Daily Analysis Report 09 June '2022

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EnclaveFX
Jun 09, 2022
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EUR/USD  

The European currency is rising somewhat versus the US dollar, attempting to rebound from a predominantly “bearish” start to trade this week, which saw EUR/USD update local lows from June 2. The instrument is testing the level of 1.0730 for a breakout, awaiting the release of the final minutes of the European Central Bank’s (ECB) interest rate meeting later today. According to projections, the regulator will maintain the current monetary policy settings but will announce a probable increase in the value in July. The ECB, on the other hand, may be more decisive, raising the rate as early as June or announcing the start of a quantitative tightening program.

The European regulator is anticipated to adopt a more aggressive monetary policy because of the good figures on the euro area’s gross domestic product published the day before. In quarterly terms, Eurozone GDP for Q1 2022 was revised from 0.3 percent to 0.6 percent, and in annual terms, from 5.1 percent to 5.4 percent.

GBP/USD

The British pound is trading in a multidirectional manner against the US dollar, with a price near 1.2535. Traders are not rushing to open new positions ahead of the European Central Bank’s (ECB) interest rate meeting. Furthermore, the macroeconomic backdrop remains bleak, and investors are gearing up for next week’s meetings of the Bank of England, the Federal Reserve of the United States, and the Bank of Japan. Macroeconomic data slightly influenced the pound’s positions issued the day before in the United Kingdom. In May, the S&P Global Construction PMI in the UK dropped from 58.2 to 56.4 points, although market expectations were for a drop to only 56.6 points. At the same time, Halifax House Prices fell from 1.2 percent to 1.0 percent in May, which might be seen as an indication that the country’s inflation peak has passed.

AUD/USD

The Australian dollar depreciates moderately against the US dollar, maintaining the corrective momentum established the day before. The AUD/USD is approaching the local lows of June 2, updated last Tuesday, and is targeting 0.7180 for a break. The Reserve Bank of Australia (RBA) opted to raise the interest rate by 50 basis points to 0.85 percent this week, despite most projections expecting only a 25-basis-point hike. The regulator went on to say that inflation has a detrimental impact on economic growth in a follow-up statement. 

The data from China today backs up the instrument strongly: Export volumes increased by 16.9% in May, compared to only 3.9 percent a month before, and growth of 8% is expected in the following months. Imports grew by 4.1 percent in the same time, which was twice as excellent as projections, and the trade surplus increased from 51.12 billion dollars to 78.76 billion dollars in May.

USD/JPY

The US dollar is trading in a mixed manner, consolidating near fresh record highs and the level of 134.00 and continuing the general rise that began on May 30. The probability of the Bank of Japan sustaining its current loose monetary policy exerts pressure on the yen’s position. While practically all major financial regulators have begun to raise interest rates considerably (the European Central Bank (ECB) is set to start the program in July), the Japanese government is pushing for further stimulus. Masazumi Wakatabe, the regulator’s Deputy Governor, said such words were made, who also agreed that new incentives could be introduced if the economic circumstances warranted them.

The yen received little apparent support from macroeconomic indicators provided in Japan yesterday. The Eco Watchers Survey on Current Situation rose from 50.4 to 54.0 points in May, compared to a forecast of 49.2 points. Revised data on the dynamics of gross domestic product for Q1 2022 were revised upward from –0.2 percent to –0.1 percent in quarterly terms and from –1.0 percent to –0.5 percent in annual terms.

XAU/USD

Gold prices are essentially unchanged, settling at about 1855.00. Trading participants are not in a rush to open new positions on the instrument before the final minutes of the European Central Bank’s (ECB) monetary policy meeting today. The ECB is expected to suggest a probable increase in interest rates at its upcoming meetings. Still, it is also feasible that the regulator will modify the value as early as June. The Federal Reserve of the United States and the Bank of England will reveal their monetary policy choices next week. Both authorities are likely to increase interest rates to combat inflationary threats.

Meanwhile, even though gold does not yield interest income, demand for it as a safe-haven asset remains strong, and the geopolitical scenario does not support a quick resolution to the current crisis in Ukraine.