London 29/06/2022
The US dollar shows signs of recovery this week after last week’s drop. It is not only the worsening markets’ sentiment that favors the dollar as a safer investment solution but the announcement in the US as well since the durable goods orders were announced above expectations and the GDP for the 1st quarter of 2022 at -1.6% (annualized). Also, the personal consumption expenditures prices were announced at 7.1%. The fears of a recession dominate the investment community but at the same time, markets seem sure enough about the ongoing interest rate hikes process by the Fed.
The Eurozone has more to contribute this week with the speeches of Christine Lagarde and the inflation announcement on Friday. Mrs. Lagarde repeated the intentions of the ECB for an interest rate hike of 0.2% and she highlighted that the bank could be more active if and when the circumstances are appropriate. The inflation (harmonized index of consumer prices) in Germany was announced earlier at 8.2%, much lower than the markets estimated and we need to see if there will be a developed view that the inflationary pressures are calmed down. The major stock indices are in a correction this week so far while the bond yields have not changed a lot so far.
The Eurozone has more to contribute this week with the speeches of Christine Lagarde and the inflation announcement on Friday. Mrs. Lagarde repeated the intentions of the ECB for an interest rate hike of 0.2% and she highlighted that the bank could be more active if and when the circumstances are appropriate. The inflation (harmonized index of consumer prices) in Germany was announced earlier at 8.2%, much lower than the markets estimated and we need to see if there will be a developed view that the inflationary pressures are calmed down. The major stock indices are in a correction this week so far while the bond yields have not changed a lot so far.
EURUSD (current price at 1.0520) is bearish this week mostly based on the strengthening of the US dollar. The euro does not seem to take advantage of the bankers’ statement regarding interest rate hikes as many assume that the recession concerns may cause a more dovish stance from the ECB. Although these recession concerns are getting bigger, the business climate and the consumer confidence in the Eurozone had positive signs but of course, the big news of the week is the inflation announcement on Friday. The pair started to decline again and it may test the critical price zone of 1.0350.
GBPUSD (current price at 1.2160) is significantly bearish this week and it is currently on the last important support, before the price area of 1.20. In a few hours, the head of the Bank of England is going to speak at the ECB forum on central banking in Portugal and we may learn more information regarding the intentions of the bank. Tomorrow the UK GDP for the 1st quarter of 2022 will be announced. In case of a robust breakout below 1.2160 and if the dollar keeps strengthening, the scenario of the 1.20 has a good chance.
USDJPY (current price at 136.38) continues the strong bullish rally for one more week, after 4 weeks with a heavy uptrend. Since Japan has just a few economic news releases this week like industrial production and Tankan Large Manufacturing Index on Friday, the movements of the USDJPY come mostly from the dollar’s strength. As the bond yields are practically neutral this week, it is not a dominating factor on the pair so far. Above 136.70 which is a multi-year high price, the rally may accelerate.
DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
