Daily Analysis Report 25 Jan '2022
United States of America:
The dollar is rising versus its key rivals, the EUR, JPY, and GBP.
The dollar is surging ahead of the US Federal Reserve’s two-day meeting, which will be the first of the year for regulators. Investors will be looking for clues and signals in the agency’s rhetoric about how often the interest rate will be hiked this year and when the cycle will start. Several experts, including Goldman Sachs Group analysts, believe the indicator will be adjusted in March, June, September, and December of this year. Still, circumstances may necessitate further increases if inflation remains high due to ongoing supply chain disruptions caused by the coronavirus pandemic. The US Federal Reserve may also boost interest rates at each session until the inflation situation stabilizes. Experts at Goldman Sachs Group predict that the department’s balance sheet reduction will begin in July and last for two or two and a half years. Manufacturing PMI may fall from 57.7 to 56.7 points, while Service PMI may fall from 57.6 to 55.0 points, according to today’s January Markit report on business activity.
The EUR gains ground against the pound but loses ground against the dollar and the yen.
Preliminary January numbers on business activity in the euro region as a whole were released today, and they were positive: Manufacturing PMI increased from 58.0 to 59.0 points instead of falling to 57.5 points as forecast, while Service PMI fell from 53.1 to 51.2 points but stayed in the positive territory. Manufacturing PMI increased to 60.5 points, rather than decreasing to 57.0 points, while Service PMI increased from 48.7 to 52.2 points, leaving the stagnation zone. In general, the European economy is recovering slowly, but the risks linked with the pandemic’s progression persist. The expansion of commercial activity in Germany, on the other hand, is reassuring for investors. Despite the encouraging economic figures, the EUR is under pressure due to the US Federal Reserve’s predicted tightening of monetary policy and the worsening of the situation in Ukraine, which could lead to a new armed war.
United Kingdom of Great Britain:
GBP is losing ground today against its biggest rivals, the EUR, JPY, and USD.
The publication of preliminary January data on business activity weighed on the GBP: Manufacturing PMI declined from 57.9 to 56.9 points, below analysts’ expectations of 57.7 points, while Service PMI fell to 53.3 points, missing analysts’ expectations of 53.9 points. Experts say that the British economy, particularly the services sector, is still suffering from the severe epidemiological scenario caused by the spread of the Omicron strain, but that it will swiftly rebound in the second quarter. Furthermore, these figures are unlikely to sway the Bank of England’s decision to stop tightening monetary policy.
The yen falls versus the dollar but rises against the euro and the pound.
Manufacturing PMI rose from 54.3 to 54.6 points but fell short of the projected value of 55.0 points, according to Japan’s preliminary January business activity statistics issued today. Services fell from 52.1 to 46.6 points, returning to a state of stagnation. The strain on the sector is increasing as the Omicron epidemic in Japan gains traction, compelling the government to take extraordinary measures to stem the infection’s spread. Officials have received a request from another 18 prefectures to impose restrictive measures, which will certainly be granted soon. The declaration of a state of emergency will allow local governments to restrict people’s and companies’ mobility, close restaurants and bars, and ban the sale of alcohol. If the new guidelines are passed, the people of 34 of Japan’s 47 prefectures will face various restrictions.
The Australian dollar is losing ground versus its key rivals, the EUR, JPY, GBP, and USD.
The preliminary January numbers on Australian business activity were bad, with the Manufacturing PMI falling from 57.7 to 55.3 points and the Service PMI falling from 55.1 to 45.0 points and stagnating. The pandemic is putting increasing pressure on Australia’s service industry. Investors are scared of the country’s soaring death rates. In addition, once Australian schools reconvene after the holidays next week, the new virus’s prevalence may rise again.
Oil quotes have a chaotic behavior: a price rise has been followed by a drop and the reversal of all previously gained positions.
Experts relate the current trend to the possibility of the US Federal Reserve tightening monetary policy even more. It may take more than four rate hikes to deal with record inflation. This likelihood supports the dollar and puts downward pressure on alternative assets. However, the present drop is likely to be temporary as long-term oil market support factors remain in place. First and foremost, rising geopolitical tensions in the region of Ukraine and the Middle East may disrupt the supply of “black gold” to the market. Furthermore, investors anticipate that energy consumption will continue to rise as the world’s main consumer countries fail to implement substantial quarantine measures in response to the Omicron coronavirus epidemic.