Foreign exchange trading reminder on September 15: The US dollar regained lost ground as US stocks fell, and commodity currencies fell
On September 14th, the US dollar index rebounded following the decline in the stock market. Analysts said that although economic growth has slowed and the US consumer price index (CPI) has risen less than expected, it may not change the Fed's reduction schedule. The Japanese yen performed best among the G10 currencies. The commodity currencies Australian dollar and Canadian dollar fell the most against the US dollar, and the Australian dollar fell the most. Earlier, the Reserve Bank of Australia Chairman Lowe described a very dovish policy outlook and said that interest rates will not rise before 2024.

On Tuesday (September 14), the U.S. dollar index rose slightly, reversing the earlier decline caused by a smaller-than-expected increase in the US Consumer Price Index (CPI). The increase in core CPI in the United States in August was the smallest since February, with an increase of 0.3% in July; a year-on-year increase of 4.0% in core CPI, and an increase of 4.3% in July.
City Index senior financial market analyst Fiona Cincotta said that slowing inflation has caused investors to stop betting that the Fed may soon reduce bond purchases. The fall in inflation will reduce the pressure on the Fed to act prematurely. She also mentioned the US August Core Producer Price Index (PPI), which was announced last week, and the index's growth rate has also slowed down. The core PPI, which excludes food, energy, and trade services, rose 0.3% in August, the smallest increase since November last year. The increase in July was 0.9%.
“The evidence that the peak inflation has passed does indeed seem to be increasing. However, supply chain bottlenecks are expected to continue for some time, so PPI or CPI is unlikely to drop sharply or rapidly,” Cincotta added.
Mark McCormick of TD Securities wrote in a report on Tuesday that the U.S. dollar continues to stay within a narrow range, reflecting the seesaw of different themes. We do not expect to break the range in the near future, but the US dollar may have peaked again.
Several Fed officials have hinted that the Fed may reduce debt purchases before the end of the year, but said that the eventual interest rate hike will not happen for a period of time.
The Fed will hold a two-day monetary policy meeting next week. Investors are eager to understand whether the Fed will announce a reduction in bond purchases. Cuts in debt purchases often benefit the U.S. dollar because it means the Fed is one step closer to tightening monetary policy. This also means that the Fed will purchase fewer debt assets, effectively reducing the number of dollars in circulation.
Some analysts said that data released on Tuesday showed that the core U.S. consumer price index (CPI), which does not include volatile food and energy components, rose only 0.1% in August from the previous month, which triggered a reduction in debt purchases this year. The scale of doubt.
Investors no longer pay attention to the deceleration of inflation, but instead focus on the uncertainty of US economic growth. The economic impact of the current Delta variant virus has clouded the growth prospects.
The euro to US dollar fell 0.07% to 1.1803; the US dollar fell 0.27% against the yen to 109.69, as the US stock market fell triggered option purchases. The dollar fell 0.14% against the safe-haven Swiss franc to 0.9204.
The Australian dollar fell 0.7% to US$0.7318 against the US dollar, the lowest since September 1. The Reserve Bank of Australia Chairman Philip Lowe said that it will take time for wages to reach the level of boosting inflation and reiterated the expectation that there will be no interest rate hikes before 2024.
The U.S. dollar rose 0.36% to 1.2694 against the Canadian dollar, as WTI crude oil reduced its gains and the yield on Canadian 2-year Treasury bonds fell; hedging activities around $1.2644 also affected the spot exchange rate.
Wednesday preview
time | area | index | The former value | Predictive value |
10:00 | China | Annual rate of added value of industrial enterprises above designated size in August-YTD (%) | 14.4 | 13.5 |
10:00 | China | Annual rate of added value of industrial enterprises above designated size in August (%) | 6.4 | 5.8 |
10:00 | China | Annual rate of total retail sales of consumer goods in August (%) | 8.5 | 7 |
10:00 | China | Annual rate of total retail sales of consumer goods in August-YTD (%) | 20.7 | 18.9 |
10:00 | China | Annual rate of urban fixed asset investment in August-YTD (%) | 10.3 | 9 |
14:00 | U.K | The annual rate of input PPI is not adjusted seasonally in August (%) | 9.9 | 10.3 |
14:00 | U.K | August CPI annual rate (%) | 2 | 2.9 |
14:00 | U.K | August core CPI annual rate (%) | 1.8 | 2.9 |
14:00 | U.K | Annual rate of retail price index in August (%) | 3.8 | 4.7 |
20:30 | Canada | August CPI annual rate (%) | 3.7 | 3.9 |
20:30 | Canada | August core CPI-ordinary annual rate (%) | 1.7 | 1.7 |
20:30 | America | August import price index monthly rate (%) | 0.3 | 0.2 |
20:30 | America | Annual rate of import price index in August (%) | 10.2 | 9.4 |
21:15 | America | Monthly rate of industrial output in August (%) | 0.9 | 0.4 |
22:30 | America | Changes in EIA crude oil inventories in the week ending September 10 (10,000 barrels) | -152.8 | -357.4 |
22:30 | America | Changes in EIA refined oil inventories in the week ending September 10 (10,000 barrels) | -314.1 | -200 |
22:30 | America | Changes in EIA gasoline inventories in the week ending September 10 (10,000 barrels) | -721.5 | -300 |
15:00 European Commission President von der Lein delivered the annual State of the Union address to the European Parliament
Summary of Institutional Views
HSBC: The U.S. dollar will gradually strengthen in the next few quarters
The spread of the delta mutation virus poses a challenge to the US economy and contributes to the view that the Fed may postpone the reduction of debt purchases. Economists at HSBC believe that this potential delay may put pressure on the dollar in the short term. However, the bank expects that the dollar will gradually strengthen due to the slowdown in global economic growth and the normalization of the Federal Reserve.
The recent epidemic in the United States has been challenging, and the Fed believes this is a recent downside risk. In fact, the US economic recovery is slowing down. These factors have contributed to the idea that the Fed may postpone the reduction of debt purchases, which will test the dollar, although we think it will be temporary. Once the spread of the delta mutant virus shows signs of peaking, the Fed will probably resume its path of gradual normalization.
Economists at the bank still believe that the dollar is gradually transitioning to a stronger path for two reasons. First, global economic growth may be slowing, but it is not decelerating rapidly. If the economy is at risk of a rapid decline, the possibility of a sharp rise in the dollar needs to be considered. Second, the Fed is getting closer and closer to finally raising interest rates, especially when the tightening actually begins, the US dollar should be supported.
OCBC Bank: The euro is expected to fall to 1.1700 against the dollar
OCBC said that last Friday, the euro against the US dollar could not break the resistance level of 1.1900, causing the exchange rate to fall and retest the support level of 1.1800. As the European Central Bank does not plan to reduce asset purchases, it is still bearish on the currency pair and is expected to fall to 1.1700 , European Central Bank President Lagarde’s “reduced but not reduced” remarks are doveish, reversing the less dovish tendencies from the end of August to the beginning of September. The bet in favor of the euro may now be reversed, further suppressing the euro. Technical indicators It also turned down. Previously, it fell below the 55-day MA moving average of 1.1806, and the downward target turned to 1.1700 again.
Citi: The pound is expected to continue to rise in the next few months
Ebrahim Rahbari, chief currency strategist at Citigroup G10, said that we continue to expect the pound to strengthen in the next few months. Upside inflation risks will prompt the Bank of England to signal normalization of policy. We believe these inflation risks are currently underestimated. Over time, this should push the pound to rise.
Policy normalization refers to the return of interest rates and broader monetary policy leverage (such as quantitative easing) to pre-crisis levels. Central banks that restore their policies to normal levels before their peers will usually bring advantages to their currencies.
Citi pointed out that last week’s tax increase in the UK is not expected to put pressure on the future of the pound. The proposal to increase the national insurance tax basically has no effect on economic growth, because the money will be used to fund additional public expenditures. At the same time, the bank expects The October 27 budget will further increase public expenditures between 1.5 and 20 billion pounds.
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