquidity from the system to keep the global financial market afloat. The current situation weakens the US dollar, which resists negativity. The US dollar is supported by the fact that the markets have considered the tightening of the Fed's policy at current prices.
     
  5. KostiaForexMart

    KostiaForexMart Well-Known Member

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    US stock indicators rose on inflation data

    The Dow Jones Industrial Average rose 38.3 points (0.11%) to 36,290.32 points. Standard & Poor's 500 increased by 13.28 points (0.28%) - up to 4726.35 points. The Nasdaq Composite added 34.94 points (0.23%) to 15,188.39 points.

    Papers of the pharmaceutical company Biogen Inc. fell by 6.7%. The U.S. government said Medicare will only cover the cost of Alzheimer's drug Aduhelm for early-stage patients enrolled in clinical trials. The share price of Eli Lilly & Co., which is developing a similar drug, fell 2.44%.

    The cost of the health insurance company Humana Inc. rose by 0.92%. The company will launch a $1 billion share buyback as part of the $3 billion buyback program announced last February.

    Meta Platforms Inc. (formerly Facebook) has appointed Tony Xu, head of food delivery service DoorDash Inc., to the company's board of directors. DoorDash shed 2.1%, while Meta lost 0.3%.

    The manufacturer of surgical robots and systems Intuitive Surgical reported that revenue in October-December, according to preliminary data, reached nearly $1.55 billion, which is 17% higher than the same period in 2020. However, the company's share price fell 1.5%.

    Bank Jefferies Financial Group Inc. in the 4th quarter of 2021 recorded revenue of $1.81 billion, which is 3% less than in the same period last year. The indicator also turned out to be worse than analysts' forecasts, who estimated it at $1.9 billion. Quotes of the bank's papers fell by 9.3%.

    Satellite provider Dish Network Corp. rose by 2.8%. The New York Post, citing informed sources, said the company is in talks to merge with DirectTV.

    Cost of Caterpillar Inc. rose by 1.1%. Analysts at UBS Bank increased the target price of the company's shares to $250 from $235 per share.

    Consumer prices (CPI) in the United States soared 7% last month compared to the same month in 2020, according to data from the country's Department of Labor. The pace of growth has become the highest in 40 years - since June 1982.

    Inflation accelerated from 6.8% in November and was in line with analysts' forecasts.

    Capitol Securities Management economist Kent Engelk noted that despite the fact that the indices ended trading below the highs of the session, the market showed signs of relief, as inflation was in line with forecasts.

    According to experts from RBC Capital Markets, inflation will continue to accelerate in early 2022, stabilize and begin to slow down in the second quarter, they believe. But the Fed will most likely feel pressure from rising prices and will be forced to make a decision to raise (rates) already at a meeting in March.
     
  6. KostiaForexMart

    KostiaForexMart Well-Known Member

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    US dollar is trying to resist the decline amid statistics and high inflation

    The US currency has to fight the collapse again at the end of the week, resisting the negative impact of several factors, including the problem of macro statistics. Nevertheless, experts are confident that it will recover without much loss.

    For a long time, this currency remains hostage to high US inflation. It can be recalled that the December macro statistics showed the highest core inflation over the past 40 years. The recent US CPI excluding food and energy in annual terms was 5.5%, which is higher than November's 4.9%. Current macro reports have shown that the expectation of the Fed's decisive action has reached a peak. The current situation practically sharply affected the US dollar, which is trying to resist the impact of negative factors.

    It has now suffered significant losses, including a key technical breakthrough in the EUR/USD pair. On Thursday, the classic pair broke the resistance line around 1.1386, which limited the actions of the EUR/USD pair since November 2021. The reason for this is the sharp weakening of the US currency, recorded after the release of the December CPI. On Friday morning, the EUR/USD pair was trading at the level of 1.1477, trying to keep its won positions.

    Experts consider the level of 1.1500 to be the next important resistance area for the pair. This is the previous low of the EUR/USD pair recorded before its massive collapse last November. The current situation is much the same. Today, the US dollar hit its biggest weekly drop in eight months. The reason for this is a sharp reduction in long positions on the USD and the markets taking into account several Fed rate hikes in its price.

    According to analysts, expectations of decisive action from the Fed do not matter much for the US dollar. Earlier, the US currency collapsed amid a sharp rise in the price of a number of commodities. The only "trump card" it has now will be another search for a safe haven if risk sentiment changes dramatically. The dynamics of this currency are significantly affected by inflation, and most often negatively. The Fed keeps the need to outpace its growth, and this tension has a negative impact on the American currency.

    However, many experts are optimistic about the US dollar's medium and long-term prospects. Specialists believe that it will systematically strengthen, alternating ups and downs. Analysts summarize that this is facilitated by the continued growth of commodities and the global asset market.
     

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