Daily Analysis Report 08 June '2022

EnclaveFX Ltd
Jun 08, 2022


During the Asian session, the European currency fell slightly versus the US dollar, settling near 1.0680. The market’s activity remains low as the news backdrop shifts marginally. Yesterday, investors were focused on German Factory Orders data, which showed a loss of 2.7 percent in April after falling by 4.2 percent the month before, despite experts expecting a 0.5 percent increase. The negative dynamics expanded from –2.9 percent to –8.9 percent annually, which was also worse than market expectations. Only data on Sentix Investor Confidence in the Eurozone, which rose from –22.6 to –15.8 points in June, provided minor support for the instrument, despite experts expecting slight improvement.

Investors are currently anticipating the release of new figures on the dynamics of the Eurozone GDP for the first quarter of 2022. According to previous projections, the region’s GDP grew by 0.3 percent quarter over quarter and 5.1 percent year over year. Employment Change figures for Q1 2022 will also be revealed during the day.


During the morning session, the British pound trades with multidirectional dynamics against the US dollar, retracing following a day of rapid increase. The instrument is waiting for new drivers to arrive on the market before testing 1.2550 for a breakdown. The British pound grew due to a vote of confidence in British Prime Minister Boris Johnson. The official received the Conservative Party’s support as expected, albeit with only 59 percent of the total votes.

Analysts draw comparisons with previous Prime Minister Theresa May, who resigned after receiving 63 percent of the vote in a similar referendum. Statistics from the United Kingdom provided additional support for the pound on Tuesday. The S&P Global Services PMI rose from 51.8 to 53.4 points in May, outperforming analysts’ unbiased estimates.


In the Asian session, the Australian dollar is actively depreciating versus the US dollar, correcting after a day of equally vigorous growth. Under pressure from the recovering US dollar, the instrument tests the level of 0.7200 for a break. Contrary to expectations, the Reserve Bank of Australia (RBA) hiked its interest rate by 50 basis points to 0.85 percent on Tuesday. Officials rationalized the decision by rising consumer prices in a follow-up statement, stressing that they remain under control and are often lower than in other advanced nations. The speech of US Treasury Secretary Janet Yellen, who once again focused on the challenges of high inflation in the US, put pressure on the US currency.

The official recognized that the US Federal Reserve is to blame for rising costs and mentioned external dangers, such as supply chain disruptions and the looming oil market crises. Yellen also advocated for securing the flow of Russian oil to global markets to avoid a worsening of the problem with “black gold” and gasoline prices.


In Asian trading, the US dollar rises boldly against the Japanese yen, testing 133.00 for a breakout and updating multi-year highs. A further increase in US Treasury yields, which makes the dollar more appealing as a safe-haven asset, supports the positive dynamics. The yen’s pressure increased due to Bank of Japan Governor Haruhiko Kuroda’s speech, in which he reaffirmed the regulator’s commitment to further monetary stimulus. This indicates that the regulator still views inflationary pressure as a transient phenomenon beneficial to the country’s economy, which is facing deflationary dangers.

Optimistic macroeconomic indicators from Japan provide minor support for the yen today. The country’s GDP declined by 0.1 percent in Q1 2022, which was much better than the market’s projection of a 0.3 percent decline. After a predicted drop of 1%, the Japanese economy slowed by 0.5 percent annually.


During the Asian session, gold prices stabilize near 1850.00, with uncertain dynamics. The instrument had shown a moderate increase the day before, recovering from its local lows of June 1 and nearly fully recouping Monday’s losses. A drop aided the formation of the uptrend in the yield on US Treasury notes, which fell from 3.038 percent to 2.979 percent from their prior highs. On the other hand, investors are not in a rush to create new trading positions in the instrument, preferring to wait for monetary policy decisions from key global financial authorities.

The European Central Bank (ECB) will meet this week, and the market expects the regulator to announce the start of a quantitative tightening program. Next week, the US Federal Reserve and the Bank of England will discuss the key issues, and the market expects “hawkish” rhetoric from both. Based on Governor Haruhiko Kuroda’s recent comments, the Bank of Japan would continue a dovish stance.


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