official Daily Forex News by XtreamForex.com

[xtreamforex26]

Euro Having Harder Time Against Both Dollar and Sterling

The University of Michigan consumer confidence for the month of May unexpectedly set the tone for last week’s trading session WS. The overall indicator fell more than expected, from 63.5 to 57.7, the lowest level since last July. However, markets focused on the prospective inflation expectations component of the report. 1-year inflation expectations fell less than hoped from 4.6% to 4.5%, while long-term (5-10 year) expectations rose from 3% to 3.2% (versus 2.9% consensus), the highest level since March 2011! Similar signs were provided by the NY Fed’s latest survey of consumer expectations (inflation expectations for 3 and 5 years rose by 0.1 percentage points) and in Europe by the ECB survey of consumer expectations.

Median expectations for 1-year and 3-year inflation EMU rose from 4.6% to 5% and from 2.4% to 2.9%, respectively. U.S. Treasuries slipped after the Michigan survey and underperformed German bunds. U.S. yields rose more than 9 basis points in the 2- to 7-year range of the curve, while longer maturities gained 5 to 8 basis points. The 2-year US yield closed just below the psychological 4% mark.

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[xtreamforex26]

Agreement On U.S Debt Ceiling Unlikely Before Last Minute

U.S. stocks started the week on a slightly positive note after weak economic data fueled expectations of a pause by the Federal Reserve (Fed), hopes of a resolution in the debt ceiling talks between Joe Biden and Kevin McCarthy, and Microsoft received EU approval to buy Activision.

However, the latter are all weak reasons to jump on an upward trend, because,

1. New York’s Empire State manufacturing index fell to -31.80 in May, while analysts had expected a drop to around -3.70. Minneapolis Fed head Kashkari, however, warned investors that the Fed will continue to raise interest rates. Bostic of the Atlanta Fed said the Fed should hold rates this year but definitely not cut them, while Goolsbee of the Chicago Fed wouldn’t promise a rate pause in June. He said he’s watching the data and remains ‘particularly vigilant about the impact of rate hikes on credit conditions.”

While a Fed rate hike in June is still off the table, activity in fed funds futures suggests investors see higher odds of a rate hike next month. The probability of a 25 basis point rate hike is now at 19%. But of course, the data and the progress of the debt ceiling talks will be key to what the Fed could and would do.

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[xtreamforex26]

US Debt Theater: Final Act?

Risk sentiment remains poor as the US couldn’t reached an agreement on its debt ceiling.

But House Speaker McCarthy hinted that an agreement is possible within days. Despite both sides being far apart, everyone knows the catastrophic consequences of an eventual US default, and no one is ready to push the US into that black hole.

Yesterday, both equities and bonds were sold off on US debt ceiling impasse, while the US dollar index remained capped at two-week highs.

On the data front, U.S. retail sales released yesterday were weaker than expected. Although the monthly numbers showed a rebound after two months of negative results, it was less than expected, and the annual numbers showed that sales growth unexpectedly slowed, falling to a disappointing 1.6% from 2.4% the previous month and well below the 4.20% forecast by analysts. Core retail sales excluding gas and autos rose more than expected, while industrial production posted a larger increase in April. However, the latest data is unlikely to persuade Fed officials to change their view that the Fed’s next move should be a pause in tightening rather than another hike.

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[xtreamforex26]

Gold Price Forecast: XAU/USD could rebound to $2,005 if 50 DMA support holds

Gold price is replicating the moves seen in Wednesday’s Asian trading, making headways for a minor recovery toward $2,000 early Thursday. The retreat in the United States Dollar (USD) and the US Treasury bond yields supports Gold price.

US Dollar steadies as US debt ceiling optimism wanes, Gold price bounces

The US Dollar is preserving a part of the previous day’s gains, although on the defensive so far this Thursday. The pullback in the US Treasury yields across the curve is capping the US Dollar upside, which is somewhat helping Gold price stay afloat. Despite the gains in the Asian indices, investors remain cautious, reflective of a minor drop in the US S&P 500 futures. Markets continue to weigh the prospects of a United States default even though the recent progress on the US debt ceiling talks

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[xtreamforex26]

EUR/USD Trying to Extend Bottoming Out

U.S. Treasuries and German bunds parted ways Friday after a combined 10 basis point rise the day before. U.S. yields still rose between 1.3and 4.8 basis points, with the belly underperforming. They easily overcame a setback in the early hours of U.S. trading when Fed Chairman Powell said credit stress could limit the need for new rate hikes. That threw a spotlight on a growing split in the FOMC. Several other Fed governors last week were far less convinced by the idea of such a pause. This also contrasts with the ECB chairman, who on Sunday called for more rate hikes: “We are not done, we are not taking a pause, based on the information I have today.” German interest rates entered the weekend down 0.5to 2.9 basis points. The chart data presented too much of a challenge for the 10-year bond (resistance 2.5%). This was also true for equities.

The S&P500 tested the February high – before the SVB collapse – but could not overcome it. European stocks closed in the green nonetheless, with the EuroStoxx50 making an attempt to reach the important resistance at 4415. This is the post-pandemic recovery and multi-year high from November 2021. The dollar took a breather after its earlier rise. EUR/USD recovered from a low of 1.076 to 1.0805. The DXY (trade-weighted dollar) eased from the highest level since mid-March (103.58) to 103.2. Sterling consolidated near the highest level since December last year. EUR/GBP settled in the upper range of 0.86.

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[xtreamforex26]

Fed’s 2 Biggest Hawks Yesterday Colored Trading

The Fed’s two biggest hawks yesterday coloured trading which until then turned out to be non-directional. Kashkari from the Minneapolis Fed said it’s a close call between a pause and a hike in June, adding that the former wouldn’t mean tightening is over per se. St. Louis Fed president Bullard called US recession worries overstated and expects some 50 bps more rate hikes sooner rather than later this year.

SF’s Daly and Atlanta’s Bostic argued for caution but their comments were largely dismissed. US yields went from losing almost 5 bps to similar-sized gains at the front end of the curve. Longer tenors also added between 3.8-4.2 bps. German yields followed suit, adding 3.1-5.2 bps with the front underperforming. ECB’s Villeroy warned about persistent underlying price pressures. Especially services inflation needs to be monitored as it is likely to become the dominant inflation source. Peripheral spreads narrowed with Greece hugely outperforming (-17 bps, to the lowest since Nov 2021) following incumbent PM Mitsotakis’s election victory last Sunday.

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[xtreamforex26]

RBNZ Monetary Policy Statement May 2023

The RBNZ tightened by 25 points to 5.5 percent and expressed confidence that this will be sufficient to bring inflation back to target. We continue to see risks that the large migration surge will ultimately require more action after July.

RBNZ Monetary Policy Statement, May 2023

The RBNZ increased the OCR as expected to 5.5 percent.

However, the big surprise was in the forward profile, in which the RBNZ strongly suggests that it is on hold from here until at least mid-2024. We see some upside risks to the RBNZ’s view, but for now see the RBNZ on hold in July, with some potential of a 25 point rise in the OCR in August.

Migration pressures are acknowledged, but the RBNZ takes a sanguine view on their impact on capacity pressures. The RBNZ’s net migration estimates are higher and imply a net 75,000 net inflow in the year to December. This is only slightly lower than Westpac’s equivalent forecast of a net 83,000 inflow (on a working-age population basis). Despite the upgrade, the RBNZ’s view is that this adds significantly to supply as well as demand. Migration is seen as having some supportive impact on house prices but by not as much as we have taken in our recent Economic Overview.

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[xtreamforex26]

Fed Minutes Depict Uncertainty Surrounding Future Rate Hikes

The minutes from the May 2-3 Federal Open Market Committee (FOMC) meeting reiterated that curtailing inflation remains the principal objective of the Fed.

On the current state of the economy, the Committee members noted that “economic activity had expanded at a modest pace in the first quarter. Nonetheless, job gains had been robust in recent months, and the unemployment rate had remained low. Inflation remained elevated. Participants agreed that the U.S. banking system was sound and resilient.”

When discussing credit conditions, participants noted that, “stress in the banking sector would, in coming quarters, likely induce banks to tighten lending standards by more than they would have in response to higher interest rates alone.” Participants noted however, that the economic impact was uncertain at this time.

On the future path of monetary policy, committee members stated that “in light of the lagged effects of cumulative tightening in monetary policy and the potential effects on the economy of a further tightening in credit conditions, the extent to which additional increases in the target range may be appropriate after this meeting had become less certain.” Several participants noted however, that if the economy progressed in line with their current projections, future rate hikes may not be warranted.

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[xtreamforex26]

US PCE Deflators and Durable Goods Orders Scheduled

UK bonds crashed for a second day straight with yields adding 10.6-19.2 bps across the curve. UK money markets discount an additional 100 bps tightening by December following the big upside CPI surprise Wednesday morning. Sterling initially revisited YtD highs but unable to force a break higher, technical return action kicked in. EUR/GBP eventually closed narrowly above 0.87. Bonds in the US and Germany slid as well with huge underperformance of the former. US yields ripped between 0.9 (30-y) and 15.6 (2-y) bps higher. Second-tier but above-consensus data including weekly jobless claims spurred the move with recessionary along with financial stability concerns easing. Markets even fully priced in a July rate hike. Optimism about US negotiators reaching a debt ceiling deal also helped sentiment. A two-year suspension in return for spending cuts is on the table. German yields followed from a distance. Changes varied from +3.7 to 6.2 bps with the belly underperforming the wings and the 10-y yield testing the 2.53% resistance area. ECB’s Nagel, Knot and Villeroy hit the wires on a hawkish note. The US dollar performed strongly, even as Wall Street posted gains up to 1.7% (Nasdaq, Nvidia-sparked rally). EUR/USD closed around important support of 1.0727. The trade-weighted index took a look beyond 104.089 resistance to close at 104.25 – the highest since mid-March. USD/JPY ventured north of 140 for the first time since November last year.

The Asian session this morning is a quiet one. Aside from Tokyo CPI (see below) there’s little news. Speaker of the House McCarthy vowed to continue working until a debt ceiling deal is reached. We wouldn’t be surprised if they’d strike one during the weekend. In the run-up, we still have US PCE deflators and durable goods orders scheduled for release today. The former are the Fed’s preferred inflation gauge and seen accelerating from 4.2% to 4.3% on a 0.3% m/m pace for the headline. Core PCE should come in at an unchanged 4.6% (0.3% m/m). An outcome in line with expectations probably is enough to sustain the current bond yield trend, be it on a less blistering pace. The technical charts offer help as well with the US 2-y and 10-y yield surpassing 4.50% and 3.80% levels respectively. A weekly close above that level would be a major plus. This also goes for the DXY dollar closing above 104.089 level and EUR/USD sub 1.0727. Both levels are being tested as we write. UK April retail sales this morning surprised to the upside, with the core gauge double the 0.4% that was expected. It comes with a downward revision of the March figure though. EUR/GBP in a first reaction barely budges. The 0.87 big figure for the time being survives.

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[broforex51]

https://charts.mql5.com/36/208/audcad-h1-riston-capital-ltd.png

 

AUDCAD today as we see here, the price is going bearish, so it is good if you open sell position when the price breaks support area at 0.6033 with potential target up to 50 pips below

[xtreamforex26]

Forex and Cryptocurrency Forecast

EUR/USD: Dollar Awaits U.S. Bankruptcy

The dollar has been rising since May 4. Last week, on May 26, the DXY Index reached 104.34. It hasn’t been this high since mid-March 2023. What is driving the U.S. currency up and, consequently, pushing the EUR/USD pair down? According to analysts at Commerzbank, “the absolute calmness in the options market suggests that the driving force behind the EUR/USD exchange rate is monetary policy considerations rather than ongoing U.S. debt ceiling negotiations.” It is worth noting that the probability of a rate hike at the June 14 FOMC (Federal Open Market Committee) meeting increased throughout May. At the beginning of the month, the likelihood of a rate increase was close to 0%, but by the end of the month, it reached 50%. It turns out that the U.S. economy is holding up very well compared to other economies, and the deterioration in lending has not been as severe or rapid as initially feared.

Of course, 50% is far from 100%. Moreover, the FOMC published the minutes of its latest meeting on Wednesday, May 24, and the key phrase regarding the possibility of additional tightening of monetary policy was absent. The document also revealed divergent opinions among committee members regarding further rate hikes. However, despite this, the flight to safety in anticipation of a potential U.S. default continued to support the dollar.

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