Skip to main content

XtremeMarkets

Xtreme Markets Ltd

Web Trader
Register
Download App
Login
Affiliates
Xtreme Markets Logo

Market News

GBP/USD Ascends Towards 1.2700 Prior

GBP/USD Remains Below 1.2700 Before Fed Chair Powell’s Testimony

GBP/USD Remains Below 1.2700 Before Fed Chair Powell’s Testimony

In the early Asian trading session on Wednesday, the GBP/USD currency pair was observed holding below the significant 1.2700 mark, indicating a slight downtick influenced by a resurgence in the US Dollar (USD). This currency movement sets the stage for a day filled with key economic events, including the UK S&P Global Construction Purchasing Managers’ Index (PMI) and the eagerly awaited testimony of Federal Reserve Chair Jerome Powell. The pair was trading near 1.2695, reflecting a modest 0.08% decline from the previous day.

A recent statement by Atlanta Federal Reserve President Raphael Bostic has further stirred market speculation. On Monday, Bostic expressed his expectation of an initial interest rate cut by the Federal Reserve in the third quarter of this year, followed by a pause to assess the impact of this policy change on the US economy. Market participants, guided by the CME FedWatch Tool, are currently pricing in a meager 3.0% chance of a 25 basis point rate reduction at the upcoming Federal Open Market Committee (FOMC) meeting in March.

Adding to the complexity of the market dynamics was Tuesday’s report from the Institute for Supply Management (ISM). The ISM survey revealed that the US Services PMI dropped to 52.6 in February, down from 53.4 in January, falling short of market expectations set at 53.0. This decline in the PMI points towards a slower expansion in the services sector, a critical component of the US economy.

In the UK, Chancellor Jeremy Hunt’s speech at the Spring Budget announcement drew attention. Hunt unveiled a significant cut in national insurance by 2p, signaling a potential shift in fiscal policy. Alongside this development, investors are also anticipating the Bank of England’s (BoE) move towards interest rate cuts by August, aiming to bring inflation back to the 2% target, followed by a predicted increase.

A major focal point for the day is Fed Chair Jerome Powell’s semiannual testimony before Congress. This event is closely monitored by investors, as Powell’s remarks could provide insights into the Fed’s future monetary policy direction. Adding to the week’s significance is the US Nonfarm Payrolls (NFP) report due on Friday, with expectations of an addition of 200,000 jobs in February. These events are crucial for traders who are keenly watching the GBP/USD pair, looking for trading opportunities influenced by these economic indicators and policy decisions.

Read More
EUR/USD Eases Near

EUR/USD Gains Momentum in the Mid-1.0800 Range Due to a Weakening US Dollar

EUR/USD Gains Momentum in the Mid-1.0800 Range Due to a Weakening US Dollar

As the new week commences, the EUR/USD currency pair exhibits a positive trajectory in the early trading hours of Monday in Asia. This uptrend in one of the major currency pairs is primarily underpinned by a diminishing strength of the US Dollar (USD). A pivotal moment for investors this week will be the European Central Bank (ECB) monetary policy meeting scheduled for Thursday, where it is widely anticipated that interest rates will remain unaltered. Currently, the EUR/USD is trading at a value of 1.0845, reflecting a slight increase of 0.07% for the day.

This recent development in the EUR/USD pair’s performance is happening against a backdrop where several policymakers from the Federal Reserve (Fed) have expressed that future decisions on interest rate cuts will be heavily influenced by emerging economic data. Prominent figures such as Boston Fed President Susan Collins and New York’s John Williams have hinted that the first rate reduction could be feasible later in the year. In a similar vein, Raphael Bostic from the Atlanta Fed anticipates a shift towards an easing policy by this summer.

Adding to the complexity of the market dynamics is the latest US Manufacturing Purchasing Managers’ Index (PMI), which declined to 47.8 in February, falling from its previous mark of 49.1 and not meeting the market expectations. This data, released by the Institute for Supply Management (ISM), also highlighted a decrease in the New Orders Index to 49.2, indicating a contraction. Moreover, the Production Index was recorded at 48.4, with the Employment Index at a lower 45.9.

On the European front, the ECB is cautiously waiting for more indicators, particularly regarding the relaxation of wage pressures, before making any significant adjustments to its monetary policy stance. It is highly likely that the ECB will maintain the current interest rates in its upcoming March meeting. Market participants are keenly awaiting the post-meeting press conference for insights into future policy directions. Any hawkish comments from the central bank could potentially bolster the Euro (EUR) and create a challenging environment for the EUR/USD pair.

Looking ahead, the focus will shift to the Eurozone Services PMI, due for release on Tuesday, followed by the German Trade data and Eurozone Retail Sales on Wednesday. If these datasets surpass expectations, they could mitigate concerns about a possible recession in the Eurozone. The spotlight will then turn to the ECB’s interest rate decision on Thursday, which precedes the eagerly awaited US Nonfarm Payrolls (NFP) announcement. These events collectively hold significant potential to influence the trajectory of the EUR/USD pair in the week ahead.

Read More
GBP/USD Modestly Recovers

GBP/USD Modestly Recovers Near 1.2630, Limited Upside Potential

GBP/USD Modestly Recovers Near 1.2630, Limited Upside Potential

During the Asian trading session on Friday, the GBP/USD currency pair witnessed a revival of buying interest, breaking a two-day losing streak that had led it to a one-week low in the region of 1.2615-1.2610 just a day earlier. The pair’s spot prices are currently hovering around the 1.2630-1.2635 zone. This change in momentum is largely attributed to the dynamics surrounding the US Dollar (USD).

The market’s attention was particularly drawn to the US Personal Consumption Expenditures (PCE) Price Index data released on Thursday. The report indicated that annual inflation in January reached its lowest point in three years, fueling speculation about a potential interest rate cut by the Federal Reserve (Fed). This speculation, however, didn’t provide much support to the USD Index (DXY), which measures the USD against a basket of other major currencies. The DXY struggled to build on its recent recovery from a critical 200-day Simple Moving Average (SMA), partly due to the prevailing risk-on market sentiment. This sentiment tends to reduce the appeal of the USD as a safe-haven asset, thereby offering some support to the GBP/USD pair.

On the British side, the Pound (GBP) is finding support from the Bank of England (BoE) policymakers’ efforts to counter market expectations for imminent interest rate cuts. This stance has lent a positive tone to the GBP/USD pair. However, there is a growing consensus that the Fed might delay any interest rate reductions until their June policy meeting, a view reinforced by hawkish comments from several Federal Open Market Committee (FOMC) officials. This outlook has helped sustain high US Treasury bond yields, which could provide a boost to the USD and potentially restrain bullish traders in the GBP/USD market.

Investors are now focusing on the upcoming release of the final UK Manufacturing Purchasing Managers’ Index (PMI) and a scheduled speech by BoE Chief Economist Huw Pill for fresh impetus. Additionally, the early North American session will bring attention to the US ISM Manufacturing PMI, the revised Michigan Consumer Sentiment Index, and comments from Fed officials. These events, along with US bond yield movements and broader risk sentiment, are expected to influence the USD and create short-term trading opportunities in the GBP/USD pair.

Despite the current uptick, the GBP/USD pair appears set to close the week with losses, particularly in anticipation of significant US economic data releases scheduled for the start of the new month.

Read More
EUR/USD Falls Amid Risk-Aversion

EUR/USD Falls Amid Risk-Aversion Before Eurozone, US Data; Trades Near 1.0840

EUR/USD Falls Amid Risk-Aversion Before Eurozone, US Data; Trades Near 1.0840

The Euro/US Dollar exchange rate, known as EUR/USD, has seen a decrease, reaching nearly 1.0840 in the Asian market on Wednesday. This drop is mainly because traders are being very careful due to some important economic reports that are expected to be released soon. These reports include the Euro Zone Economic Sentiment Indicator for February and the preliminary data on the United States’ economic growth for the last quarter (Q4) of the year.

Meanwhile, the US Dollar Index (DXY), which measures the strength of the US dollar against other major currencies, is trying to rise due to the cautious mood in the market. However, the lower interest rates offered on US government bonds (also known as Treasury yields) might be causing the US dollar to face some challenges. At the moment, the DXY has improved slightly to about 103.90, with the interest rates for 2-year and 10-year US government bonds at 4.68% and 4.29% respectively.

Recently, there was a small increase of 0.1% in the US Housing Price Index, which was less than the expected 0.3% and the previous 0.4%. Also, the orders for long-lasting goods made in the US fell by 6.1%, which was more than the anticipated 4.5% drop. According to predictions by the CME FedWatch Tool, the chances of the US Federal Reserve lowering interest rates in March are now only 1%. However, there’s a 21% chance of a rate cut in May and almost a 50% chance in June.

On the other side, the Euro might see some positive effects from recent statements by the President of the European Central Bank (ECB), Christine Lagarde. She mentioned that even though inflation is getting closer to the ECB’s target, the bank plans to keep its current policies for some time.

In Germany, a survey about consumer confidence for March showed a result of -29, which was in line with expectations and slightly better than February’s -29.6. Later this week, more data from Germany, including retail sales and consumer price inflation, will provide further insights into the economic situation.

Experts at Commerzbank are paying close attention to the inflation data coming out on Friday, but they don’t see any clear signs that the Euro will weaken. On the other hand, Kit Juckes, a top strategist at Société Générale, believes that whether the Federal Reserve or the European Central Bank reduces interest rates first or more aggressively will be crucial in deciding the direction of the EUR/USD exchange rate this year.

Read More
EUR/GBP Nears 0.8540 Before

EUR/GBP Nears 0.8540 Before ECB’s Lagarde Speech

EUR/GBP Nears 0.8540 Before ECB’s Lagarde Speech

The EUR/GBP currency pair witnessed a halt in its three-day downtrend, observing a modest rise to approach 0.8540 during Monday’s Asian trading session. This upward movement is primarily attributed to the Euro (EUR) gaining strength following hawkish remarks from members of the European Central Bank (ECB). In addition, the ECB’s Monetary Policy Meeting Accounts for January revealed a cautious approach by policymakers towards easing monetary policy. The consensus among them highlighted that it was too early to consider discussions on rate reductions.

Traders are now keenly awaiting the speech by ECB President Christine Lagarde, scheduled for later on Monday, for further cues on the ECB’s monetary policy direction.

Recent comments from various ECB officials have contributed to shaping the market sentiment. For instance, ECB member Yannis Stournaras projected a potential rate cut in June, dismissing any likelihood of such action in March. Conversely, Joachim Nagel, another ECB policymaker, expressed confidence in controlling inflation, stressing the need for a data-driven approach to policy decisions rather than emulating other central banks.

On the UK front, the decline in consumer confidence for February has exerted downward pressure on the British Pound (GBP), thereby providing support to the EUR/GBP pair. The GfK Consumer Confidence index for the UK, released on Friday, registered a disappointing -21, falling short of market expectations of -18 and deteriorating from the previous -19. This indicates a weakening in consumer confidence regarding the UK’s economic activity for the month of February.

Analysts at MUFG Bank have observed that recent PMI data from the UK suggests an end to the technical recession experienced in the latter half of the previous year. They anticipate that the improvement in global risk sentiment will likely lead the Bank of England (BoE) to adopt a wait-and-see approach, in line with other central banks. There is also speculation about the UK inflation rate hitting the 2% target by April.

Adding to the array of economic speeches, Huw Pill, the Chief Economist at the Bank of England, is also slated to address the public on Monday. His insights will be closely monitored for indications of the BoE’s future monetary policy actions and their potential impact on the GBP. As the market navigates through these developments, the EUR/GBP pair’s performance remains a key focus, reflecting broader economic trends and monetary policy expectations in Europe and the UK.

Read More
EUR/USD Stabilizes Near

EUR/USD Stabilizes Near 1.0820 After PMI-Driven Volatile Session

EUR/USD Stabilizes Near 1.0820 After PMI-Driven Volatile Session

The EUR/USD currency pair exhibited consolidation patterns following a tumultuous trading session triggered by the release of significant Purchasing Managers Index (PMI) data from both Europe and the United States on Thursday. During the early hours of Friday’s Asian trading session, the Euro (EUR) demonstrated stability, hovering around the 1.0820 mark, as investors evaluated the implications of mixed data regarding private sector business activities within the European Union (EU).

The day’s trading dynamics were heavily influenced by the latest PMI figures from the Eurozone and Germany, revealing a complex economic landscape. February’s PMI data showed a divergence in performance between the services and manufacturing sectors. While the preliminary Services PMIs for both the Eurozone and Germany indicated an upward trend, the Manufacturing PMIs did not meet market expectations, reflecting ongoing challenges in the manufacturing sector.

Amidst this backdrop, the European Central Bank (ECB) released its Monetary Policy Meeting Accounts for January, showcasing a cautious stance among policymakers. The minutes revealed a consensus against discussing rate cuts at the current juncture, underlining the need for prudence in monetary policy adjustments. ECB officials acknowledged some positive developments in inflation trends, adopting a more optimistic outlook compared to previous years. However, they were unanimous in their view that potential downward revisions in March’s inflation projections would not automatically warrant rate cuts.

Across the Atlantic, the US Dollar Index (DXY) remained firm, trading near 103.90. This strength was partly underpinned by the rising yields of US Treasury bonds, which stood at 4.71% for the 2-year bonds and 4.33% for the 10-year bonds at the time of writing. Additionally, the US Dollar (USD) found support following the release of encouraging labor market data from the United States.

The US Bureau of Labor Statistics reported that weekly Initial Jobless Claims had fallen to 201K for the week ending on February 16, significantly below the market forecast of 218K and the previous figure of 213K. This data suggests a robust labor market, which could have implications for the broader economy.

Regarding PMI data, the S&P Global US Services PMI recorded a figure of 51.3 in February, slightly below expectations of 52.0 and the previous month’s 52.5. Conversely, the Manufacturing PMI showed an improvement, reaching 51.5, which exceeded the anticipated 50.5 and the prior figure of 50.7. The US Composite PMI, however, declined to 51.4 in February from 52.0 in the previous month.

Further bolstering the US Dollar’s position were hawkish comments from Federal Reserve officials. They emphasized the unlikelihood of interest rate cuts in the near term, suggesting a continued focus on controlling inflation and supporting economic stability. This stance may provide additional strength to the USD in the international currency markets.

Read More
Focus Shifts to FOMC Minutes

GBP/USD Remains Steady Above 1.2600, Focus Shifts to FOMC Minutes

GBP/USD Remains Steady Above 1.2600, Focus Shifts to FOMC Minutes

During the early hours of Wednesday’s Asian trading session, the GBP/USD pair saw a modest rise, climbing above the 1.2600 mark. This upward movement is largely attributed to positive remarks from Andrew Bailey, the Governor of the Bank of England (BoE), which provided a boost to the Pound Sterling (GBP). At present, the major currency pair is trading around 1.2625, showing no significant change for the day.

The shift in investor sentiment regarding the Federal Reserve’s (Fed) anticipated interest rate cuts has been a key factor influencing the pair’s dynamics. This change in outlook followed the release of the U.S. January Producer Price Index (PPI) data last week, which signaled persistent inflationary pressures in the U.S. economy. Consequently, market participants are now aligning their expectations to forecast the Fed’s initial rate cuts to occur between May and June during the monetary policy meeting. The upcoming release of the Federal Reserve Open Market Committee’s (FOMC) minutes from January’s policy meeting is eagerly awaited, as it is expected to shed light on the Fed’s future interest rate trajectory.

Tuesday’s testimony by BoE Governor Andrew Bailey on inflation and the economic outlook played a significant role in the Pound’s strength. Governor Bailey expressed his comfort with the market’s projections of interest rate cuts in 2023, citing signs of recovery in the British economy after its plunge into a recession in late 2023. He further noted that inflation does not necessarily have to fall below the 2% target before the initiation of rate cuts, suggesting the possibility of a rate decrease within the year, though without specifying an exact timeline.

As the week progresses, the focus will shift to the release of the FOMC Minutes on Wednesday. These minutes are anticipated to provide deeper insights into the Fed policymakers’ hesitancy to commence policy easing in the first quarter of 2024. Additionally, the upcoming release of the preliminary U.S. S&P Global PMI for February on Thursday is another significant event on the economic calendar. These developments are expected to offer clearer directional cues for the GBP/USD currency pair.

Overall, the GBP/USD pair’s trajectory is being shaped by a combination of optimistic domestic factors from the UK and broader economic indicators from the US. The upcoming economic releases and policy minutes will be crucial in determining the near-term movement of this currency pair, as traders and investors alike gauge the economic health and policy stances of both the UK and the US.

Read More
Chinese Stocks Rally, but Global Funds Remain Skeptical

Chinese Stocks Rally, but Global Funds Remain Skeptical

Chinese Stocks Rally, but Global Funds Remain Skeptical

Chinese stocks have potentially reached their lowest point, yet there remains a significant hesitation among money managers to reengage fully with the market. The MSCI China Index has seen a 27% rise since its January low, primarily driven by a shift towards undervalued stocks. However, this increase in value hasn’t yet been backed by convincing Chinese corporate earnings, according to insights from Lombard Odier, Pictet Asset Management, and Fidelity International. Despite some optimistic views, such as those from abrdn plc emphasizing the importance of profit gains, the broader investment sentiment remains cautious.

At a glance, Chinese equities haven’t looked this appealing in some time, with major indices entering bull markets bolstered by supportive policies, and long-only funds ceasing to cut positions. However, persistent economic uncertainties and ongoing strategic tensions with the US have diminished the appeal of Chinese stocks as a staple in emerging-market portfolios. John Woods, Chief Investment Officer for Asia at Lombard Odier, notes that tactical plays on short-lived rallies are less preferred than a focus on earnings and fundamentals.

The recent rally, starting in April, took many by surprise, including analysts from Goldman Sachs Group Inc., who noted a widespread fear of missing out among traders. To date, Chinese stocks have regained about $2.5 trillion in market value, recuperating over one third of the losses from a historic downturn earlier this year. This recovery is partly due to a rotation from markets like the US, Japan, and India, where stocks are peaking, towards the relatively low valuations in China, marking the longest stretch of net purchases via Hong Kong trading links in a year.

David Mudd, founder and CIO of PegasusAsia, a hedge fund, predicts a continued shift towards Chinese tech firms from their US counterparts, setting the stage for potential divergences and intriguing trading pairs. The MSCI China Index currently trades at 10 times forward earnings, significantly below both its five-year average and the 20.6 times earnings of the S&P 500.

Nicholas Yeo, head of China equities at abrdn, describes the recent market surge as a technical rebound due to historically low valuations, emphasizing that its sustainability will hinge on forthcoming earnings reports. In contrast, John Lin from AllianceBernstein expresses skepticism, pointing out that the current earnings growth expectations for Chinese stocks, around 10%, may be overly optimistic without supporting corporate performance.As the earnings season progresses, companies within the MSCI China Index have reported a nearly 30% drop in net profits before exceptional items as of mid-May. The upcoming earnings reports from tech giants like Tencent Holdings Ltd. and Alibaba Group Holding Ltd. are highly anticipated, as they could be pivotal in determining the rally’s durability.

Additional momentum for the rally comes from signs of increased policy support in Beijing, especially measures aimed at addressing the stagnant property sector. Simultaneously, the persistent high policy rates in the US make Chinese stocks an attractive alternative, particularly in the tech sector. The Golden Dragon Index, which tracks US-listed Chinese firms, recently experienced a notable rise, fueled by robust quarterly results from Tencent Music Entertainment Group.

Despite the tempting market conditions, Luca Paolini from Pictet remains cautious, opting for tactical investments in China. Morgan Stanley’s strategists, including Laura Wang, advise against chasing the rally, although they recognize specific opportunities. As Beijing encourages companies to enhance dividends and buybacks, and incentivizes key industries like semiconductors, Chinese equities are gradually becoming attractive to value-focused investors, as noted by George Efstathopoulos from Fidelity. However, the critical determinant remains the improvement in consumer sentiment within China, a factor that is still considered fragile.

Read More
Hong Kong Attempts to Attract Saudi Investment to Revitalize Stock Market

Hong Kong Attempts to Attract Saudi Investment to Revitalize Stock Market

Hong Kong Attempts to Attract Saudi Investment to Revitalize Stock Market

Hong Kong is actively seeking investment from Saudi Arabia to help rejuvenate its stock market, which has been facing multiple challenges. The city, known for its role as a global financial hub, is collaborating with the Saudi Tadawul Group to host a conference aimed at attracting fresh stock listings and fund inflows. This comes at a crucial time when Hong Kong needs to bolster its financial status.

The upcoming forum is not only an opportunity for Hong Kong but also for Saudi company officials who are keen on increasing their exposure to Asian markets. According to industry analysts, there is a significant political push fostering closer relations between China, including Hong Kong, and Gulf countries. Chinese businesses have expressed a keen interest in the Middle East, looking for new investment avenues to explore in the region.

This strategic conference highlights Hong Kong Exchanges & Clearing Ltd.’s efforts to attract new investors as part of its broader strategy to diversify its investor base amid reduced interest from U.S. and European investors due to rising geopolitical tensions. 

Last month, the nation’s securities regulator announced initiatives to encourage more companies to launch initial public offerings (IPOs) in Hong Kong, amidst a challenging period marked by a slow Chinese economy and increasing tensions between Beijing and Washington. These factors have led to a decline in investor interest and a significant drop in funds raised through IPOs, reaching a low not seen since 2009.

Bonnie Chan, CEO of Hong Kong Exchanges & Clearing, remains optimistic about the resurgence of significant IPOs in the city, with 100 applications currently in the pipeline and more expected. The recent uptick in applications has provided a hopeful outlook for the market’s recovery.

On the other side, Saudi Arabia sees clear benefits in tightening relations with China. Under the kingdom’s Vision 2030 agenda, spearheaded by Crown Prince Mohammed bin Salman, Saudi Arabia aims to increase foreign ownership and enhance liquidity in its stock markets. The Saudi market has shown robust growth, with the market capitalization increasing by 11% over the past three years, contrasting sharply with Hong Kong’s 25% decline. The Riyadh stock exchange has consistently performed well, attracting significant foreign investment, particularly after its inclusion in MSCI Inc.’s emerging-markets equities benchmark in 2019.

Recently, Hong Kong introduced the CSOP Saudi Arabia ETF, the first such exchange-traded fund in Asia, allowing investors to tap into the Saudi market. Despite a strong start with backing from Saudi Arabia’s sovereign wealth fund, it has seen modest fund inflows. Efforts are underway to cross-list this ETF in Shanghai to enhance accessibility for Chinese investors, who are increasingly recognizing the investment potential in the Middle East.

Further strengthening the ties, Hong Kong and Saudi Arabia have commenced negotiations on an “investment promotion and protection agreement.” There are also plans to launch a Riyadh-based ETF that tracks Hong Kong stock indexes. These initiatives underline the enduring partnership and mutual financial interests between the two regions.

Hong Kong’s Chief Executive John Lee has also expressed aspirations to attract a dual listing from Saudi Aramco, the world’s top oil producer, in Hong Kong. While this remains a future possibility, it signifies the city’s ambition to enhance its stature as a leading financial exchange.

Read More
Asian Stocks Rise Slightly as Hopes for Federal Reserve Action Boost Sentiment

Asian Stocks Rise Slightly as Hopes for Federal Reserve Action Boost Sentiment

Asian Stocks Rise Slightly as Hopes for Federal Reserve Action Boost Sentiment

Asian stock markets achieved modest gains on Tuesday, driven by rising optimism that the Federal Reserve may initiate interest rate cuts within the year. This sentiment mirrored the uptick on Wall Street, sparked by soft U.S. employment figures which fueled speculation about potential changes in Fed policy. The optimism extended across major Asian markets, particularly in Japan, Korea, and Australia, contributing to the longest streak of gains in the region since February.

In Japan, the Nikkei 225 surged by as much as 1.6% as Tokyo investors returned from a holiday, showing robust trading activity. However, markets in Hong Kong and Shanghai experienced fluctuations, alternating between losses and gains throughout the trading day. The Japanese yen weakened following comments from Japan’s top currency official, Masato Kanda, who indicated that there was no immediate need for government intervention in currency markets as long as they remained functional.

The global equity landscape has been positively influenced by adjustments in investor expectations regarding the Federal Reserve’s monetary policy, especially after the recent U.S. jobs data suggested a less robust labor market. Chinese stocks, in particular, saw an uplift from assurances by China’s leaders to introduce new measures aimed at addressing the lingering issues in the housing sector.

Investment analysts highlight Asia’s attractive prospects in terms of growth, earnings potential, and valuation compared to the U.S. According to Ray Sharma-Ong of abrdn Plc, Asian markets have historically outperformed during periods of Fed monetary easing, thanks to better growth dynamics and attractive currency yields.

In the bond markets, there has been a cautious but noticeable shift towards expecting Fed easing this year, influenced by signs of cooling in the U.S. labor market. The yield on U.S. 10-year Treasuries showed little change, mirroring a stable yield environment in Australia as well.

Statements from Federal Reserve officials have underscored this cautious approach. Thomas Barkin, President of the Fed Bank of Richmond, noted that sustained high interest rates are likely to further slow economic growth and help bring inflation down to the 2% target. His counterpart in New York, John Williams, mentioned that rate cuts are anticipated eventually, but the timing would hinge on a broader array of economic data.

Meanwhile, the Reserve Bank of Australia held interest rates steady at a 12-year peak, indicating it would take time before inflation consistently met its target range. In China, positive sentiments were further buoyed as Shenzhen and other major cities relaxed home buying restrictions, part of broader efforts to rejuvenate the struggling real estate sector.

Strategists at HSBC Holdings, including Herald van der Linde, suggest that Chinese markets are poised to remain attractive in the short term due to an undervalued yen, high investment in Japanese funds, and ongoing improvements in China’s regulatory and economic environment. They predict that any Fed easing in late 2024 would likely benefit mainland China more than Japan, pointing to a continued shift in regional market dynamics.

Read More
Asian Stocks Rise Post-Fed Decision; Yen Declines Resume

Asian Stocks Rise Post-Fed Decision; Yen Declines Resume

Asian Stocks Rise Post-Fed Decision; Yen Declines Resume

Most Asian stocks rose following comments from Federal Reserve Chair Jerome Powell, which tempered expectations for further interest-rate hikes. Meanwhile, the yen weakened after briefly surging, indicating possible intervention.

In market movements, equity indexes in Australia and Hong Kong saw gains, while Japanese stocks remained stable. U.S. stock futures experienced a rally, contrasting with a dip in European contracts. Market focus now shifts to forthcoming economic indicators, including euro-area manufacturing data and Apple Inc.’s earnings report.

The yen’s decline by as much as 1.1% against the dollar, following a sharp rise in New York, suggests doubts about Japan’s ability to counter further weakening despite its significant interest-rate gap with the U.S. Japan’s chief currency officer, Masato Kanda, refrained from commenting on potential market interventions.

The Federal Reserve maintained the federal funds rate at 5.25% to 5.5%. Powell indicated that a rate hike is unlikely without clear signs that current policies are insufficient to achieve a 2% inflation target. This stance suggests a cautious approach towards monetary policy, aimed at managing persistent inflation pressures.

On the currency front, the Bloomberg dollar index fell for a second consecutive day, influenced by lower U.S. yields post-Fed announcement. The euro remained steady after a slight increase the previous day.

Corporate earnings also highlighted market dynamics. ArcelorMittal SA reported better-than-expected results, and Apple’s upcoming earnings will provide insights into its performance amid a slowdown in China.

John Woods of Lombard Odier commented on the resilience seen in earnings, emphasizing the predominance of U.S. narratives in the current market environment.

Additional economic insights are expected with the release of April’s non-farm payroll data, with forecasts suggesting a stable unemployment rate of 3.8%. This could indicate persistent robust hiring trends, potentially challenging the Fed’s moderation efforts.

In commodities, oil prices bounced back from prior losses driven by concerns over demand and high U.S. crude inventories. Gold prices increased, supported by the Fed’s indication of a potential shift towards reducing borrowing costs once confident in the easing of inflation.

Read More

Japan Drives Asian Stocks Up, China PMI Steady

Japan Drives Asian Stocks Up, China PMI Steady

Asian stock markets saw gains on Tuesday, with Japan taking the lead, as recent Chinese economic data indicated sustained recovery in the world’s second-largest economy. Japanese and Hong Kong indices climbed, while Chinese mainland shares showed mixed responses after reports of continued growth in factory activities. Meanwhile, U.S. stock futures remained stable following a robust earnings kickoff on Wall Street, despite expectations of sustained high interest rates by the Federal Reserve.

In Japan, equities rose sharply after a national holiday, buoyed by a strong rebound in the yen from a 34-year low against the dollar, amid rumors of government intervention to stabilize the currency. The yen experienced significant volatility, swinging over 2% after a previous drop to 160.17 per dollar, marking the broadest range since late 2022. During Asian trading hours, the yen’s gains moderated slightly as the U.S. dollar strengthened.

Analysts note a cautious optimism surrounding the Japanese currency, as fears of its continued depreciation seem to have eased. Elsewhere in Asia, there’s speculation that China might consider a drastic step to boost its sluggish economy, such as a substantial devaluation of the yuan. Chinese markets are set to close later in the week for the Labor Day holidays.

On the corporate front, Samsung Electronics saw a notable increase in earnings, driven by profits in its semiconductor unit for the first time since 2022, highlighting the surge in global AI development. Shares of Sumitomo Corp. also soared following reports that Elliott Management Corp. had acquired a significant stake in the company. Meanwhile, HSBC announced a decline in its first-quarter pretax profit and the upcoming retirement of its CEO, Noel Quinn, sparking a search for his successor.

In the U.S., early earnings reports are surpassing expectations with a significant majority of companies outperforming initial estimates. This has led to an upward revision in expected earnings growth, boosting investor sentiment. U.S. Treasury yields stabilized after a slight drop, and bond yields in Australia and New Zealand fell.

Market analysts anticipate continued volatility in U.S. markets but remain optimistic, particularly for AI-driven sectors. They recommend a balanced investment approach, emphasizing the potential in U.S. equities, especially technology stocks.

In commodities, oil prices steadied after a notable drop, as peace talks in the Middle East lowered risk premiums. Gold is on track to rise for the third consecutive month, with investors closely watching the upcoming Federal Reserve meeting.

Read More

Apple’s Market Lead in China Slips as Q1 Shipments Drop 6.6%

Apple’s Market Lead in China Slips as Q1 Shipments Drop 6.6%

Apple has been dethroned as the leading smartphone seller in China during the first quarter of 2024, according to preliminary data released by research firm IDC on Thursday. The company saw its smartphone shipments decline by 6.6% compared to the same period last year, amidst fierce competition that has reshaped the market dynamics.

In a closely contested race for market dominance, both Honor and Huawei have now edged out Apple. Honor experienced a rise in market share to 17.1%, while Huawei closely followed with a 17% share. Apple’s market share, in contrast, has slipped to 15.6%. IDC identifies a statistical tie in market share when the difference between companies is 0.1% or less, underscoring just how tight the competition has become.

This shift comes despite Apple’s attempts to regain traction through price promotions during the quarter. Arthur Guo, a senior research analyst at IDC China, noted in the report that these efforts were insufficient to counter the robust challenge posed by Android-based competitors.

Adding to Apple’s challenges, the overall smartphone market in China is on the rise, with total shipments increasing by 6.5% to reach 69.3 million units, as reported by IDC. This growth suggests a recovering market where competition is becoming increasingly stiff.

Further emphasizing the scale of Apple’s current predicament, another research firm, Counterpoint, revealed that Apple’s smartphone shipments in China plummeted by 19% in the first quarter. This marks the company’s poorest performance since 2020, indicating significant hurdles in one of its key markets.

The increasing market share of rivals like Honor and Huawei is indicative of a broader trend where Chinese consumers are responding more favorably to domestic brands, which have been aggressively innovating and marketing their products. As these brands continue to capitalize on national sentiment and technological advancements, Apple faces the dual challenge of adjusting its strategy to regain lost ground and redefining its value proposition to appeal to Chinese consumers amidst a rapidly evolving smartphone landscape.

Read More

UBS Upgrades Chinese Stocks to Overweight

UBS Upgrades Chinese Stocks to Overweight

UBS Group AG has upgraded its rating for a prominent Chinese stock index to overweight, indicating a renewed confidence in the market’s recovery prospects. This upgrade, described as a rare and optimistic move in 2024, reflects UBS’s positive stance on the financial health and earnings potential of China’s largest stocks.

In a detailed analysis released on Tuesday, UBS strategists, including Sunil Tirumalai, highlighted the robust earnings and solid fundamentals of these top companies. They pointed to a noticeable increase in consumer spending and a potential shift in household savings towards market investments as key drivers of this optimism.

The timing of UBS’s bullish outlook on the MSCI China Index coincides with the market showing signs of recovery from a prolonged downturn. The index, along with corporate performance, has begun to improve, buoyed by economic upturns and a tentative easing of corporate struggles. Despite this, the shadow of geopolitical strife and regulatory uncertainties continues to temper investor enthusiasm, preventing a full-scale commitment to this asset class.

Simultaneously, UBS has adjusted its views on other Asian markets, upgrading Hong Kong stocks to overweight while downgrading Taiwan and South Korea’s tech-centric markets to neutral. This shift reflects a broader strategy of divesting from highly valued tech stocks amid expectations of sustained high interest rates by the Federal Reserve.

Year-to-date, the MSCI China Index has risen over 13% from its January low, with similar gains seen in the Hang Seng Index. This growth comes after a cautious period among brokerages who were hesitant to amend their market forecasts following a volatile market phase post-2022’s aggressive rally.

Historically, UBS had moved Chinese stocks to a neutral stance in late 2023, mirroring actions by Morgan Stanley, as it awaited economic stabilization and policy interventions. Recent data, however, shows a rebound in the 12-month forward earnings estimate for the MSCI China Index by 1.7%, the first rise since a dip at 2022’s end.

This positive trend in Chinese equities is further supported by national policies aimed at stabilizing the market and enhancing corporate governance, as outlined in China’s recent “Nine-Point Guideline.” These initiatives are expected to foster better dividend practices and higher quality stock offerings.

Nonetheless, UBS warns that the looming US elections could escalate geopolitical tensions, posing a significant risk to the ongoing recovery in Chinese stocks. This backdrop of uncertainty makes the current market landscape both promising and precarious as investors navigate these complex dynamics.

Read More
Gold Struggles Below $3,300 as Fed Rate Cut Hopes Dim Ahead of FOMC Minutes

Gold Struggles Below $3,300 as Fed Rate Cut Hopes Dim Ahead of FOMC Minutes

Gold (XAU/USD) dipped to a one-and-a-half-week low near $3,284 during the Asian trading session on Wednesday, weighed down by a stronger US Dollar and rising Treasury yields. Investors are increasingly convinced that recent US tariff hikes may fuel inflation, prompting the Federal Reserve to keep interest rates elevated for longer. 

The firmer Greenback, bolstered by expectations of prolonged Fed tightening and a robust June jobs report, has dulled the appeal of non-yielding assets like gold. Benchmark 10-year US bond yields also climbed, adding further pressure on the precious metal. 

Market participants remain cautious amid ongoing concerns about the economic fallout from Donald Trump’s aggressive tariff proposals. On Tuesday, the former US President threatened to impose duties of up to 50% on copper and 200% on foreign pharmaceuticals, unsettling global markets. However, gold’s traditional safe-haven demand has yet to see significant support in response. 

Traders are now eyeing the release of the FOMC meeting minutes later today, hoping for clues on the Fed’s rate path. Although a July rate cut appears off the table, markets are still pricing in up to 50 basis points of easing by year-end, likely beginning in October. 

Technically, a break below the $3,300 level, coupled with resistance at the 100-period SMA on the 4-hour chart, signals further downside. Momentum indicators suggest gold could slide towards the next support at $3,270, with a deeper drop towards $3,248–$3,247 not ruled out. 

On the upside, recovery attempts may face initial resistance near $3,310 and stronger barriers around $3,326 and $3,340. A decisive move above $3,360 could open the door to a short-term rebound toward the $3,400 mark. 

Read More
Gold Price Climbs Steadily

Gold Price Climbs Steadily, Eyes Record High Amid Trade War Concerns

Gold (XAU/USD) extends its intraday rally, reaching the $2,880 region during the Asian session on Monday. The gains come in response to US President Donald Trump’s plan to impose new 25% tariffs on all steel and aluminum imports, reigniting fears of a global trade war and driving demand for the safe-haven precious metal. Additionally, concerns that Trump’s protectionist policies could fuel inflation further bolster gold’s appeal as a hedge against rising prices.

Gold Supported by Trade War Fears, But Fed Policy Remains a Concern

Despite strong upside momentum, gold’s gains may face limitations due to the resilient US Dollar (USD) and expectations that the Federal Reserve (Fed) might delay further rate cuts. The strong US employment data released on Friday, coupled with inflationary concerns, has reinforced speculation that the Fed will maintain a cautious stance.

Overbought conditions on the daily chart could also deter traders from initiating fresh bullish positions, especially in the absence of key US economic data early in the week.

Trump’s Tariff Announcement Sparks Market Uncertainty

On Sunday, Trump reaffirmed plans to impose 25% tariffs on all steel and aluminum imports into the US, adding that his administration would match tariff rates imposed by other countries. These announcements have further fueled uncertainty and strengthened gold’s safe-haven appeal.

Meanwhile, geopolitical tensions remain elevated. Russian Deputy Foreign Minister Galuzin stated there are no satisfactory proposals for Ukraine peace talks, dismissing Western statements as mere rhetoric. US Vice President JD Vance is reportedly heading to Germany this week to outline US policy proposals.

Fed Policymakers Express Caution Amid Economic Uncertainty

The latest US Nonfarm Payrolls (NFP) report showed 143K jobs were added in January, falling short of the 170K estimate but offset by an unexpected dip in the Unemployment Rate to 4.0%. While the report provides mixed signals, it has reinforced the belief that the Fed will remain cautious regarding further monetary easing.

Several Fed officials have weighed in on economic policy:

  • Minneapolis Fed President Neel Kashkari stated he would consider supporting further rate cuts if inflation data remains favorable and the labor market stays strong.
  • Chicago Fed President Austan Goolsbee noted that inconsistent US government policies create economic uncertainty, making it difficult to assess inflation trends.
  • Fed Governor Adriana Kugler acknowledged steady US economic growth but warned that progress toward the 2% inflation target remains uneven and slow.

What’s Next for Gold?

A stronger US Dollar could act as a headwind for gold prices, limiting aggressive bullish momentum. Traders will closely monitor Fed Chair Jerome Powell’s semi-annual congressional testimony and the upcoming US consumer inflation figures for further market direction.

Read More
Gold Price Rally Holds Strong, But Overbought Conditions Raise Caution

Gold Price Bulls Hold Firm, But Overbought Conditions Suggest Caution

Gold (XAU/USD) continues its upward trajectory through the Asian session on Wednesday, reaching a fresh all-time high near $2,858. Concerns about the economic impact of US President Donald Trump’s trade tariffs continue to drive demand for the safe-haven metal. Furthermore, predictions that the Federal Reserve (Fed) would continue its easing cycle, backed by signs of deteriorating momentum in the US labor market, are fuelling demand for the non-yielding yellow metal.

 

Meanwhile, the US dollar (USD) remains under pressure near its weekly low, with rising expectations of further Fed policy easing, offering an extra lift to gold prices. However, Trump’s decision to suspend tariffs on Canada and Mexico has contributed to a risk-on mentality, which may restrict future gains for XAU/USD. Furthermore, gold is entering overbought territory on the daily chart, implying a short-term consolidation or minor retreat before the advance begins. Traders are now waiting for significant U.S. data releases, such as the ADP private-sector employment report and the ISM Services PMI, for new market signals.

Gold Bulls Retain Control Amid US-China Trade Tensions

Despite the positive risk tone, a further escalation in U.S.-China trade tensions continues to lend support to the upward momentum in gold. In response to President Trump’s latest tariffs, China has imposed targeted duties on US imports, and the threat of a trade war between the world’s two biggest economies has seen gold reach an all-time high on Wednesday.

On the macroeconomic front, the Job Openings and Labor Turnover Survey (JOLTS) released Tuesday revealed a decline in U.S. job openings, dropping to 7.6 million in December from a previous 8.09 million. The data signals a cooling labor market, increasing the likelihood of additional Fed rate cuts. This has kept USD bulls on the defensive and further strengthened XAU/USD.

Trump’s decision to postpone the application of a 25% tax on Canadian and Mexican imports by 30 days has revived hopes that a global trade war can be avoided. However, this has done little to undermine the positive enthusiasm toward gold.

Market players will be keenly monitoring Wednesday’s U.S. economic data, such as the ISM Services PMI and the ADP employment report, which may cause short-term changes in gold prices. However, Friday’s highly anticipated Nonfarm Payrolls (NFP) report continues to be the main focus. Furthermore, any fresh information about trade tariffs is probably going to cause financial markets to become more volatile.

Read More
WTI Crude Oil Struggles Near $72.00, 100-Day SMA Holds as Key Support

WTI Crude Oil Struggles Near $72.00, 100-Day SMA Holds as Key Support

West Texas Intermediate (WTI) crude oil prices fell from a one-week high on Tuesday, attracting sellers for the second straight session. The commodity trades at $72.00, barely above last week’s one-month low and close to the important 100-day Simple Moving Average (SMA) support. 

US Tariff Delay Weighs on Oil Prices

US President Donald Trump has announced a one-month suspension on newly imposed tariffs on imports from Canada and Mexico, easing worries about potential supply disruptions from two of the country’s main oil suppliers. This development put downward pressure on crude oil prices. Furthermore, fears of lower gasoline demand—driven by the larger economic impact of Trump’s trade policies—are contributing to gloomy sentiment in the oil market.

OPEC+ Stands Firm on Production Policy

Despite Trump’s calls for higher output to combat rising oil prices, the Organization of Petroleum Exporting Countries and its allies (OPEC+) have chosen to keep current production levels. This decision may give some support for crude oil prices, avoiding further losses in the near term.

Key Technical Levels to Watch

Traders will closely monitor the 100-day SMA, currently positioned near the $71.00 mark, which serves as a crucial support level. A decisive break below this threshold could trigger an extended pullback from the recent multi-month highs. Conversely, a bounce from this level may reinforce buying interest and help WTI recover from its recent slump.

Read More
Gold Holds Below $2,800 Despite Intraday Recovery

Gold Price Trims Intraday Losses but Remains Below $2,800 Amid Stronger USD

The gold price (XAU/USD) recovers some of its losses following the strong Asian session sell-off but remains in negative territory, hovering around $2,785, down about 0.60% for the day. The recent rise in the US Dollar (USD), fueled by President Donald Trump’s decision to impose tariffs on Canada, Mexico, and China, has pushed the greenback closer to a two-year high, weighing on gold and dragging it away from its all-time high of $2,817, hit on Friday.

However, projections that the Federal Reserve (Fed) would lower interest rates twice by the end of 2025, combined with indications about probable economic disruptions from Trump’s trade policies, contribute to gold’s safe-haven appeal. The current risk-off mentality further shields the downside, so bearish traders should exercise caution ahead of this week’s key US macroeconomic data, which begins with today’s ISM Manufacturing PMI release.

Technical Outlook: Gold’s Uptrend Intact Despite Intraday Pullback

From a technical perspective, the intraday decline found support near the $2,772 resistance-turned-support level, which now serves as a pivotal point. A decisive break below this zone could trigger further selling pressure, exposing gold to the next key support levels:

 

  • $2,755 – Initial downside target
  • $2,740 – Intermediate support
  • $2,725-$2,720 – Strong demand zone
  • $2,700 – Psychological level, a break below which could accelerate losses

Conversely, immediate resistance is seen in the $2,790-$2,800 region, followed by the record high of $2,817. Notably, momentum indicators on the daily chart remain comfortably positive, indicating that gold has not yet reached overbought levels. This provides room for additional upward momentum, confirming the broader bullish trend that began with the December swing bottom.

If gold manages to sustain a move above $2,817, it could pave the way for fresh record highs, with bulls eyeing further gains amid ongoing market uncertainty.

Market Drivers to Watch

US Dollar Strength: The impact of Trump’s tariffs on global trade could continue supporting the USD, potentially weighing on gold.

Federal Reserve Policy: Expectations of rate cuts in 2025 remain a crucial factor for gold’s long-term trajectory.

US Economic Data: The upcoming ISM Manufacturing PMI and Nonfarm Payrolls (NFP) report later this week could trigger volatility in gold prices.

Risk Sentiment: Any escalation in geopolitical or economic tensions could further boost gold’s safe-haven demand.

Overall, while gold has retreated from its highs, the larger bullish trend remains intact, with technical signals suggesting further upward movement as long as critical support levels hold.

Read More
WTI Slips to $71.00 Amid Trade Tariff Concerns and Weak China Data

WTI Slips to $71.00 Amid Trade Tariff Concerns and Weak China Data

West Texas Intermediate (WTI) crude oil prices edge lower during Wednesday’s Asian session, erasing part of the previous day’s modest recovery from a nearly three-week low. The commodity trades near $71.00, down over 0.25% for the day, and remains vulnerable to further losses amid prevailing bearish sentiment.

Investor concerns persist over US President Donald Trump’s threat to impose trade tariffs on Canada, China, and Mexico by February 1, which could weigh on global fuel demand. Additionally, weak Chinese economic data adds to downward pressure. Official PMIs released on Monday highlighted continued weakness in the world’s second-largest economy and top crude importer, raising concerns over lower consumption.

Further pressure on oil prices comes from Trump’s energy policies, which include plans to ramp up US energy production and calls for the Organization of Petroleum Exporting Countries (OPEC) to increase output to drive prices lower.

With bearish fundamentals dominating, WTI remains susceptible to further downside risks in the near term.

Read More
WTI Drops Toward

WTI Drops Toward $74.00 as Trump Pressures OPEC to Lower Oil Prices

West Texas Intermediate (WTI), the US crude oil benchmark, trades near $74.10 on Friday, continuing its downward trend after US President Donald Trump urged Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) to reduce oil prices.

Uncertainty surrounding Trump’s proposed tariffs and energy policies adds to the pressure on WTI. Speaking at the World Economic Forum in Davos on Thursday, Trump announced plans to request Saudi Arabia and OPEC to lower oil prices, saying, “I’m also going to ask Saudi Arabia and OPEC to bring down the cost of oil.”

Expectations of increased US production under Trump’s administration further weigh on oil prices. Earlier this week, Trump declared a national energy emergency, leveraging his authority to expedite the approval of oil, gas, and electricity projects that would typically require years of permitting.

Meanwhile, US crude inventories declined for the ninth consecutive week. The US Energy Information Administration (EIA) reported a drop of 1.017 million barrels in crude oil stockpiles for the week ending January 17, following a 1.962 million-barrel decline in the prior week. Market expectations had forecast a larger decrease of 2.1 million barrels.

Oil traders will closely monitor developments surrounding Trump’s energy policies and tariff announcements. Additionally, attention will shift to the preliminary US S&P Global Purchasing Managers Index (PMI) for January, set for release later on Friday. A weaker-than-expected reading could pressure the US Dollar (USD), potentially offering some support to the USD-denominated WTI price.

Read More
Ex-Chief Economist Predicts BOJ Rate Hike as Early as June

Ex-Chief Economist Predicts BOJ Rate Hike as Early as June

Ex-Chief Economist Predicts BOJ Rate Hike as Early as June

The Bank of Japan (BOJ) might implement up to three additional benchmark interest rate hikes this year, with the first potential increase occurring as early as June. This move would be a response to what a former BOJ chief economist describes as the excessive ease of the current monetary settings.

The economist, Toshitaka Sekine, expressed his view in a Bloomberg interview, suggesting that the central bank could adopt a more aggressive approach to monetary tightening. According to Sekine, there are no rigid constraints like a 0.25% limit that should prevent further rate increases if the economic conditions are favorable. He emphasized that gradual rate adjustments are feasible as long as the economic environment supports such actions.

Sekine, who now serves as an economics professor at Hitotsubashi University in Tokyo, believes that the BOJ has the opportunity to roll back its easy monetary policies gradually, particularly since real interest rates remain significantly negative.

In anticipation of the BOJ’s April policy meeting, a Bloomberg survey of economists indicated a median year-end benchmark rate prediction of 0.25%, suggesting expectations of only one more hike this year following the BOJ’s initial increase since 2007 in March.

However, Sekine’s stance is notably more hawkish compared to the general market consensus. Investment firms like Vanguard Group Inc. and Pacific Investment Management Co. also forecast a steeper increase in the key rate, with predictions of it reaching up to 0.75% by the end of the year.

The April summary from the BOJ’s policy meeting hinted at a possible hawkish shift within the nine-member board, with suggestions that the future rate path could surpass current market expectations. This was further supported by the BOJ’s recent decision to reduce its bond purchasing, which has fueled speculation about an impending rate hike.

Sekine also touched on the potential necessity of a higher rate if the yen’s value begins to adversely affect pricing trends, a situation made more likely as Japanese businesses adjust their pricing strategies in response to inflation.

Despite Japan’s fragile economic recovery, evidenced by a contraction in the first quarter of the year and stagnant growth at the end of 2023, Sekine argues that these economic conditions are unlikely to significantly impact the BOJ’s plans for rate hikes. He pointed out that the output gap is roughly zero, suggesting that even a contraction wouldn’t substantially alter the scope of monetary easing required.

The BOJ’s recent forecast projected that consumer prices, excluding fresh food and energy, would increase by 2.1% in the fiscal year starting April 2026, signaling that higher rates might be necessary. Sekine concluded by emphasizing that while the rate increases are not predetermined, they are likely to proceed incrementally as long as they align with common sense and favorable conditions.

Read More
Japan's Economy Falters, Impacting BOJ Rate Hike Plans

Japan’s Economy Falters, Impacting BOJ Rate Hike Plans

Japan’s Economy Falters, Impacting BOJ Rate Hike Plans

Japan’s economy contracted more sharply than anticipated in the first quarter, exacerbated by the ongoing weakness of the yen, which has put significant pressure on consumers. This presents a fresh challenge for the Bank of Japan (BOJ) as it attempts to move interest rates further from near-zero levels.

Preliminary gross domestic product (GDP) data from the Cabinet Office revealed a 2.0% annualized decline in Japan’s economy for January-March, exceeding the 1.5% drop forecasted by economists in a Reuters poll. This follows a barely perceptible growth in the fourth quarter of 2023, primarily due to downgraded capital expenditure estimates.

Despite the potential for heavy revisions in the final release of capital spending data, the across-the-board declines in all GDP components indicate a lack of major growth drivers in Japan’s economy during the first quarter. This scenario could cause the BOJ to reconsider the timing of future rate hikes, especially given its recent move in March to raise interest rates for the first time since 2007, with intentions to continue tightening policy.

Economist Yoshimasa Maruyama from SMBC Nikko Securities noted that the timing of rate hikes could be delayed depending on how the GDP rebounds in the current quarter. While rising wages are expected to spur economic recovery, uncertainty remains around consumption in the service sector.

The latest GDP data translates to a quarterly contraction of 0.5%, slightly worse than the 0.4% decline predicted by economists. Revised figures for the first quarter will be released on June 10.

The weak yen has created a dual-speed economy in Japan. While the export and tourism sectors benefit from a more competitive exchange rate, households and small businesses are burdened by inflated costs of imported goods. This situation complicates the BOJ’s decision on whether to maintain or unwind its monetary stimulus.

Daiwa Securities’ chief economist Toru Suehiro pointed out that the adverse effects of a weaker yen are becoming a significant concern. While real wages are expected to turn slightly positive in the latter half of the year, they are not projected to rise sharply due to the continued depreciation of the yen.

This year, Japan’s large businesses implemented the biggest wage hikes in three decades, which the BOJ sees as a necessary condition to end decades of radical monetary stimulus. However, households have been tightening their spending as price increases outpace wage gains, reducing their real incomes and purchasing power.

Private consumption, which makes up more than half of the Japanese economy, fell by 0.7%, more than the anticipated 0.2% drop, marking the fourth consecutive quarter of decline—the longest streak since 2009.

Economists remain hopeful that the first quarter’s weakness is temporary and expect that the drag on growth from factors like the Noto earthquake and the suspension of operations at Toyota’s Daihatsu unit will dissipate. However, persistent yen declines and potential spikes in crude oil prices due to the Middle East crisis remain threats to the recovery.

Capital spending, a crucial driver of private demand, fell by 0.8% in the first quarter, against an expected 0.7% decline, despite robust corporate earnings. External demand, defined as exports minus imports, subtracted 0.3 percentage points from the first-quarter GDP estimates.

Policymakers are currently relying on significant pay hikes and planned income tax cuts to boost consumption and avoid a return to deflation. Maruyama suggests that rate hikes or cuts in bond purchases could mitigate the negative impacts of yen weakening, potentially leading to income gains that could fuel consumption. However, if consumption remains weak, raising rates would be challenging.

Read More
Traders Anticipate Post-CPI Surge, Eyeing US 10-Year Yield at 4.3%

Traders Anticipate Post-CPI Surge, Eyeing US 10-Year Yield at 4.3%

Traders Anticipate Post-CPI Surge, Eyeing US 10-Year Yield at 4.3%

Traders in US Treasury options are positioning for a bond rally and a sharp drop in yields following the release of crucial inflation data on Wednesday. Over the past week, there has been significant buying activity centered on options that would benefit from US 10-year yields dropping to around 4.3%, which is about 15 basis points lower than current levels and the lowest in more than a month. One particularly high-risk trade stood out, with the potential to generate a $15 million windfall on a wager of just $150,000 if the 10-year benchmark yield falls further to 4.25% by May 24.

This bet on a bond rally comes as bonds have regained some ground following a challenging April, when prices slumped and yields soared to their highest levels of the year due to diminishing expectations for interest-rate cuts. Since then, Federal Reserve Chair Jerome Powell has alleviated market concerns by downplaying the need for additional rate hikes. Further gains were made after a report on Friday indicated a cooling labor market, which might pave the way for rate cuts despite persistent inflation.

Investors are now focused on the latest data on US consumer prices in April, which will be critical in determining the direction of the rally. On Tuesday, Treasuries advanced after a report provided what Powell described as a “mixed” reading on wholesale prices last month.

Open interest, or the amount of new positioning, has surged recently in options tied to the so-called 110.00 call strike, which corresponds to a roughly 4.3% 10-year yield level, according to CME data. Buying has been concentrated in the June tenor expiring on May 24, capturing this week’s significant economic news, including reports on producer and consumer prices.

Meanwhile, asset managers have continued to add to long bets in futures, increasing bullish positions for the fourth consecutive week, as indicated by data from the Commodity Futures Trading Commission. However, caution is still evident in some parts of the market. For instance, a recent JPMorgan Chase & Co. client survey showed a slight increase in short positions in the cash market for Treasuries, marking a shift from a neutral stance. Notably, the past three consumer price index reports have surprised to the upside, challenging bullish expectations.

Despite this, the futures market has turned less bearish since last week’s jobs report. Traders have unwound bearish futures positions linked to the Fed-sensitive Secured Overnight Financing Rate, removing hedges against potential rate hikes and reviving bets on easing. New long positions have also emerged across various tenors of the futures strip. This has resulted in a pullback from the severe bearishness observed in late April, although short positions remain.

Significant options flows include a large bullish “screen” trade, executed electronically at a cost of $4 million, which appeared as new risk. The same dovish protection was purchased again during Tuesday’s early Asia session. Similarly, there has been heavy buying of risky option strategies known as risk-reversals, where calls are funded by selling puts.

Overall, traders are setting up for a potential bond rally and a sharp drop in yields, with a close eye on the upcoming inflation data to determine the market’s next move.

Read More
US Foreign Exchange Deposits

US Foreign Exchange Deposits Increase for Fourth Consecutive Month, Reaching $549 Million

US Foreign Exchange Deposits Increase for Fourth Consecutive Month, Reaching $549 Million

Retail forex deposits in the United States have seen a continuous rise for the fourth month, according to March 2024 data from the Commodity Futures Trading Commission (CFTC). In this period, the total value of client deposits in the forex market increased to over $549 million, marking a 1.3% growth from February’s figures. This represents a significant recovery, reaching the highest value recorded in over a year and maintaining a growth trajectory since a low in December.

The increase comes after a period of stagnation where, following a downturn, deposits hit a low of $516 million in September 2023. Since then, there has been a consistent upward trend in the volume of funds retail investors are parking in forex trading accounts in the U.S., suggesting a revitalized interest in forex trading among U.S. retail investors.

The CFTC report highlights that the leading broker, Gain Capital, holds deposits of $208.4 million, despite a slight decrease of 0.5% from February’s $209.4 million. Charles Schwab also saw a minor reduction in forex deposits, dropping by less than $300,000 to $62.4 million. On the other hand, other brokers showed positive growth in their deposit figures. Trading.com enjoyed the most substantial percentage increase, with an 8.9% rise bringing their total to $1.8 million. OANDA experienced the largest nominal increase, with a boost of $4.2 million (2.3%), raising its total forex deposits to $183.9 million and securing its position as the second-largest broker after Gain Capital in terms of retail forex obligations.

The CFTC enforces strict regulatory reporting requirements for Retail Foreign Exchange Dealers (RFEDs) and Futures Commission Merchants (FCMs). These entities are required to submit monthly financial reports which include crucial financial metrics like adjusted net capital, client assets, and total retail forex obligations. Retail forex obligations represent all the assets held by FCMs or RFEDs on behalf of their clients, factoring in any gains or losses.

This reporting framework ensures transparency and regular public disclosure of financial commitments by major players in the forex market such as Charles Schwab, Gain Capital, IG, Interactive Brokers, OANDA, and Trading.com, among the 62 registered RFEDs and FCMs. This oversight is crucial for maintaining market integrity and providing investors with the confidence that their interests are being safeguarded by regulatory standards.Overall, the increasing trend in forex deposits reflects a growing confidence and a renewed interest in forex trading among U.S. retail investors, signaling a potentially robust period for the forex market in the United States.

Read More
China Schedules Meeting to Discuss $138 Billion Ultra-Long Debt Offering

China Schedules Meeting to Discuss $138 Billion Ultra-Long Debt Offering

China Schedules Meeting to Discuss $138 Billion Ultra-Long Debt Offering

China is set to launch the initial phase of its ambitious 1 trillion yuan ($138 billion) ultra-long special sovereign bond issuance this Friday, aiming to bolster the world’s second-largest economy. This announcement was made by the Ministry of Finance, which plans to issue various tranches of these bonds, beginning with 30-year bonds this week.

Subsequent offerings are scheduled with 20-year bonds to be issued from May 24 and 50-year bonds from June 14. A final batch of 30-year notes is slated for release in November, though the specific amounts for each issuance have not been disclosed.

Details from Bloomberg earlier on Monday suggest that the bond issuance will be divided as follows: 300 billion yuan in 20-year bonds, 600 billion yuan in 30-year bonds, and 100 billion yuan in 50-year bonds. This information was provided by sources who preferred to remain anonymous due to the sensitivity of the details.

The decision to sell these bonds was first revealed during the National People’s Congress in March, where policymakers expressed their commitment to increasing fiscal support to mitigate the economic strain caused by high debt levels among local governments. This strategy marks only the fourth occurrence of such a sale in the last 26 years, with the previous instance in 2020, intended to finance measures against the pandemic.

This bond sale emerges amidst signs of a contracting credit landscape in April, notable for being the first such contraction as the pace of government bond sales decelerated. The amount of new bonds issued by Chinese authorities and policy banks in the first quarter dropped to half of last year’s figures. This reduction was influenced by borrowing restrictions on highly indebted regions and the ongoing allocation of funds from last year’s sales.

Recently, however, there has been a noticeable acceleration in bond sales. Just last week, provincial governments issued a record amount of new notes since February, heeding the central government’s directive to expedite local bond issuances. The Politburo, in April, also emphasized the urgency of commencing the special sovereign debt sale.

According to Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc, this central bond sale is crucial for expediting fiscal expenditure, which has been sluggish. He predicts that the People’s Bank of China (PBOC) might lower the banks’ reserve requirement ratio by 25 basis points alongside the bond sale to maintain liquidity, potentially paving the way for a reduction in the loan prime rate.

Despite robust performance in the first quarter, challenges persist with consumer demand weakening amid an ongoing property crisis and a tepid job market. Additionally, exports, which have been a highlight this year, face uncertainties due to escalating tensions with key trading partners and concerns over China’s excess manufacturing capacity. Nonetheless, the government is focusing on infrastructure spending as a pivotal strategy to achieve its ambitious growth target of around 5% for the year.

Read More
Mexican Peso Rises as Banxico Holds Key Rate Steady

Mexican Peso Rises as Banxico Holds Key Rate Steady

Mexican Peso Rises as Banxico Holds Key Rate Steady

The Mexican Peso (MXN) experienced significant gains against its major trading counterparts following the Bank of Mexico’s (Banxico) latest policy meeting on Thursday. During the meeting, Banxico’s board unanimously decided to maintain the benchmark interest rate at 11.00%, leading to a robust appreciation of the Peso. This decision was accompanied by a significant upward revision of inflation forecasts, acknowledging ongoing high price pressures. 

Banxico now indicates that interest rate cuts are unlikely in the near future, a stance that tends to strengthen the currency as higher interest rates are attractive to foreign capital looking for better returns.

As a result, major currency pairs such as USD/MXN, EUR/MXN, and GBP/MXN were trading at 16.80, 18.12, and 21.08 respectively at the time of publication. The Peso’s appreciation was evident between roughly a quarter and three-quarters of a percent across these pairs, maintaining its strength well into Friday’s European trading session, with only a slight pullback from Thursday’s peak levels.

The upward revision in the inflation outlook by Banxico is particularly notable. The central bank now expects inflation to decline more gradually towards its target of 3.0%, which it does not anticipate achieving until the fourth quarter of 2025. This represents a delay from earlier projections, which had inflation nearing 3.1% by the second quarter of 2025 and stabilizing around that figure for the remainder of the year. Core inflation forecasts were similarly adjusted.

In its official statement, Banxico highlighted prolonged inflationary pressures, stating, “Considering that inflationary shocks are foreseen to take longer to dissipate, the forecasts for headline and core inflation have been revised upwards for the next six quarters. In particular, services inflation is foreseen to show more persistence compared to what had been previously anticipated.”

These revised forecasts and the decision to hold interest rates steady reflect Banxico’s cautious approach in the face of persistent inflation, which continues to influence the economic landscape. The central bank’s updates underscore the challenges of managing inflation within the targeted range, while also acknowledging the impacts of external economic factors and domestic fiscal policies on the broader economy. This careful balance aims to sustain economic stability while mitigating inflationary impacts, supporting the Peso’s strength in the international currency markets.

Read More
China's Exports and ImportsRebound

China’s Exports and Imports Rebound, Indicating Demand Recovery

China’s Exports and Imports Rebound, Indicating Demand Recovery

China’s exports and imports exhibited growth in April, rebounding from previous contractions and signaling a positive shift in domestic and international demand, which could bolster the nation’s unsteady economic revival.

According to recent customs data, this improvement is largely attributed to a series of policy support measures implemented over the past months, aimed at stabilizing fragile investor and consumer confidence.

Data revealed that shipments from China increased by 1.5% year-on-year in April, aligning with economic forecasts and marking a recovery from a 7.5% decline in March—the first drop since November. 

April’s imports surged by 8.4%, significantly surpassing expectations of a 4.8% increase and reversing a decrease of 1.9% from March. This resurgence in trade figures suggests that policy interventions are starting to positively impact the economy.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, highlighted that despite weak domestic demand contributing to deflationary pressures, it has inadvertently enhanced China’s export competitiveness, making exports a key driver of economic stability this year. However, broader economic indicators such as consumer inflation, producer prices, and bank lending from March indicate potential volatility in maintaining this momentum. Additionally, the ongoing property crisis continues to pressurize the economy, sparking debates on the necessity for further policy stimulus.

In response to these challenges, the Politburo of the Communist Party announced last month its commitment to fortifying economic support through prudent monetary measures and proactive fiscal policies. These include adjustments to interest rates and bank reserve requirement ratios to foster growth. Despite these efforts, and a set economic growth target of around 5% for 2024, analysts remain skeptical about achieving this goal without substantial additional stimulus.

The past year has been challenging for Chinese exporters, as rising global interest rates dampened international demand. With central banks in developed nations like the Federal Reserve showing little intention to reduce borrowing costs soon, Chinese manufacturers could face ongoing difficulties in securing international market share. To mitigate these pressures, exporters are reportedly reducing prices to sustain sales, particularly in industries plagued by overcapacity, which is expected to continue suppressing export prices in the months ahead.

Furthermore, as Chinese firms increasingly invest overseas to circumvent potential U.S. sanctions, exports of industrial inputs such as chemicals, fabric, auto parts, and electrical machinery are expected to rise, according to Dan Wang, chief economist at Hang Seng Bank China.

Concluding the analysis, China’s trade surplus expanded to $72.35 billion in April, up from $58.55 billion in March, although slightly below the projected $77.50 billion. This indicates a robust recovery in trade dynamics, reflecting the complex interplay of global economic conditions and domestic policy effectiveness in shaping China’s economic trajectory.

Read More
USD/JPY Holds Steady Near 147.00 as Yen Weakens on Trade Tensions and BoJ Rate Outlook

USD/JPY Holds Steady Near 147.00 as Yen Weakens on Trade Tensions and BoJ Rate Outlook

The Japanese Yen (JPY) continues to trade with a bearish bias on Wednesday, keeping the USD/JPY pair firm around the 147.00 mark during the Asian session. A stronger US Dollar and persistent concerns over rising trade tensions are weighing heavily on the Yen, as markets brace for the impact of US tariffs on Japanese goods starting August 1. 

Former US President Donald Trump’s announcement of a 25% tariff on Japanese imports, coupled with the threat of retaliatory action, has sparked renewed fears over Japan’s economic resilience. The country’s Q1 GDP contracted, real wages in May dropped at their steepest pace in nearly two years, and political uncertainty is rising ahead of the July 20 House of Councillors election. Recent polls suggest the ruling LDP-Komeito coalition may struggle to retain its majority, further dampening investor confidence. 

These developments have led traders to scale back expectations of a rate hike by the Bank of Japan this year. The combination of domestic headwinds and external pressure is weakening the JPY, while the US Dollar continues to gain on expectations that rising tariffs will stoke inflation and prompt the Federal Reserve to maintain a hawkish stance. 

The Fed’s June decision to hold interest rates steady, along with a strong US jobs report, has reinforced the belief that rate cuts may be delayed until at least October. The FOMC meeting minutes, due later today, will be closely watched for insights into the Fed’s policy trajectory. Markets currently anticipate up to 50 basis points in rate cuts by year-end. 

Technical Outlook: Bullish Momentum Builds 

Technically, USD/JPY’s break and close above the 100-day Simple Moving Average (SMA) — for the first time since February — signals potential for further gains. Positive momentum on the daily chart supports a move toward the 147.60–147.65 resistance area, with the 148.00 handle, a key June high, in sight. 

On the downside, immediate support lies near 146.50, with the 100-day SMA just below 146.00 acting as a critical pivot. A decisive break below this level could shift momentum in favor of bears, opening room for deeper losses. 

Read More
Best Forex Broker

NZD/USD gains ground to near 0.5700 on weaker US PMI data

During the early Asian session on Thursday, the NZD/USD pair was trading slightly higher at 0.5690. The Greenback falls against the New Zealand Dollar (NZD) as US economic data disappoints. Investors will keenly monitor developments in the rekindled trade battle between the United States and China, the world’s two largest economies. 

The weaker US Services Purchasing Manager Index (PMI) could weigh on the Greenback and generate a tailwind for the pair. The US ISM Services PMI fell to 52.8 in January from 54.0 (revised from 54.1) in December. This reading came in below the market consensus of 54.3.

On the other hand, New Zealand’s fourth-quarter employment report will put the RBNZ on pace to decrease the Official Cash Rate (OCR) by 50 basis points (bps) to 3.75% this month. Statistics New Zealand said on Wednesday that the country’s unemployment rate increased to 5.1% in Q4, up from 4.8% the previous quarter. This result was a four-year high and exceeded the 25-year average of 4.8%. Rising expectations that the Reserve Bank of New Zealand (RBNZ) may decrease interest rates may further impact on the New Zealand Dollar (NZD).

“In line with RBNZ guidance, markets continue to imply another 50bps rate cut to 3.75% at the February 19 meeting and the policy rate to through around 3.00% over the next 12 months. Bottom line: NZ-US 2-year bond yield spreads can further weigh on NZD/USD,” noted Société Générale’s FX analysts. 

On Tuesday, the finance ministry in China unveiled a package of tariffs on various US products such as crude oil, farm equipment, and some autos in a sharp response to an announcement made by US President Donald Trump imposing a 10% tariff on Chinese imports. Further, China served notice to several companies including Google for potential sanctions in response to Trump’s tariffs. Any sign of uncertainty or a rising trade war tension may see the China-proxy Kiwi being dragged lower, as China remains one of the major trading partners to New Zealand.

Read More
JPY Recovers Losses vs. USD, Bullish Outlook Intact

Japanese Yen Recovers Some Losses Against USD; Bullish Outlook Remains Intact

The Japanese yen (JPY) cut some of its intraday losses against the US dollar (USD) on Monday, bringing the USD/JPY pair back below the mid-155.00s during the early European session. The Bank of Japan’s (BoJ) Summary of Opinions showed conversations about the possibility of further hikes in interest rates. Furthermore, Tokyo’s core inflation increased at the quickest annual rate in nearly a year, raising expectations of further policy tightening by the BoJ, which supports the JPY.

Beyond monetary policy, narrowing interest rate differentials between Japan and other major economies, including the US, alongside a broader risk-off sentiment, provide additional support to the safe-haven JPY. However, concerns over the economic impact of US President Donald Trump’s newly announced trade tariffs limit the yen’s upside. Meanwhile, the USD remains broadly strong, allowing the USD/JPY pair to maintain its positive momentum for a second consecutive day, ahead of the upcoming US ISM Manufacturing PMI report.

Yen Gains Traction Amid BoJ Rate Hike Bets and Trade War Fears

US President Donald Trump signed an executive order on Saturday to impose 25% tariffs on imports from Canada and Mexico and 10% tariffs on Chinese goods, effective Tuesday.

Canada’s Prime Minister Justin Trudeau, Mexico’s President Claudia Sheinbaum, and China’s foreign ministry all replied quickly, indicating probable retaliation. The US Dollar continues to climb, approaching a two-year high last hit in January, supporting the USD/JPY pair’s upward trend.

The Bank of Japan’s latest Summary of Opinions, released on Monday, showed that policymakers are thinking about additional rate hikes, though this has failed to appreciably lift the JPY.

Board members of the Bank of Japan stressed the need of continuing to raise interest rates if economic conditions and inflation remain stable.

Japan’s Finance Minister Katsunobu Kato stated that the government is closely monitoring the impact of Trump’s tariffs on the yen amid concerns over potential economic fallout.

Economy Minister Ryosei Akazawa reiterated Japan’s commitment to achieving the BoJ’s 2% inflation target while implementing measures to offset rising living costs.

The US-Japan yield spread remains near a multi-week low, which, coupled with risk aversion, could help stabilize the yen in the near term.

Investors now turn their focus to key US economic data, starting with today’s ISM Manufacturing PMI, followed by the highly anticipated Nonfarm Payrolls (NFP) report on Friday.

USD/JPY Faces Resistance Near 156.25; Bears in Control Below This Level

From a technical standpoint, last week’s strong rebound from the 50% Fibonacci retracement level of the December-January rally and the subsequent upside move favor bullish traders. However, additional gains beyond 156.00 may encounter resistance near last week’s swing high at 156.25. A sustained break above this level could spark a short-covering rally, pushing the pair towards:

  • 156.70-156.75 resistance
  • 157.00 psychological mark
  • 157.60 horizontal barrier
  • Potential extension towards 158.00, with an ultimate target at the 158.85-158.90 multi-month high from January 10

Conversely, on the downside:-

  • 155.00 serves as immediate support
  • Below this, watch for key levels at 154.55-154.50 and 154.00
  • A break below the 153.70 January low could accelerate the decline towards 153.30 and eventually 153.00

While the JPY is exhibiting some resilience, the overall trend remains unpredictable, with market participants intently watching economic indicators and geopolitical developments.

Read More
Australian Dollar Drops as RBA Rate Cut Bets Rise, Fed Decision Looms

Australian Dollar Slides Amid Rising Odds of RBA Rate Cuts, Fed Decision in Focus

The Australian Dollar (AUD) extends its losing streak for a third consecutive session against the US Dollar (USD), weighed down by softer-than-expected inflation data from Australia.

Australia’s Consumer Price Index (CPI) rose by 0.2% quarter-on-quarter in Q4 2024, matching the previous quarter but missing the expected 0.3%. On an annual basis, CPI eased to 2.4% from 2.8% in Q3, below the market forecast of 2.5%. Despite December’s monthly CPI ticking up to 2.5% YoY, inflation remains within the Reserve Bank of Australia’s (RBA) 2%-3% target range. Meanwhile, the RBA’s Trimmed Mean CPI slowed to 3.2% YoY, its weakest pace in three years, slightly under the anticipated 3.3%.

Australian Treasurer Jim Chalmers expressed confidence that “the worst of the inflation challenge is behind us” and that a “soft landing” is increasingly likely. The cooling inflation strengthens the case for an RBA rate cut in February. The central bank has held the Official Cash Rate (OCR) steady at 4.35% since November 2023, emphasizing the need for inflation to “sustainably” return to target before considering a rate reduction.

AUD Pressured by Risk Aversion, Trump’s Tariff Threats

The AUD faces additional headwinds from risk-off sentiment following tariff threats by former US President Donald Trump. On Monday, Trump announced plans to impose tariffs on imports of key commodities, including computer chips, pharmaceuticals, steel, aluminum, and copper, aiming to boost US manufacturing.

Meanwhile, the US Dollar Index (DXY) holds firm around 108.00 as traders turn their attention to the upcoming Federal Reserve (Fed) interest rate decision. Market expectations, per the CME FedWatch tool, indicate near-certainty that the Fed will maintain its policy rate at 4.25%-4.50%. Investors will closely watch Fed Chair Jerome Powell’s press conference for guidance on future policy shifts.

Concerns over the potential inflationary impact of Trump’s trade policies add another layer of uncertainty. US Bank chief economist Beth Ann Bovino noted, “A number of White House proposals appear inflationary, which could keep the Fed in check.” Additionally, Treasury Secretary Scott Bessent has proposed universal tariffs on US imports starting at 2.5%, with Trump reportedly favoring even higher rates.

China’s Economic Slowdown Adds Pressure on AUD

The Australian Dollar remains vulnerable to China’s economic struggles. China’s NBS Manufacturing PMI dropped to 49.1 in January from 50.1, missing expectations, while the Non-Manufacturing PMI slipped to 50.2 from 52.2. As Australia’s largest trading partner, China’s weak data weighs heavily on the AUD.

Despite China’s recent stimulus measures, including a $7.25 billion investment in index products and long-term stock investments, concerns persist. Industrial profits fell 3.3% YoY in 2024, marking a third consecutive year of contraction, driven by weak demand, deflationary pressures, and a prolonged property sector slump.

Technical Outlook: AUD/USD Turns Bearish Below 0.6250

The AUD/USD pair trades near 0.6230 on Wednesday after breaking below the ascending channel on the daily chart, signaling a shift toward a bearish bias. The 14-day Relative Strength Index (RSI) has dropped below 50, reinforcing downside momentum.

A decisive break below key support at the lower boundary of the ascending channel strengthens the bearish outlook, potentially pushing AUD/USD toward 0.6131—its lowest level since April 2020. On the upside, immediate resistance lies at the nine-day Exponential Moving Average (EMA) at 0.6256. A rebound above this level could reintroduce a bullish bias, with the next upside target near 0.6360.

Read More
US Dollar Surges as Trump Revives Tariff Threats

US Dollar Surges as Trump Revives Tariff Threats

The US dollar strengthened significantly against all major currencies after President Donald Trump and his Treasury Secretary reignited concerns about potential tariffs, raising fears that trade policies may return to the forefront. Risk-sensitive currencies, particularly those tied to China, saw sharp declines, while the euro weakened amid speculation that the European Union could soon face tariff pressures. Simultaneously, the Japanese yen took a hit as traders hedged against potential US inflation spikes and rising Treasury yields.

This market turbulence followed a Financial Times report indicating that Scott Bessent, the newly appointed Treasury Department official, supports a phased approach to implementing universal tariffs on US imports. The initial proposal suggests starting with a 2.5% tariff rate. However, President Trump hinted at a much broader scope, potentially targeting a range of imports from steel to semiconductor chips and suggesting higher tariff rates over time.

The administration’s “moderate” proposal involves a gradual increase in tariffs, reaching 20% over eight months in increments of 2.5% per month. This timeline has triggered speculation about more extreme scenarios and raised questions about the global trade concessions needed to halt these measures. Bessent’s approach, which allows businesses time to adjust, could also spark a rush of imports and exports to avoid higher future costs.

Amid these developments, financial markets are grappling with the potential outcomes. Traders are assessing whether the proposed tariff measures are fully priced in and evaluating the likelihood of de-escalation through negotiation.

On the positive side, any concessions or agreements that delay or reduce tariffs could stabilize markets. However, the risks of escalating tariffs, particularly if negotiations fail, remain a significant concern. Higher tariffs could disrupt global trade and have far-reaching implications for currency valuations.

While we initially favored long positions on the dollar, the unfolding tariff narrative has introduced significant uncertainty. Staying prepared for sudden shifts in policy and market dynamics is now crucial as the situation continues to evolve.

Read More
Australian Dollar Weakens Amid Concerns Over Trump’s Trade Policies and Mixed Chinese Data

Australian Dollar Weakens Amid Concerns Over Trump’s Trade Policies and Mixed Chinese Data

The Australian Dollar (AUD) ended its three-day winning streak against the US Dollar (USD) on Monday, with the AUD/USD pair trading flat following the release of mixed Chinese Purchasing Managers’ Index (PMI) data. As a close trade partner, Australia’s economy is heavily influenced by China’s economic performance.

China’s National Bureau of Statistics (NBS) reported that the Manufacturing PMI fell to 49.1 in January, down from 50.1 in December, missing market expectations. Similarly, the Non-Manufacturing PMI dropped to 50.2 from the previous month’s 52.2. These weaker-than-expected figures suggest a slowdown in China’s economic recovery, weighing on the risk-sensitive Australian Dollar.

Despite fresh stimulus measures from China aimed at revitalizing its equity markets, the AUD struggled to gain momentum. The China Securities Regulatory Commission (CSRC) announced a second round of long-term stock investment pilot programs valued at 52 billion Yuan ($7.25 billion). However, these measures have done little to alleviate investor concerns about China’s economic challenges.

Risk Aversion Rises Amid Trump’s Trade Tariff Push

Broader market sentiment took a hit as reports emerged that US President Donald Trump’s advisers are pushing to impose 25% tariffs on Mexico and Canada as early as February 1, bypassing negotiations. According to the Wall Street Journal, Trump’s willingness to move swiftly on tariffs follows similar actions taken against Colombia, raising fears of escalating trade tensions and dampening demand for riskier assets like the Australian Dollar.

Adding to the negative outlook, China’s Industrial Profits declined by 3.3% year-over-year in 2024 to CNY 7,431.05 billion, marking the third consecutive year of contraction. This downturn highlights ongoing economic headwinds, including weak demand, rising deflationary pressures, and a prolonged slump in the property sector.

Technical Analysis: AUD/USD Eyes Key Resistance Amid Bullish Setup

The AUD/USD pair is trading near 0.6290 on Monday, showing signs of upward momentum within an ascending channel on the daily chart, indicating a potential bullish bias. The 14-day Relative Strength Index (RSI) remains slightly above 50, reflecting mild optimism in the market.

On the upside, the pair could retest the psychological resistance level at 0.6300, with the next target near the channel’s upper boundary around 0.6350.

Support levels are found at the nine-day Exponential Moving Average (EMA) of 0.6265, followed by the 14-day EMA at 0.6254. A stronger support lies near the channel’s lower boundary around 0.6240, which could act as a safety net in case of a downside correction.

Read More
NZD/USD Struggles

NZD/USD Struggles Below 0.5700 Amid Trump’s Tariff Plans and Dovish RBNZ Expectations

The NZD/USD pair remains under pressure, trading near 0.5675 during the early Asian session on Friday. The New Zealand Dollar (NZD) faces headwinds due to uncertainty surrounding US President Donald Trump’s proposed tariffs on China and the dovish outlook of the Reserve Bank of New Zealand (RBNZ).

New Zealand’s Consumer Price Index (CPI) for the fourth quarter of 2024 indicated a continued decline in underlying inflation, strengthening expectations of additional rate cuts by the RBNZ. Swap markets now estimate a nearly 90% chance of a 50-basis-point (bps) rate cut on February 19, building on the two cuts already implemented in this cycle. The RBNZ is projected to deliver a total of 100 bps in rate cuts through the remainder of 2025.

Meanwhile, the downside for the pair could be capped by recent comments from Trump. Speaking at the World Economic Forum in Davos on Thursday, Trump called for immediate interest rate cuts by the US Federal Reserve (Fed). “With oil prices going down, I’ll demand that interest rates drop immediately, and likewise, they should be dropping all over the world,” Trump said.

Investors are now closely watching for further details on Trump’s tariff policies, alongside key US economic data releases. The flash US S&P Global Manufacturing and Services PMI for January will be a key focus later on Friday, along with the release of US Existing Home Sales and the Michigan Consumer Sentiment Index.

Read More
US Yields Boost Dollar, Weaken Yen

US Yields Boost Dollar, Weaken Yen

US Yields Boost Dollar, Weaken Yen

The dollar strengthened on Tuesday, driven by rising U.S. yields, putting pressure on low-yielding currencies like China’s yuan and Japan’s yen, which fell to its lowest level since 1986.

Benchmark 10-year Treasury yields increased nearly 14 basis points to 4.479% overnight. Analysts attributed this rise to expectations of Donald Trump winning the U.S. presidency, which could lead to higher tariffs and increased government borrowing.

As the dollar gained, the euro reversed part of a small rally following the first round of France’s election, which aligned with polling predictions. The euro last traded at $1.0735.

The yen dropped to 161.72 per dollar on Monday, its weakest in nearly 38 years, primarily due to the significant interest rate gap between the U.S. and Japan. On Tuesday, the yen traded at 161.55 per dollar in Asia and was under pressure from yen bears wary of potential intervention by Japanese authorities. The yen also hit a lifetime low of 173.67 against the euro on Monday and remained near that level on Tuesday.

In the bond market, the 10-year yield gap between U.S. and Japanese rates stood at 340 basis points, and nearly 440 basis points at the two-year tenor. China’s yuan, which reached a seven-month low against the dollar last week, faced similar pressure, with U.S. 10-year yields more than 220 basis points higher than Chinese government bond yields.

Robust manufacturing data in China and an announcement from the central bank about borrowing bonds, likely to sell them and stabilize falling yields, provided only a brief boost to the currency on Monday. The yuan last traded at 7.3043 in offshore markets on Tuesday, close to its June low.

The New Zealand dollar slipped 0.3% in early trade and was testing support at its 200-day moving average at $0.6075. The British pound remained steady at $1.2641. The Australian dollar hovered within its recent range at $0.6650, with traders focused on central bank minutes to gauge the likelihood of future interest rate hikes. Swaps market pricing suggests a one-in-three chance of a rate hike as soon as next month.

The question remains about the trigger for such a move. ING economist Rob Carnell noted that discussions have taken place, but the specific trigger for a hike is still uncertain. There is a leaning towards forecasting a hike at the August meeting.

Overall, the strengthening dollar and rising U.S. yields continue to exert pressure on low-yielding currencies, with markets closely watching upcoming central bank decisions and geopolitical developments.

Read More

Cryptocurrency Move Back to Support the Pack to Level

If we have a look at the bearish start to the day in the majors and the Bitcoin move back to the level by $18,500 to the support pack. The Bitcoin to USD was seemed down at the level by 1.16% on this Thursday that reversing a 1.25% gain to the Wednesday to the ended the day at the level $18,260.0. At the start of the day, the Bitcoin rose to the early morning intraday to the high at the level before hitting the reverse level.

The major resistance level goes at the level by $18,878 and the Bitcoin fell to the intraday low to the level by $17,935.0.

The close term bullish pattern stayed flawless, disregarding the most recent pullback to sub-$18,000 levels. For the bears, Bitcoin would have to slide through the 62% FIB of $10,095 to shape a close term bearish pattern.

The Bitcoin was somewhere near at the level by 1.03% to $18,072.0. A blended beginning to the day saw Bitcoin ascend to an early morning high of $18,299.0 prior to tumbling to a low of $18,070.0.

Bitcoin left the significant help and obstruction levels untested from the get-go.

Somewhere else, it was a bearish beginning to the day for the majors. The Ripple’s XRP was somewhere around at the level 2.69% to lead the route down.

Read More

Bitcoin Slips Down Below at Level $13,000 Since the Last Rally

Bitcoin Slips Down Below at Level $13,000 Since the Last Rally

The Bitcoin seems to the low at the level of $9,813 in September that managed the bitcoin to reach at the level high at $13,868. The bitcoin price is rejected to the sequential indicators on the 3-day chart.

If we have a look at the current candlestick of the 3-day chart it will seem significantly bearish and the TD sequential indicators are presented a sell signal. The 50- SMA seems down at the level of $10,600 and the 100 SMA at the level of $9,47.

The In/Out of the Money Around Price chart shows the closest and most grounded help region to be somewhere in the range of the level at $12,687 and $13,073 with near 624,000 BTC in volume. A break below this point can drive the cost of Bitcoin down to $11,914.

Despite the fact that bears appear to have assumed responsibility for the present moment, the powerful day by day upswing stays unblemished for Bitcoin. The 50-SMA and the 100-SMA harmonize around $11,200 which will go about as a critical help level. The MACD keeps bullish and the most basic obstruction level is still at $13,863. A breakout over this point can without much of a range drive the lead digital currency towards the untouched high at the level of $20,000.

Read More

Bitcoin Price Clear the Path and Rose to the Level $13,000

Bitcoin Price Clear the Path and Rose to the Level $13,000

Bitcoin Price of the bulls has been the full control of the market to the price at the level of $11,340 to $12,835. The cryptocurrency had the largest to the single day that put the gain. The MACD shows the increasing the bullish momentum to price the growth anticipated.

The position detector is a convenient little apparatus that causes us to imagine solid opposition and backing levels. According to the everyday conjunction detector, there is an absence of solid obstruction levels on the potential gain. This should be empowering news for the buyers as they plan to bring BTC into the $13,000-zone.

Santiment’s holder’s distribution charts show you the number of addresses having a place with a specific symbolic section. According to the chart, the number of addresses holding 10,000-100,000 tokens tumbled from 111 on October 8 to 104 on October 20. This is an intensely bearish sign as it shows that the whales are selling off their property.

Bitcoin buyers have the opportunity to bring the cost into the level at $13,000 and even the $14,000 interference. The everyday intersection finder shows a total absence of solid opposition barriers straightforward.

For the bears, the drawback is covered off at the $12,000-$12,100 uphold divider. A break below that zone will bring the value down to $11,000, which has both the 50-day and 100-day SMA

Read More

Cryptos Market: Bitcoin Shows Bullish Momentum Over Dollar Strength

Cryptos Market: Bitcoin Shows Bullish Momentum Over Dollar Strength

The BTC/USD traded at the level of $11,355 after the mild rejection of the top-level $11,720 that losing some of the bullish.

Ethereum USD had a similar fate at the higher risk that seeing the longer pullback than the Bitcoin. If we talk about the XRP/USD is the clear loser after breaking below the 50 SMA and the 100 SMA on the daily chart that currently trading at the level of $0.2482 after yet facing another rejection.

Bitcoin, BTC to USD, fell by 1.02% on Tuesday. Incompletely turning around a 1.55% increase from Monday, Bitcoin finished the day at the level of $11,442.0.

It was a quiet beginning to the day. Bitcoin rose to a late morning intraday high to the level of $11,574.9 before operating reverse.

Missing the mark concerning the primary significant obstruction level at $11,830, Bitcoin tumbled to an early evening intraday low of $11,333.0.

Avoiding the primary significant help level at $11,201 Bitcoin quickly returned to $11,470 levels before moving back.

The close term bullish pattern stayed perfect, upheld by the most recent move back through to $11,000 levels. For the bears, Bitcoin would need to slide through the 62% FIB of $6,400 to shape a close term bearish pattern.

Bitcoin was up by 0.22% to $11,467.0. A beginning to the day saw Bitcoin tumble to an early morning low of $11,427.0 before ascending to a high at the level of $11,467.0. Bitcoin left the support and Resistance levels untested at an early stage.

Read More

Ethereum Rate Hits at Higher Level More Profitable Than Bitcoin Mining

Ethereum Rate Hits at Higher Level More Profitable Than Bitcoin Mining

Let’s have a look at the cryptocurrency that hovering near to the level at $10,600 mark. The Bitcoin price is consolidating to the 50-12 Hour SMA and the 200-12 Hours SMA. The strong resistance lies at the level 50-12 SMA that repeatedly rejected the price.

This repeated dismissal may drop the value down to the level at  $10,400 uphold level, which is by all accounts the main observable help level on the drawback. If case this level doesn’t hold firm, at that point you can anticipate that the cost should plunge below $10,000. For this situation, one can anticipate that BTC should tumble to the level of $9,700 before it experiences another solid help.

While this may not appear to be a huge number, remember that every one of these addresses holds a great many dollars worth of Bitcoin. The fishes using the stale value activity to merge their positions look good for the general market.

With respect to the top 50 digital forms of money, the greatest failures incorporate Compound, down 12% over the most recent 24 hours, UMA down 12%, OMG Network down at the level 13%, Yearn.finance down 16%, and Aave down 18%. The main bull among the sloths of bears is EOS, which broke out greatly as covered Tuesday.

Ethereum has since September 23, been holding inside a rising equal channel. Recuperation towards $400 flamed out marginally above $360 a week ago. On the drawback, the misfortunes that followed grasped uphold at the level of $335 throughout the end of the week, permitting the shrewd agreement sign to revitalize, making strides above $350.

The Ethereum selling pressure in the market halted the increase at the 50 SMA and 100 SMA. Ether fell below the climbing channel, confirming a bear banner.

The downside of a significant help zone shows that Ethereum is at grave risk of spiraling to the level at $300. Other than the various simple help zones, the most significant one lies somewhere in the range of $298 and $309. Previously, around 879,000 locations purchased almost 2 million ETH.

Read More

Cryptocurrency Bitcoin Shows the Bullish Divergence on User Count

Cryptocurrency Bitcoin Shows the Bullish Divergence on User Count

The Bitcoin moves back and shows the bearish to the start of the day with the support level at $10,900 to the broader market.

The Bitcoin BTC to USD is rose by the level at 1.33% this Tuesday and reversing the loss at the level of 0.83% on Monday.

It was a mixed start to the day. Bitcoin fell to an early morning low $10,674.2 before finding support.

Steering clear of the major support levels, Bitcoin struck a late morning high at the level of $10,815.4 before operating reverse.

Coming up short of the major resistance levels, Bitcoin slid to a late afternoon intraday low $10,654.0.

Steering clear of the first major support level at $10,585, Bitcoin rallied to a final hour intraday high at the level of $10,889.0.

Falling short of the first major resistance level at $10,915, Bitcoin eased back to end the day at sub-$10,860 levels.

The near-term bullish trend remained whole, in contempt of the latest pullback. For the bears, Bitcoin would need to slide through the 62% FIB of $6,400 to form a near-term bearish trend. At the hour of composing, Bitcoin was somewhere around 0.28% to the level of $10,826.0. It was a blended beginning to the day. Bitcoin rose to an early morning high $10,866.0 before tumbling to a low $10,826.0.

Bitcoin started the significant help and obstruction levels untested from the get-go. Somewhere else, it was a blended beginning to the day.

Bitcoin Cash ABC (+0.54%), Bitcoin Cash SV to the level (+0.62%), and Crypto.com Coin (+0.65%) evaded the pattern right off the bat.

It was a bearish beginning to the day for the remainder of the majors, in any case. Binance Coin was somewhere around 1.18% to lead the way down.

https://xtreamforex.com/nasdaq-futures-shows-the-short/

Read More

Popular Articles

USD/JPY Holds Steady Near 147.00 as Yen Weakens on Trade Tensions and BoJ Rate Outlook

USD/JPY Holds Steady Near 147.00 as Yen Weakens on Trade Tensions and BoJ Rate Outlook

Gold Struggles Below $3,300 as Fed Rate Cut Hopes Dim Ahead of FOMC Minutes

Gold Struggles Below $3,300 as Fed Rate Cut Hopes Dim Ahead of FOMC Minutes

EUR/USD Drops Toward 1.1700 as US Dollar Strengthens

EUR/USD Drops Toward 1.1700 as US Dollar Strengthens; FOMC Minutes in Spotlight

Forex Trading

Unlocking the Power of Forex Trading: Why Xtreme Markets is Your Ultimate Trading Partner

Commodity currencies

What Are Commodity Currencies? How They Impact Your Forex Trades

AI changing Forex trading?

How is AI changing Forex trading?

Categories

,
,
,

Subscribe Now!