Daily Analysis Report 23 May '2022
EUR/USD
The euro begins the new week with modest gains versus the US dollar, reaching 1.0600 for a breakout and ending near the local highs established last Thursday. The weakness of the US dollar, which came under pressure with a notable adjustment in the yield on US Treasury notes, gave moderate support for the single currency at the start of the week. Last Thursday, analysts reported that the work on 10-year notes had dropped to a three-week low of 2.77 percent, down from 3.2 percent earlier. The European Central Bank’s (ECB) soft monetary policy, or the widening gap between the two rates, pressures the euro.
Representatives of the European Central Bank are beginning to favor launching a rate hike program, but the Bank’s official attitude remains cautious. The ECB, on the other hand, is unlikely to be able to stay on the sidelines for long, and the argument here is not about rate competition or exchange rates. Inflation in the eurozone is at an all-time high, and the European regulator risks following in the footsteps of the US Federal Reserve, which for a long time dismissed record price growth as a fad.
GBP/USD
During the morning session, the pound continued its climb by trading in tandem with the US dollar, testing the level of 1.2550 for a breakout and updating local highs from May 5. The increase of corrective mood for the US dollar against the backdrop of a noteworthy decline in the yield on US Treasury bonds has aided the strengthening of the British pound at the start of the week. Traders are also following the lead of reasonably upbeat macroeconomic data from the UK released on Friday, which outperformed negative expectations. Retail Sales rose 1.4 percent in April after dipping 1.2 percent the month before, despite economists expecting a 0.2 percent drop.
The index fell sharply by 4.9 percent on an annual basis after gaining by 1.3 percent in March, while prior market predictions indicated a more active loss of 7.2 percent. Retail Sales Excluding Fuel, up 1.4 percent month over month but down 6.1 percent year over year, compared to a forecasted decline of 0.2 percent month over month and 8.4 percent year over year. Housing prices in the United Kingdom were announced today. The Rightmove House Price Index climbed by 2.1 percent month over month and 10.2 percent year over year, which was somewhat higher than the prior readings of 1.6 percent MoM and 9.9 percent YoY.
NZD/USD
During the Asian session, the New Zealand currency strengthens versus the US dollar, building on last week’s strong “bullish” Trend. NZD/USD is attempting a breach above 0.6450, updating local highs from May 5. The instrument is in an uptrend against the backdrop of a US currency correction, accompanied by a steep decline in the yield on US Treasury bonds. The New Zealand currency is also rising due to news from Shanghai, where authorities expect to relax previously imposed quarantine restrictions beginning June 1. On the other hand, New Zealand’s macroeconomic backdrop remains relatively neutral.
According to data released on Friday, credit Card Spending fell from 3.4 percent to 1.1 percent in April, lower than experts’ average projection of 1.6 percent growth. New Zealand’s exports fell slightly in April, from 6.48 billion to 6.31 billion dollars. Still, imports fell even more sharply, from 7.06 billion to 5.73 billion dollars over the same period, resulting in a 584 million increase in the country’s Trade Balance, up from 581 million dollars a month earlier. Traders are anticipating the outcome of the Reserve Bank of New Zealand (RBNZ) meeting, which will be revealed on May 25, and expect another 50 basis point increase in interest rates.
USD/JPY
During the Asian session, the US dollar is trading in a decline versus the Japanese yen, testing the level of 127.50 for a breakdown. USD/JPY is trading near the local lows of April 27, suggesting that the decline will continue in the short term. The corrective mood in the US currency and a reduction in the yield on US Treasury bonds have aided the formation of the “bearish” Trend. Although the most recent data on consumer prices in the US indicated the likely crossing of the growth peak, investors worry about further worsening inflation.
The US Federal Reserve’s policy has not altered significantly in recent months, and the regulator aims to hike the interest rate by another 50 basis points at its next meeting. The Bank of Japan, on the other hand, is taking a wait-and-see approach, preferring to focus on managing the quantitative easing program. According to Japanese inflation data released on Friday, the National Consumer Price Index increased by 2.5 percent in April, up from 1.2 percent a month earlier. Market analysts predicted only a 1.5 percent increase.
XAU/USD
Gold prices are still rising moderately at the start of the week, updating local highs from May 12. The instrument is attempting a breakout around 1850.00, with no apparent evidence of a weakening trend. The fundamental driver of gold’s current rise is the weak dollar, under pressure since less-than-optimistic macroeconomic data last week. Furthermore, the dramatic drop in US Treasury yields is causing investors to react unfavorably.
Market participants are waiting for the minutes of the US Federal Reserve’s most recent meeting to be released this week to see unambiguous evidence of the Central Bank’s “hawkish” monetary policy continuing. On Thursday, updated statistics on Q1 2022 will be released on US GDP dynamics. The prior estimate represented a 1.4 percent yearly decline in the US GDP.