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  1. NZ business sentiment is less dire, RBNZ hint at rate cycle high Business outlook is now -37.6, up 25.9 points higher than the June low. Business outlook rose for a third month and at its fastest m/m pace since December 2020. Activity outlook rose from-4 to -1.8. Import intentions expanded for a second month. A large improvement for profit expectations, even though it remains negative overall. Credit conditions highest since mid-2021. All sectors see improved activity vs 1-year ago. Pricing intentions are still high, but inflation expectations dipped below 6% for the first time in six months. Business sentiment may not be going from strength to strength, but to see pessimism lose its grip after multi-year lows certainly a step in the right direction. Besides, investors tend to look at the rate of change over the absolute level of such indicators, and right now it looks very likely that business sentiment hit its low in June. The inflation and higher rates are having a negative effect on business sentiment. At 3%, RBNZ has one of the highest cash rates among the major economies and second place to the BOC and Fed at 3.25%. It’s likely we’ll see another 25bp hike but it’s also possible we could be nearing the terminal rate. Governor Orr said in August that the next rate move is not obvious and earlier today he said, whilst there’s still work to do regarding rates, the tightening cycle was already very mature. So against that backdrop, we suspect a 25bp hike on October the 5th, and may even see a pause-and will look for such clues in the October statement and minutes. Read More : Daily & Weekly Analysis On Xtreamforex
  2. US Housing data, Core PCE inflation The slowing US housing market is making alive some memories from the 200—2009 great recession but there is some confusion about whether it’s a red flag for the economy these days. New home sales have been trending downwards so far this year and the August reading is expected to mark a new low at 500k from 511k previously, the lowest in six years. Pending home sales due today could show a steeper contraction of -1.4% from -1.0% previously, remaining negative for the third consecutive month. A stabilization in the red-hot rent market in August, perhaps on the back of state limits in some regions, was probably a catalyst to a softer house demand too. However, more than half of the renters are still facing elevated prices year-on-year and given the inflation in construction materials as well as the tight supply of houses, there is little prospect for a significant slowdown in the market. The strength in the labor market is also a tailwind for the real estate sector, delaying any defaults in loan payments. Personal income and consumption figures and together the core PCE inflation on Friday could provide some updates on that front. Although expectations are for a minor monthly pickup to 0.3% and 0.2% respectively, the indicators may not rise any concerns if they stay within normal levels. A potential mild increase in the core PCE inflation to 4.7% y/y would not be something new either after similar pace in the core CPI inflation reading. Read More : Daily & Weekly Analysis On Xtreamforex
  3. EUR/USD approaches 0.9600 lows as recovery loses There was a sharp movement in euro which may be missed. The single currency dropped to a fresh low on the year against the greenback, reaching a low of 0.9551 before bouncing back to hit 0.9700, from where it has since drifted back lower. The EUR/USD has now fallen for the fifth consecutive day. However, it was still off the lows at the time of writing, along with the GBP/USD. Will there be any dup buying as we had to the European close? There are no obvious sings of a bottom in the EUR/USD yet, there’s the possibility we may see some short-covering at the start of this week, primarily due to the prospects of some coordinated central bank action while the lack of fresh news may encourage short-side profit-taking. In addition, the ECB is acknowledging that the growth and inflation outlook has bad and that the risks on latter are on the upside because of a weaker exchange rate. This is what President Lagarde said earlier today, which cause a bit if a bounce in the euro, although the upside remained capped as investors worried about the health of the economy. Any front-loading of interest rate hikes will only bring forward the time the ECB cuts again to help boost the economy. The central bank’s hands are tied, like the BoE and others. Read More : Daily & Weekly Analysis On Xtreamforex
  4. GBP down during Asian Trade The pound was aggressively lower during Asian trade. CME stopped trading of GBP futures. GBP/USD touched a record low. Combination of the UK’s mini budget and flight to the dollar weigh on sterling. The GBP was already facing heavy selling pressure on Friday when the UK’s new chancellor unveiled his new mini budget. The plan has been perceived as a tax cut for the rich alongside higher levels of debt, with one former treasury minister calling budget a “high risk gamble. The week closed with GBP/USD falling to just shy of its all time low set in 1985. And that level did not last very long. In today’s session there is an aggressive selloff for the British pound, which has sent GBP.USD to a fresh record low. Currently down around -2.4%, its within its fifth consecutive down day, which includes a -3.6% decline on Friday. Such levels of volatility have not been seen since March 2020, and not restricted to GBP/USD. Read More : Daily & Weekly Analysis On Xtreamforex
  5. BOE: Another 50bp hike and we expect more to come The BOE hiked policy rates by 50bp, bringing the bank rate to 2.25. The extent to which fiscal policy is set to boost demand and hence impact policy setting is still highly uncertain. Call for a 50bp hike in November and December and 25bp in February with risks of skewed towards additional hikes in 2023. The Bank Of England increased the Bank Rate by 50bp to 2.25% with 5 member voting for 50bp increase, 3 members voting for 75bp and one member voting for 25bp. As expected, BoE announced that outright government bond selling will start with a total reduction in bond holdings of 80 billion pounds over 12 months. The BoE repeated its meeting-by-meeting approach stating that “Policy is not on a pre-set path” giving close to no forward guidance to markets. One of the key takeaways from the Monetary Policy Summary is that the BoE no longer seem to pencil in a recession by Q4 2022. Note no inflation or growth forecast were published at this interim meeting, but not mentioning a recession gives a hint that the recession won’t hit as soon as BoE predicted in August. This feeds well into our narrative of the Fiscal stimulus providing near-term support to the economy. With newly elected PM Lizz Truss having announced the energy relief plan, which will cap energy prices for households, BoE now sees the peak in CPI inflation to be just below 11% compared to the 13% projected in August. Read More : Daily & Weekly Analysis On Xtreamforex
  6. How Much FOMC Interest Rate Hike By Fed? The Federal Reserve Open Market Committee lifted the federal funds rate to the 3.0% to 3.25% range and reaffirmed a continuation of its balance sheet runoff. The Fed updated its language stating the “recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to pandemic, higher food and energy prices, and broader price pressures”. The Summary of Economic Projections was updated from June:- The median projection for real GDP growth was downgraded in 2022. The forecast for 2023,2024,2025 and the longer run came in at 1.2%, 1.7%, 1.8% and 1.8% respectively. The median unemployment rate forecast was 3.8% for 2022. 4.4% for 2023, 4.4% in 2024 and 4.3% in 2025. The longer-run estimate of the unemployment rate stayed the same at 4.0%. On inflation, the median estimate for core PCE was assumed to be 4.5% in 2022, 3.1% in 2023, 2.3% in 2024 and 2.1% in 2025. The median projection for the fed funds rate was lifted to 4.4% in 2022, 4.6% in 2023, 3.9% in 2024, and 2.9% in 2025. The long-run neutral rate was assumed to be 2.5%. Read More : Daily & Weekly Analysis On Xtreamforex
  7. SNB could surprise (again) with a larger than expected hike The central bank entered ZIRP between 2011-2015 before switching to NIRP with a rate of -0.75%, where it remained until June this year. And with seemingly few paying attention, they not only hiked rates but came out swinging with a 50 bp hike and sent shockwaves across currency markets. This quickly saw the yen strengthen as traders assumed the BOJ would be next to follow, but we’re still waiting and will likely be for some time. But the main point is that the SNB is likely to hike again tomorrow, and it would be wise to at least be prepared for a larger hike than some expect. A recent poll saw economists up their 50bp hike for the SNB to 75bp. But in light of Sweden’s Riksbank hiking by 100bp, wholesale prices in Germany exploding higher and the potential for the Fed to hike by 100bp, the potential for the SNB to join to 100bp club. Besides, they hiked by 50bp when the consensus was for no change at all and have a track record with an element of surprise. Furthermore, the Swiss government upgraded 2022 CPI from 2.5% to 3%, and for 2023 from 1.4% to 2.3%- so perhaps they know something. There are some examples of a strong bullish trend on a currency chart, than CHF/JPY right now. Momentum has been increasing during each impulse move higher, the moving averages are in bullish sequence and fanning out, and prices are respecting the closest average as support. Read More : Daily & Weekly Analysis On Xtreamforex
  8. Reserve Bank of Australia raises rates again The Reserve Bank Board should slow the pace of rate increases once it reaches its assessment of neutral. That is particularly because of the treacherous lags that will have built up as the inevitable result of such a sharp rate increase in rates, from 0.1% back in May. The Governor has certainly indicated that intention, both in the speech to the Australian Business Economists on September 8 and in the Parliamentary hearing last Friday. The scaling back to a slower pace of tightening could begin from the October meeting, with the cash rate having reached the neutral zone at 2.35%. There has always been some uncertainty as to whether a starting point of 2.35% would be too far below the Governor’s assessment of neutral. He has argued in the past that the real neutral is at least zero, implying a 2.5% nominal rate given longer term inflation expectations. That is above the 2.35% starting point for the October meeting. That 1% growth rate now has some downside risks but for now given the current momentum in the economy, it’s decided not to mark 2023 growth down any further. It’s also noted that since the forecast is 1% growth rate in 2023 we have revised down our 2022 growth rate from4.4% to 3.4% meaning that the level of GDP by end 2023 will be considerably lower than we had expected when we first made the 1% growth forecast. Read More : Daily & Weekly Analysis On Xtreamforex
  9. USD Index COT Data from the commitments of traders report US bond yields have continued to rise in an almost parabolic fashion, with 1 year note now just shy of 4%, and the 2-year at 3.8% with an increasingly inverted yield curve. And large speculators are not shy in capitalizing on these lower bond prices- which move inversely to bond yields. Last week they were net-short the 2 year treasury note by-358k contracts, which is their most bearish position since April 2021. The net-short exposure over time it could be argued it is approaching a sentiment extreme. Net-short exposure hasn’t ever spent much below -350k. It’s 3-year Z-score is -2.3 standard deviations. It’s 1-year SD is 2.9 There are 4.6 bears for every bull. Read More : Daily & Weekly Analysis On Xtreamforex
  10. US Dollar Japanese Yen (USD JPY) Analysis | Xtreamforex The Japanese Yen is on a wild ride lately. But there were some surprise moves earlier, an explanation of these moves could give some explanation on whether or not the USDJPY has hit a ceiling. There are some important implications for the future of the yen, and something traders need to be very careful. The yen has been weakening generally because the BOJ isn’t raising rates while other central banks are raising. The BOJ isn’t likely to raise rates in the foreseeable future, which makes the currency ripe for carry trading. The USDJPY spiked higher after US CPI figures came out, because of speculation of an even stronger move by the Fed at the upcoming meeting. Couples of decades ago the pair moved to similar levels, prompting a response from authorities. In that case, the pair got up to 147.00 and there was joint action from the US and Japan . The Bank Of Japan does conduct the operation, but it’s at the direction of the Ministry of Finance, who pay for the move. The BOJ will buy yen on the market in a very large volume, enough to push the exchange rate down by several thousand pips all at once. The move is not pre-announced, and can happen more than once. The idea is precisely to keep the market from trying to push the pair up by burning out many of the long positions, and threatening to repeat at any moment. Read More : Daily & Weekly Analysis On Xtreamforex
  11. How does fx trading work? Trading forex involves the buying and selling of one currency at the same time. In forex, traders try to make a profit by buying and selling currencies by actively speculating on the direction of currencies in the future. Sometimes you may have heard from others that trading forex is gambling. This is wrong information that you have heard from others. The definition of gambling is one where your victory or defeat depends entirely on luck. Read More: How does fx trading work
  12. New Zealand Q2 GDP Beats Expectations New Zealand’s GDP rebound by 1.7% in the second quarter, close to the forecast and the RBNZ’s expectation. Services grew strongly as tourists started to return. New Zealand’s GDP rose bu 1.7% on the June Quarter, much in line with 1.6% forecast, as well as the 1.8% rise that the Reserve Bank expected in its August Monetary Policy Statement. In contrast, the result beat the median market forecast for 1% rise. The bounce in the second quarter followed a 0.2% dip in the first quarter. Assessment at the time was due ti disruptions to activity from the peak of the Omicrone wave, and the absence of the usual uplift in tourist spending at that time if year. Both of those effects were reversed out in the second quarter; the border reopening led to a strong lift in tourists during what would normally have been the seasonal lull. Read More : Daily & Weekly Analysis On Xtreamforex
  13. What will happen to GBP/USD if the UK surprises with higher CPI? US released its August CPI report. The headline was 8.3% YoY and expectation of 8.1% YoY and a July reading of 8.5% YoY. Headline inflation is decreasing. However, the Core CPI print for August was 6.3% YoY vs an expectation of 6.1% YoY and a previous reading of 5.9% YoY. After the release of the data, the USD shot higher, pushing GBP/USD lower by nearly 150 pips near 1.1530. Can a similar situation occur tomorrow for the UK when it releases its own August CPI data ? The headline print is expected to be 10.2% YoY vs a July reading of 10.1% YoY. In addition, the Core CPI is expected to be 6.3% YoY vs a 6.2% YoY reading in July. August’s reading was the highest since February 1982, the BOE has already told us that it expects CPI to reach as high as 13% in October and that the UK economy will enter a recession in Q4. Therefore, unlike that of the US in which Fed is not expecting a recession, higher CPI readings shouldn’t do as much damage to the GBP to the FTSE, as markets are already pricing in an element of higher inflation and lower growth. Read More : Daily & Weekly Analysis On Xtreamforex
  14. Silver outshines gold as dollar slips | Xtreamforex The new week has started with a bang for risk-sensitive assets, including stocks and metals. Silver had risen around 5% so far on the day, and was leading other metals higher. Gold was also up, but not as impressively as silver, with the yellow metal looking to build a base above the $1725 short-term pivotal level. Similarly, the EUR/USD and GBP/USD were up around 1% on the day. Whether the metals can kick on from here or go in reverse depends almost entirely on the direction of USD. It will face a big test on Tuesday with the release of US CPI data which is surely going to be the main focal point for the week. Headline CPI is expected to have cooled to 8.1% on an annual basis from 8.5% in the previous month. Core CPI, which excludes food and energy, is seen accelerating to 6.1% from 5.9% last. Regardless of the CPI prints, the Fed is almost certain to deliver another jumbo-sized, 75-basis-point, rate hike next week. This outcome seems to be priced in by now, which is why the dollar is on a retreat after making solid gains in recent months. On Friday, Fed Governor Christopher Waller said he favors another significant increase in interest rates at the September meeting, something echoed by James Bullard. Read More : Daily & Weekly Analysis On Xtreamforex
  15. EUR/USD faces barricades around 0.9863, focus shifts to US Inflation data The past week was marked by two important events. The EUR/USD pair updated its 20-year low on Tuesday, September 6th once again, falling to 0.9863. And then the European Central Bank raised its key interest rate for the first time in its history by 75 bps to 1.25% on Thursday, September the 8th, accompanying this act with very hawkish comments. Both the events did not come as a surprise to the market and on the whole, were in line with the forecasts that we voiced in the previous review. The pair’s rebound to the upside following the ECB’s decision was not surprising either. Having risen by about 250 points, it peaked at 1.0113 on September 9. This was followed by a correction to the north, and the pair finished at 1.0045 . Read More : Daily & Weekly Analysis On Xtreamforex
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