Markets Get Cautious Ahead of Significant Macroeconomic Events in Forex Today

EnclaveFX Ltd
Jul 20, 2022

The US Dollar Index moved marginally over 106.50 on Wednesday, having lost more than 1 percent this week, suggesting that the dollar selloff has temporarily halted. Following the significant risk rise seen earlier in the week, the benchmark 10-year US Treasury bond yield moves above 3%, and US stock index futures trade flatly. The US economic docket will include the Canadian Inflation Report and the US Existing Home Sales report from June. The European Commission will make the July 2018 Consumer Confidence Index data available during American trade hours. Last but not least, investors will closely monitor the 20-year US Treasury note auction, which is set to begin at 17.00 hours(GMT).

For the first time since May 20, China recorded more than 1000 coronavirus infections, and investors are growing more apprehensive about Chinese officials enacting further restrictions. Markets are still betting against a 100 basis point (bps) Fed rate increase in July.

As measured by the Consumer Price Index, Inflation in the UK increased to 9.4% percent yearly in June from 9.1 percent in May, according to statistics released earlier in the day by the UK's Office for National Statistics. The British pound struggled to gain momentum even though this print exceeded the market consensus of 9.3 percent.

After the positive labor market data released on Tuesday and the hawkish remarks made by Bank of England (BOE) Governor Bailey, markets appear to have already fully priced in a 50 basis point BOE rate increase in August. When writing, GBP/USD traded above 1.2000 with modest daily increases.

On Tuesday, the EUR/USD pair recorded its third consecutive joyous reading day due to reports that the European Central Bank may decide to raise interest rates by 50 basis points at its forthcoming meeting on Thursday. In the middle of the 1.0200 range in the early European morning, the pair is still trading in the green. After the annual maintenance is finished on Thursday, it is reported that the Nord Stream 1 pipeline will reopen; however, the gas supply will be at a lower rate.

The AUD/USD exchange rate reached a high of over 0.6980 on Tuesday and appeared to have entered a consolidation period early on Wednesday. Phillip Lowe, governor of the Reserve Bank of Australia, reaffirmed during the Asian session that additional rate hikes would be necessary for the coming months.

Before the Bank of Japan's policy pronouncements, the USD/JPY rate still fluctuates in a small band close to 138.00.

For the fourth straight trading day, gold trades aimlessly over $1,700 and finds it difficult to make an apparent turn in either direction. Rising US T-bond rates prevent XAU/USD from taking advantage of the widespread dollar selling pressure.

After posting slight daily losses on Tuesday, Bitcoin trades at its highest level in more than a month, above $23,000, while Ethereum remains quiet above $1,500.


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