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Upward move of EUR / USD on the Fed official's comments

Upward move of EUR / USD on the Fed official's comments

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Jim Anderson - Public Relations

Officials suggest that, despite the absence of obvious harbingers of a recession, the US-Chinese trade war weakens business confidence, and the global slowdown in manufacturing activity may be enough to justify the need for quick and aggressive measures.

The head of the Federal Reserve Bank of New York, John Williams, said on Thursday that because of the low rates and inflation, officials couldn’t afford to take a pause in anticipation of economic problems. However, Williams did not say whether this means that he would support a rate cut later in June.

At the same time, Fed Deputy Chairman Richard Clarida said that officials may have to act quickly to stimulate the American economy as a hedge against growing risks.

The market quickly responded to comments from two high-ranking Fed officials. On Thursday afternoon, the EUR / USD pair started to move up sharply and by 3:00 pm New York time, the rate rose from 1.12170 to 1.12800.

 

The pound sterling fell to a two-year low

The pound sterling fell to a two-year low

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Erik Holm - Head of media

The pound fell to its lowest level since 2017, as the market again assesses the risk of no-deal Brexit for a transition period after bidders for the post of British Prime Minister increased their demands to revise Brexit conditions. Sterling was at its lowest level in the last two years against the dollar and reached a six-month low against the euro, since the Brexit talks seemed to have become more hostile. Both contenders for leadership, Boris Johnson and Jeremy Hunt, said that the so-called safety plan, aimed at avoiding the hard border in Ireland, which Brussels considers necessary, should be canceled.

After a strong start of the year, the pound is now on its way to become the worst currency in the G10. The new British Prime Minister will be appointed next week. Meanwhile, the Brexit deadline, postponed to October 31, is approaching.

The UK currency fell by 0.7% to 1.2429 dollars by 12:56 London time on Tuesday, having previously reached a minimum of two years at 1.2407. The overall decline this month was already 2.1%. It fell 0.5% to 90.38 pence per euro, its lowest level since January 11. The British currency also fell against the Swiss franc to its lowest level since August 2017. 

Euro jumped on Bloomberg post

Euro jumped on Bloomberg post

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Jim Anderson - Public Relations

The euro has reached a new intraday high on media reports that the European Central Bank is not yet ready to resort to additional monetary incentives when it will discuss this issue at a meeting this month. This, in particular, was reported by Bloomberg, citing an official who’s familiar with the matter.

ECB officials prefer to wait instead of a larger amount of data on the economic situation in the region. The Board of Governors may change its rhetoric and the text of the final statement this month to signal that the introduction of new incentives is inevitable, the source added.

EUR / USD jumped for 0.3% to 1.1321, but by lunchtime Tuesday it is already down. The ECB often uses a way to communicate with the market, such as transmitting information through anonymous sources, to see how markets react.

                                                                                                                           

It’s time for USD to shine with a new power

It’s time for USD to shine with a new power

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Jim Anderson - Public Relations

Experts are betting on the growth of the dollar against the euro, pound sterling, and the Swiss franc. Central banks in different parts of the world signaled that soon additional stimulus will come amid expectations of a slowdown in economic growth and inflation. In the US, the market is expected to cut rates, perhaps even in July, which increases interest in the Fed's comments following the FOMC meeting on Wednesday.

Even though the reduction in interest rates reduces the attractiveness of the currency, the dollar looks quite stable against most of the major competitors from the Big Ten. Investment subsidiary of the banking holding company Well Fargo hedges potential risks by buying dollars. At the same time, the American investment company Invesco predicts the growth of the US currency against the euro, pound sterling, and the Swiss franc.

Experts from both companies are confident that economic weakness in Europe and China will not undermine the fundamental picture in the United States. Even if the US economy slows down, there will be no more attractive alternatives elsewhere on the planet. Therefore? There are no special incentives to reduce the shape of assets in the dollar.

In general, the concept of a dollar strategy is this: if other developed countries also face a slowdown and their central banks are also forced to lower rates to maintain economic expansion, the dollar will not have to depreciate much, even if the Fed rates are reduced.

GBP / USD remains near 2-weeks lows

GBP / USD remains near 2-weeks lows

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Erik Holm - Head of media

 

The GBP/USD pair remains near 2-weeks lows around 1.2550 after the publication of the weak PMI data in the UK service sector. The pair continued to retreat from a monthly high of 1.2784 and remained under pressure for the third consecutive session on Wednesday.

Let’s recall that the pessimistic attitude towards the pound, associated with the fears about no-deal Brexit on October 31, worsened again yesterday. The cause of the worsening is the pigeon comments of the head of the Bank of England. Even a decline in the dollar index amid falling yield treasurers could not help the currency of Britain.

We’ll see if the pair will succeed in attracting buyers at low levels or it will continue to lose ground in the face of political and economic uncertainty in Britain. Meanwhile, the United States today will publish ADP data on private sector employment and an ISM business services index.