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Market News Foreign exchange trading reminder on June 8: Sterling may not perform well in the third quarter, the US dollar index has fallen from a high level, pay attention to the CPI data in May
Foreign exchange trading reminder on June 8: Sterling may not perform well in the third quarter, the US dollar index has fallen from a high level, pay attention to the CPI data in May
The U.S. dollar index fell on Tuesday, pulling back from earlier highs as U.S. stocks pared earlier losses on growing hopes that inflation may have peaked, but the dollar hit a 20-year high against the yen. The dollar hit 132.99 against the yen on Tuesday, the highest since April 3, 2002, before closing up 0.54% at 132.59. Sterling, which had fallen to its lowest in nearly three weeks, rose on Tuesday before closing up 0.49% at 1.2589.
2022-06-08
11147
The U.S. dollar index fell on Tuesday, pulling back from earlier highs as U.S. stocks pared earlier losses on growing hopes that inflation may have peaked, but the dollar hit a 20-year high against the yen.
Target's decline capped gains in U.S. stocks, but some investors took the retailer's profit warning as a sign that price pressures on consumers may be starting to ease. Yields on longer-dated U.S. Treasuries also eased as slowing inflation threatens to slow the U.S. Federal Reserve's rate hike plans, hitting a 3-1/2-week high overnight on worries the central bank will continue to aggressively raise rates to fight inflation.
Thomas Martin, senior portfolio manager at Globalt Investments, said: “The market is pricing in the expectation that the Fed will deliver on almost everything it promises, but having said that, people are starting to realise that inflation may have peaked and may start to pull back.” Merchants are facing an inventory buildup and will see some price declines, so U.S. yields have stalled at least at current levels."
Investors will pay close attention to the latest inflation data due to the release of the U.S. consumer price index (CPI) for May.
The U.S. dollar index fell as much as 0.176% on Tuesday, hitting a low of 102.26, before closing down 0.05% at 102.34. The euro climbed as much as 0.14% against the dollar to hit a high of 1.0713 before paring gains to end up 0.05% at 1.07.
After hitting a near 20-year high of 105.01 on May 13, the dollar index has retreated to around 102, but Friday's strong jobs report helped the dollar post its first weekly gain in three weeks
The dollar hit 132.99 against the yen on Tuesday, the highest since April 3, 2002, before closing up 0.54% at 132.59. USD/JPY has been strengthening due to differences in the policy paths of the Federal Reserve and the Bank of Japan. Bank of Japan Governor Haruhiko Kuroda reiterated his view on Tuesday that a weaker yen is good for Japan's economy if the yen moves less violently. The yen hit a 20-year low earlier this year.
Rising U.S. Treasury yields boosted the dollar, but other central banks - including the Bank of Canada, the Reserve Bank of Australia and the European Central Bank - strengthened, Scotiabank strategists Shaun Osborne and Juan Manuel Herrera wrote in a note to clients on Tuesday. Monetary policy games, and the Bank of Japan's continued pledge to ease monetary policy to help inflation keep rising towards its 2 percent target, also dragged the yen lower against some other major currencies.
Sterling, which had fallen to its lowest in nearly three weeks, rose on Tuesday before closing up 0.49% at 1.2589. British Prime Minister Boris Johnson narrowly passed a confidence vote yesterday, weakening his political standing. Analysts believe that future central bank policies and economic issues will have a greater impact on the pound than the political situation.
The Australian dollar rose as much as 0.65% to a high of 0.7244 on Tuesday. The Reserve Bank of Australia (RBA) stunned markets after announcing its biggest rate hike in 22 years and signalling further policy tightening as it struggles to rein in sharply rising inflation . The Australian dollar then pared gains against the US dollar and finally closed up 0.53% at 0.7230.
The European Central Bank will announce its interest rate decision on June 9, while the Fed will announce its interest rate decision on June 15. Investors need to keep an eye on this.
Big event: Treasury Secretary Yellen testifies before the House Ways and Means Committee to discuss President Biden's fiscal 2023 budget.
1. Mitsubishi UFJ: Sterling may underperform in the third quarter
Japan's MUFG said that British Prime Minister Johnson won a confidence vote on Monday by 211 votes to 148, but it was an empty victory, adding to the Reasons for a weaker pound. If the prime minister lacks support, Britain's poor economic outlook will make it harder to weather the storm, analyst Derek Halpenny said in a note. He said difficult policies, such as changing the Northern Ireland Protocol framework, meant further divisions (within the Conservative Party) ahead. The bank's forecast for GBP/USD to underperform in the third quarter is weaker than current spot levels, and last night's vote was in line with its bearish view on GBP
2. Rabobank: U.S. recession in 2023
The U.S. appears unavoidable into a recession, triggered either by exogenous supply shocks that reduce business activity or by the Federal Reserve’s response to persistently high inflation. The exact timing may depend on whether the triggering factor is exogenous or endogenous. Given the current strength of the labor market, consumption and investment markets, we believe the U.S. is more likely to fall into an endogenous recession in 2023
3. National Australia Bank: U.S. and Japan are still at the mercy of 10-year U.S. Treasury yields and the resilience of the U.S. economy
National Australia Bank Sydney-based strategist Rodrigo Catril said Kuroda has made it very clear that the Bank of Japan’s ultra-easy Policy will continue for some time until evidence of sustained wage gains is seen, meaning USD/JPY remains at the mercy of 10-year Treasury yields and the resilience of the U.S. economy
4. UBS Securities commented on the impact of the depreciation of the yen
UBS Securities economist Masamichi Adachi said that the depreciation of the yen is not good for household budgets, but looking at the overall Japanese economy, its positive impact is greater
5. Shinkin Asset: Haruhiko Kuroda's pledge to stabilize interest rates may push USD/JPY to 135.15
The yen faces a fresh round of selling after Bank of Japan Governor Haruhiko Kuroda said Japan was not in a position to raise interest rates, said Jun Kato, chief market analyst at Shinkin Asset, whose remarks have propelled the yen towards a 2002 low of 135.15. And strong ISM and U.S. employment data have strengthened the Fed's expectation of a 50 basis point interest rate hike in September, and rising U.S. Treasury yields will continue to support the dollar against the yen. In addition, the pair gained momentum towards 135.15 after Kuroda yesterday reiterated his continuation of accommodative policy and highlighted the policy difference between the US and Japan. And although USD/JPY tends to continue its upward trend, we do not expect it to rise above the 133 mark today
6. The Commonwealth Bank of Australia does not expect the yen to continue to depreciate significantly will continue to depreciate significantly.
②CBA strategist Carol Kong wrote in a note to clients, “We believe the yen will continue to benefit from safe-haven inflows as long as Japan maintains a current account surplus.”
③ She said, "Therefore, we do not expect the dollar to the yen to repeat the rapid appreciation trend in March and April, but to consolidate near the top of the recent 126-131 range."
7. Wells Fargo strategist: The yen will continue to weaken in the short term ① Bank of Japan Governor Haruhiko Kuroda confirmed in his speech on Monday that he still does not intend to tighten policy. He pointed out that the economy still needs more time to recover, and Japan lacks sufficient salary increase.
② "In this case, monetary policy tightening is not an appropriate measure at all," he said, indicating that the Bank of Japan is committed to promoting economic activity.
③ Wells Fargo strategist Brendan McKenna said, therefore, the divergence between the dollar and the yen is unlikely to reverse in the short term ④ "We expect the Fed to continue raising interest rates and the Bank of Japan to keep interest rates unchanged for the foreseeable future," he said. "As long as this remains the case, the yen will continue to weaken"
Target's decline capped gains in U.S. stocks, but some investors took the retailer's profit warning as a sign that price pressures on consumers may be starting to ease. Yields on longer-dated U.S. Treasuries also eased as slowing inflation threatens to slow the U.S. Federal Reserve's rate hike plans, hitting a 3-1/2-week high overnight on worries the central bank will continue to aggressively raise rates to fight inflation.
Thomas Martin, senior portfolio manager at Globalt Investments, said: “The market is pricing in the expectation that the Fed will deliver on almost everything it promises, but having said that, people are starting to realise that inflation may have peaked and may start to pull back.” Merchants are facing an inventory buildup and will see some price declines, so U.S. yields have stalled at least at current levels."
Investors will pay close attention to the latest inflation data due to the release of the U.S. consumer price index (CPI) for May.
The U.S. dollar index fell as much as 0.176% on Tuesday, hitting a low of 102.26, before closing down 0.05% at 102.34. The euro climbed as much as 0.14% against the dollar to hit a high of 1.0713 before paring gains to end up 0.05% at 1.07.
After hitting a near 20-year high of 105.01 on May 13, the dollar index has retreated to around 102, but Friday's strong jobs report helped the dollar post its first weekly gain in three weeks
The dollar hit 132.99 against the yen on Tuesday, the highest since April 3, 2002, before closing up 0.54% at 132.59. USD/JPY has been strengthening due to differences in the policy paths of the Federal Reserve and the Bank of Japan. Bank of Japan Governor Haruhiko Kuroda reiterated his view on Tuesday that a weaker yen is good for Japan's economy if the yen moves less violently. The yen hit a 20-year low earlier this year.
Rising U.S. Treasury yields boosted the dollar, but other central banks - including the Bank of Canada, the Reserve Bank of Australia and the European Central Bank - strengthened, Scotiabank strategists Shaun Osborne and Juan Manuel Herrera wrote in a note to clients on Tuesday. Monetary policy games, and the Bank of Japan's continued pledge to ease monetary policy to help inflation keep rising towards its 2 percent target, also dragged the yen lower against some other major currencies.
Sterling, which had fallen to its lowest in nearly three weeks, rose on Tuesday before closing up 0.49% at 1.2589. British Prime Minister Boris Johnson narrowly passed a confidence vote yesterday, weakening his political standing. Analysts believe that future central bank policies and economic issues will have a greater impact on the pound than the political situation.
The Australian dollar rose as much as 0.65% to a high of 0.7244 on Tuesday. The Reserve Bank of Australia (RBA) stunned markets after announcing its biggest rate hike in 22 years and signalling further policy tightening as it struggles to rein in sharply rising inflation . The Australian dollar then pared gains against the US dollar and finally closed up 0.53% at 0.7230.
The European Central Bank will announce its interest rate decision on June 9, while the Fed will announce its interest rate decision on June 15. Investors need to keep an eye on this.
Key data and outlook for Wednesday
Big event: Treasury Secretary Yellen testifies before the House Ways and Means Committee to discuss President Biden's fiscal 2023 budget.
Aggregate Viewpoints
1. Mitsubishi UFJ: Sterling may underperform in the third quarter
Japan's MUFG said that British Prime Minister Johnson won a confidence vote on Monday by 211 votes to 148, but it was an empty victory, adding to the Reasons for a weaker pound. If the prime minister lacks support, Britain's poor economic outlook will make it harder to weather the storm, analyst Derek Halpenny said in a note. He said difficult policies, such as changing the Northern Ireland Protocol framework, meant further divisions (within the Conservative Party) ahead. The bank's forecast for GBP/USD to underperform in the third quarter is weaker than current spot levels, and last night's vote was in line with its bearish view on GBP
2. Rabobank: U.S. recession in 2023
The U.S. appears unavoidable into a recession, triggered either by exogenous supply shocks that reduce business activity or by the Federal Reserve’s response to persistently high inflation. The exact timing may depend on whether the triggering factor is exogenous or endogenous. Given the current strength of the labor market, consumption and investment markets, we believe the U.S. is more likely to fall into an endogenous recession in 2023
3. National Australia Bank: U.S. and Japan are still at the mercy of 10-year U.S. Treasury yields and the resilience of the U.S. economy
National Australia Bank Sydney-based strategist Rodrigo Catril said Kuroda has made it very clear that the Bank of Japan’s ultra-easy Policy will continue for some time until evidence of sustained wage gains is seen, meaning USD/JPY remains at the mercy of 10-year Treasury yields and the resilience of the U.S. economy
4. UBS Securities commented on the impact of the depreciation of the yen
UBS Securities economist Masamichi Adachi said that the depreciation of the yen is not good for household budgets, but looking at the overall Japanese economy, its positive impact is greater
5. Shinkin Asset: Haruhiko Kuroda's pledge to stabilize interest rates may push USD/JPY to 135.15
The yen faces a fresh round of selling after Bank of Japan Governor Haruhiko Kuroda said Japan was not in a position to raise interest rates, said Jun Kato, chief market analyst at Shinkin Asset, whose remarks have propelled the yen towards a 2002 low of 135.15. And strong ISM and U.S. employment data have strengthened the Fed's expectation of a 50 basis point interest rate hike in September, and rising U.S. Treasury yields will continue to support the dollar against the yen. In addition, the pair gained momentum towards 135.15 after Kuroda yesterday reiterated his continuation of accommodative policy and highlighted the policy difference between the US and Japan. And although USD/JPY tends to continue its upward trend, we do not expect it to rise above the 133 mark today
6. The Commonwealth Bank of Australia does not expect the yen to continue to depreciate significantly will continue to depreciate significantly.
②CBA strategist Carol Kong wrote in a note to clients, “We believe the yen will continue to benefit from safe-haven inflows as long as Japan maintains a current account surplus.”
③ She said, "Therefore, we do not expect the dollar to the yen to repeat the rapid appreciation trend in March and April, but to consolidate near the top of the recent 126-131 range."
7. Wells Fargo strategist: The yen will continue to weaken in the short term ① Bank of Japan Governor Haruhiko Kuroda confirmed in his speech on Monday that he still does not intend to tighten policy. He pointed out that the economy still needs more time to recover, and Japan lacks sufficient salary increase.
② "In this case, monetary policy tightening is not an appropriate measure at all," he said, indicating that the Bank of Japan is committed to promoting economic activity.
③ Wells Fargo strategist Brendan McKenna said, therefore, the divergence between the dollar and the yen is unlikely to reverse in the short term ④ "We expect the Fed to continue raising interest rates and the Bank of Japan to keep interest rates unchanged for the foreseeable future," he said. "As long as this remains the case, the yen will continue to weaken"
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