Daily Analysis Report 27 June ‘2022
The euro exhibits a modest increase, forming a faint “bullish” momentum after the previous trading week, testing 1.0560 for a breakout, and awaiting additional movement catalysts. Trading attention is focused on the possibility of different monetary policy tightening by the world’s top financial authorities, particularly the US Federal Reserve and the European Central Bank (ECB). With some initial success, the US Fed is now rushing through the second increase in interest rates against the backdrop of a substantial rise in inflation. The European regulator, meanwhile, is only getting ready to begin a cycle of tightening monetary policy with the July meeting, and initially, the ECB is likely to behave wildly.
Investors will pay close attention to Isabel Schnabel, a spokeswoman of the European Central Bank, and Christine Lagarde, its president, as they speak today. A monthly report from the Bundesbank will also be released that day.
Due to contradicting macroeconomic data from the US and the UK and vague predictions for how the global economy will evolve, the pound has been fluctuating throughout the week and is currently consolidating near 1.2300. Analysts worry that the economy may enter a recession due to a dramatic rise in interest rates in the US. Similar trends are seen in the UK, where the Bank of England is maintaining its tight monetary policy despite record-high inflation rates. The macroeconomic numbers released on Friday further strained the British pound’s position.
June saw a decrease in GfK Consumer Confidence from -40.0 to -41.0 points. Retail Sales fell by 0.5 percent in May after increasing by 0.4 percent the previous month, falling short of analysts’ expectations of a 0.7 percent reduction. In annual terms, sales dynamics improved from -5.7 percent to -4.7 percent, while expectations had been for a 4.5 percent decline.
The New Zealand dollar is rising somewhat and developing a relatively confident “bullish” signal established last Thursday. NZD/USD is attempting to stabilize above 0.6300 and is being helped by releasing unimpressive US macroeconomic numbers. Despite experts’ expectations for the index to remain constant, the Michigan Consumer Sentiment Index ended the previous week from 50.2 points to a new record low of 50.0 points. Investors anticipate the release of May data on the dynamics of durable goods orders today. Forecasts predict a significant drop from 0.5 percent to 0.1 percent, partly attributable to a substantial slowdown in vehicle purchases. A revised report on the US GDP’s dynamics for the first quarter of 2022 will be released on Wednesday. The indicator is anticipated to stay constant at the -1.5% level.
The value of the American dollar decreases somewhat, trying to break through at 134.70. US macroeconomic indicators that are not the most confident, while Japanese publications frequently prove to be upbeat, put some pressure on the positions of the US currency. The University of Michigan Consumer Confidence Index hit a new record low last Friday, falling from 50.2 points to 50.0 points. Japan, in turn, released data on the dynamics of consumer prices for May, showing that the CPI increased by 2.5 percent as opposed to the 2.9 percent analysts had predicted. Contrary to predictions of a slowing to 0.4 percent, inflation rose by 0.8 percent in May when food and energy prices were excluded. This suggests that the Bank of Japan will continue to maintain its current policy.
Investors are again paying close attention to data from Japan at the start of the week. The Coincident Index in April stayed around 96.8 points, while the Leading Economic Index for the same period increased from 100.8 to 102.9 points, in line with expectations.
The price of gold is increasing, trying to break through the level of 1835.00. On Monday, XAU/USD opened with a slight upward gap, showing the somewhat uneasy mood of investors attempting to keep their money in a “safe” asset. News concerning a potential restriction on buying precious metals also lends strength to the instrument. The chiefs of the G7 countries decided to impose a gold embargo on the Russian Federation during their recent summit in the Bavarian Alps, which the US Treasury is expected to announce tomorrow formally. The instrument continues to be negatively impacted by the actions of top global regulators. The European Central Bank (ECB) is scheduled to release the
The US Federal Reserve is one of the first institutions to experience the adverse effects of tight monetary policy due to the severe slowdown in the US economy. Analysts worry about a full-fledged recession even while the inflation rate may continue to be close to record highs. Similar to how earlier officials believed the rise in consumer prices to be a fad, the Fed now views the dangers of stagflation as modest.