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Market News Foreign exchange trading reminder on June 9: Safe-haven appeal boosts the strength of the dollar, the European Central Bank may raise interest rates, but beware of a factor that may become a potential negative for the pound
Foreign exchange trading reminder on June 9: Safe-haven appeal boosts the strength of the dollar, the European Central Bank may raise interest rates, but beware of a factor that may become a potential negative for the pound
GMT+8 In early Asian trading on June 9, the U.S. dollar index was trading around 102.55. The U.S. dollar index rose on Wednesday, reversing earlier losses as U.S. stocks fell, boosting the greenback's safe-haven appeal. The euro strengthened ahead of the European Central Bank's policy announcement, which is expected to raise interest rates on Thursday. British Prime Minister Boris Johnson won a vote of no confidence, but his position remains challenged. In addition, he plans to overturn part of the Brexit deal, which could spark domestic and EU opposition and could be a potential bear for the pound.
2022-06-09
8003
GMT+8 (Thursday) In early Asian trading on June 9, the US dollar index was trading around 102.55. The U.S. dollar index rose on Wednesday, reversing earlier losses as U.S. stocks fell, boosting the greenback's safe-haven appeal, while the euro strengthened ahead of the European Central Bank's policy announcement, which is expected to raise interest rates on Thursday. British Prime Minister Boris Johnson's status remains challenged, and he also plans to overturn some of the Brexit deal, which could spark domestic and EU opposition and could be a potential negative for the pound.
The dollar extended gains against the yen on Wednesday, closing up 1.23 percent at 134.225. The exchange rate rose slightly after the Asian market opened on Thursday, and once refreshed the highest level since February 27, 2002 to 134.522. The euro continued to rise against the yen on Wednesday, hitting its highest level since January 5, 2015 at 144.242, before closing up 1.22 at 143.634. Currently, the euro has risen against the yen for 10 consecutive sessions, the longest winning streak in eight months.
However, Jimmy Chang, chief investment officer at Rockefeller Global Family Office, said a very strong dollar is not good for the market, and he thinks there will be some turbulence ahead.
The Bank of Japan remains one of the few central banks in the world to maintain a dovish stance, while others have adopted a tightening policy of raising interest rates to fight inflation. The Bank of Japan on Wednesday stuck to its stance of supporting a weaker yen, saying it was a boon for the economy. Bank of Japan Governor Haruhiko Kuroda said the Bank of Japan will maintain its monetary easing policy with a view to achieving stable and sustainable 2 percent inflation. Technical strategists believe that USD/JPY is moving further into overbought territory. Capital Economics' James Reilly said the continued policy divergence means the dollar will rise further against the yen.
On Wednesday, the euro gave up earlier gains on better-than-expected economic data from the euro zone and was last up 0.14% at 1.0715. Market focus remains entirely on the European Central Bank's interest rate meeting on Thursday and whether policymakers hit back on expectations for more aggressive policy tightening. The European Central Bank was expected to take a hawkish stance on Thursday, with rate hikes starting in July, with markets pricing in a 75 basis point hike by September.
Edward Moya, senior market analyst at Oanda in New York, said euro bulls would like to see the ECB raise rates by 50 basis points, but may only raise rates by 25 basis points. The expectation is that global bond yield levels, especially across Europe, may have more room to rise. Ultimately, however, markets will lock in the message from ECB President Christine Lagarde at a press conference.
Investors will look at U.S. inflation through the U.S. May CPI following the ECB’s policy decision. The market expects the U.S. CPI to increase at an annual rate of 8.3% in May without seasonal adjustment, unchanged from April. The US will release May CPI data at 20:30 GMT+8 on June 10.
Sterling fell as much as 0.6% to 1.2512 against the dollar on Wednesday, before closing down 0.44% at 1.2534. British Prime Minister Boris Johnson suffered a no-confidence vote on Monday. Although he narrowly won, some analysts said his prime ministership is still facing challenges. Political risk in the UK and fears of an economic slowdown weighed on the pound. Three people familiar with the matter said Johnson’s plan to move forward with legislation giving him the power to overturn parts of the Brexit deal could anger some party lawmakers and the European Union and is a potential bear for the pound.
In terms of major events, investors need to focus on the European Central Bank's interest rate decision on June 9, President Lagarde's monetary policy press conference, and Bank of Canada President Macklem's speech.
ING looks ahead to the European Central Bank's interest rate decision: the European Central Bank may moderate the volatility of government bond spreads
ING interest rate strategists said in a note that the ECB's "dovish rhetoric" at Thursday's monetary policy meeting would ease volatility in bond spreads to some extent, but said they doubted they would be enough to convince the private sector. Investors returned to euro zone peripheral bond markets in droves.
Once the ECB's net asset purchase program, which is expected to end this month, stops, the shortfall in demand will have to be filled by private sector investors. It's not impossible, but the best way to convince them to do so is to reduce the risk associated with peripheral bonds, or offer higher yields. This burden is expected to fall on the shoulders of the ECB in the near future
Jefferies previews ECB interest rate decision: ECB June meeting is crucial, but no rate hike expected
Mohit Kumar, chief economist at Jefferies, said Thursday that the ECB's meeting on Thursday will set the market's expected policy path at a time when the ECB's Governing Council is divided on how to proceed. Most notable is the rhetoric and tone surrounding the July and September rate hikes.
The most likely scenario is that the ECB announces that it will start raising interest rates in July and that the deposit rate will rise to zero in the third quarter. The dovish approach is to say rates will rise to zero by the end of 2023, as that would rule out a 50 basis point hike. ECB President Lagarde is expected to neither close the door on a 50bps rate hike nor explicitly support a 50bps hike
ING Bank analyst: Dollar is expected to remain strong ahead of next week's Fed meeting
The dollar should remain in the 102-103 range ahead of the Fed's policy meeting next week. Volatility in the U.S. stock market last month cast doubt on whether the Federal Reserve will raise interest rates to 3.25%, but recent stock market stability and encouraging U.S. economic data support the view that the Fed is still fully tightening policy.
The Fed will release a dot plot of its rate forecasts at its meeting next Wednesday, which should support expectations that the Fed's policy rate will hit 3% in 2023. So the dollar will remain strong ahead of next week's Fed meeting
Financial website DailyFX analyst Justin: USD/JPY will test the 135 level
Under the continued influence of the interest rate gap between the United States and Japan, the yen suffered a new round of selling. At the same time, stronger oil prices have also exacerbated the negative outlook for the yen, and the risk of continued USD/JPY gains remains, especially given the Bank of Japan’s dovish policy. With U.S. bond yields firm at 3%, the dollar will continue to strengthen against the yen, and the possibility of a test of the 135 level has greatly increased.
The dollar extended gains against the yen on Wednesday, closing up 1.23 percent at 134.225. The exchange rate rose slightly after the Asian market opened on Thursday, and once refreshed the highest level since February 27, 2002 to 134.522. The euro continued to rise against the yen on Wednesday, hitting its highest level since January 5, 2015 at 144.242, before closing up 1.22 at 143.634. Currently, the euro has risen against the yen for 10 consecutive sessions, the longest winning streak in eight months.
However, Jimmy Chang, chief investment officer at Rockefeller Global Family Office, said a very strong dollar is not good for the market, and he thinks there will be some turbulence ahead.
The Bank of Japan remains one of the few central banks in the world to maintain a dovish stance, while others have adopted a tightening policy of raising interest rates to fight inflation. The Bank of Japan on Wednesday stuck to its stance of supporting a weaker yen, saying it was a boon for the economy. Bank of Japan Governor Haruhiko Kuroda said the Bank of Japan will maintain its monetary easing policy with a view to achieving stable and sustainable 2 percent inflation. Technical strategists believe that USD/JPY is moving further into overbought territory. Capital Economics' James Reilly said the continued policy divergence means the dollar will rise further against the yen.
On Wednesday, the euro gave up earlier gains on better-than-expected economic data from the euro zone and was last up 0.14% at 1.0715. Market focus remains entirely on the European Central Bank's interest rate meeting on Thursday and whether policymakers hit back on expectations for more aggressive policy tightening. The European Central Bank was expected to take a hawkish stance on Thursday, with rate hikes starting in July, with markets pricing in a 75 basis point hike by September.
Edward Moya, senior market analyst at Oanda in New York, said euro bulls would like to see the ECB raise rates by 50 basis points, but may only raise rates by 25 basis points. The expectation is that global bond yield levels, especially across Europe, may have more room to rise. Ultimately, however, markets will lock in the message from ECB President Christine Lagarde at a press conference.
Investors will look at U.S. inflation through the U.S. May CPI following the ECB’s policy decision. The market expects the U.S. CPI to increase at an annual rate of 8.3% in May without seasonal adjustment, unchanged from April. The US will release May CPI data at 20:30 GMT+8 on June 10.
Sterling fell as much as 0.6% to 1.2512 against the dollar on Wednesday, before closing down 0.44% at 1.2534. British Prime Minister Boris Johnson suffered a no-confidence vote on Monday. Although he narrowly won, some analysts said his prime ministership is still facing challenges. Political risk in the UK and fears of an economic slowdown weighed on the pound. Three people familiar with the matter said Johnson’s plan to move forward with legislation giving him the power to overturn parts of the Brexit deal could anger some party lawmakers and the European Union and is a potential bear for the pound.
Important data and big events on June 9
In terms of major events, investors need to focus on the European Central Bank's interest rate decision on June 9, President Lagarde's monetary policy press conference, and Bank of Canada President Macklem's speech.
Aggregate Viewpoints
ING looks ahead to the European Central Bank's interest rate decision: the European Central Bank may moderate the volatility of government bond spreads
ING interest rate strategists said in a note that the ECB's "dovish rhetoric" at Thursday's monetary policy meeting would ease volatility in bond spreads to some extent, but said they doubted they would be enough to convince the private sector. Investors returned to euro zone peripheral bond markets in droves.
Once the ECB's net asset purchase program, which is expected to end this month, stops, the shortfall in demand will have to be filled by private sector investors. It's not impossible, but the best way to convince them to do so is to reduce the risk associated with peripheral bonds, or offer higher yields. This burden is expected to fall on the shoulders of the ECB in the near future
Jefferies previews ECB interest rate decision: ECB June meeting is crucial, but no rate hike expected
Mohit Kumar, chief economist at Jefferies, said Thursday that the ECB's meeting on Thursday will set the market's expected policy path at a time when the ECB's Governing Council is divided on how to proceed. Most notable is the rhetoric and tone surrounding the July and September rate hikes.
The most likely scenario is that the ECB announces that it will start raising interest rates in July and that the deposit rate will rise to zero in the third quarter. The dovish approach is to say rates will rise to zero by the end of 2023, as that would rule out a 50 basis point hike. ECB President Lagarde is expected to neither close the door on a 50bps rate hike nor explicitly support a 50bps hike
ING Bank analyst: Dollar is expected to remain strong ahead of next week's Fed meeting
The dollar should remain in the 102-103 range ahead of the Fed's policy meeting next week. Volatility in the U.S. stock market last month cast doubt on whether the Federal Reserve will raise interest rates to 3.25%, but recent stock market stability and encouraging U.S. economic data support the view that the Fed is still fully tightening policy.
The Fed will release a dot plot of its rate forecasts at its meeting next Wednesday, which should support expectations that the Fed's policy rate will hit 3% in 2023. So the dollar will remain strong ahead of next week's Fed meeting
Financial website DailyFX analyst Justin: USD/JPY will test the 135 level
Under the continued influence of the interest rate gap between the United States and Japan, the yen suffered a new round of selling. At the same time, stronger oil prices have also exacerbated the negative outlook for the yen, and the risk of continued USD/JPY gains remains, especially given the Bank of Japan’s dovish policy. With U.S. bond yields firm at 3%, the dollar will continue to strengthen against the yen, and the possibility of a test of the 135 level has greatly increased.
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