London 12/08/2022

After the results of the US inflation, the US dollar started a downturn movement as a more dovish monetary policy is expected to be implemented by the Fed. Two weeks ago, the estimation that the interest rates could be at the level of 3.5%-4% by the end of 2022, was revised to the level of 3%-3.5%. CPI’s outcomes combined with the very robust NFP results of the previous week may lead to further adjustments in the interest rate hikes.
The news is also reflected on US and European stock indices, as higher liquidity is anticipated, which may boost the prices. The major indices had positive weekly returns.
In the UK, the GDP in Q2 was negative but slightly better than the consensus achieving a -0.1% compared to the consensus estimate of -0.2%.
Commodities like gold and oil have developed an uptrend this week.
The bond yields continue the previous week’s rise with the US 10-year bond yield climbing to 2.86%.
EURUSD (current price at 1.0284) is bullish this week after the previous week’s bearish movement. The bullish trend came out after the U.S. inflation data on Wednesday, which boosted the currency pair by more than 100 pips, but after that, a narrow consolidation was achieved. Moreover, industrial production rose to 0.7% by June in the Eurozone, surpassing the initial consensus.  If the pair manages to exceed the important resistance of 1.0350, the uptrend will be more solid and robust.
GBPUSD (current price at 1.2142) is slightly bullish this week. The US inflation data helped the currency pair to reverse the direction after Monday’s downturn movement. Today’s macro announcements were positive. GDP in Q2, industrial & manufacturing Production, and the trade balance surpassed the estimations.  However, despite the better-than-expected macro results, the sterling is dropping today and this fact confirms its weakness. If the US dollar starts strengthening again, we can not rule out the case of 1.20 for the GBPUSD.
USDJPY (current price at 133.56) is bearish this week. The weak dollar overrides the mild rising of the bond yields. In Japan, the Producer Price Index was announced at 8.6%, which may cause some concerns for the BoJ regarding its monetary policy. Above 135.60 the bullish scenario becomes stronger but as the pair approaches 130 more and more, the bears are in the first place.

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.

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