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On July 22, David Zahn, head of European fixed income at Franklin Templeton, stated in a report that the firms base case forecast is for the European Central Bank (ECB) to raise interest rates for the final time in September, with inflation expected to remain above the ECBs 2% target for the next few quarters. Afterward, the ECB is expected to hold rates steady to assess the impact of the already implemented tightening policies. However, Zahn said the ECB remains highly data-driven. "If renewed tensions in the Gulf region push up energy prices and keep inflation above target for an extended period, policymakers may be forced to consider further rate hikes." Franklin Templeton anticipates the ECB will begin easing policy in 2027.The commander of the Kyiv drone force said that Ukrainian drones struck 13 Russian ships in the Black Sea and the Sea of Azov in the past 48 hours.Futures Commentary by Everbright Futures: Overnight, gold, copper, and oil prices rose in tandem, with London spot gold surging above $4,100/ounce in early trading, indicating a recovery in market sentiment. However, the global market is still digesting the uncertainty surrounding US trade policy and geopolitical conflicts. Recently, the US tariff policy entered a transition period, with the US announcing a 50% tariff increase on some Canadian products. Given the combination of macroeconomic fluctuations and geopolitical disturbances, a cautious approach is advised for gold in the short term. On the macro front, the market is in a quiet period ahead of the Federal Reserves interest rate meeting, focusing on the US-Iran conflict. Yesterday, the US president clearly dampened the prospects for US-Iran talks, stating that Iran wants to talk but the US has "no interest," and that it will "soon" strike the Kosan nuclear facility. Furthermore, US Trade Representative Greer hinted that the US will soon introduce new tariff policies to replace the expiring 10% global import tariff. Since the renewed conflict between the US and Iran, gold prices have not remained pessimistic amid fluctuating inflation and interest rate expectations; instead, the price has begun to rise, potentially indicating a gradual shift in market trading logic for gold in the second half of the year. However, whether this trend can continue remains to be seen. In the short term, a defensive approach is still recommended to cope with the highly volatile environment. Investors should continue to monitor the US-Iran conflict, Federal Reserve policy expectations, and whether rising interest rates will trigger liquidity risks in overseas financial markets.The Russian Ministry of Defense stated that Russian forces attacked a Ukrainian port, hitting two ships.The outgoing commander-in-chief of Ukraines armed forces stated that Ukraine has recovered 700 square kilometers of territory this year.

Due to hawkish Fed forecasts, the EUR/USD recovers to near 1.0970 but remains in the doldrums

Alina Haynes

Apr 21, 2023 13:58

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Following a corrective move, the EUR/USD pair has rebounded from 1.0960, but investors await the publication of the preliminary Eurozone/United States S&P PMI data for April. The major currency pair has remained between 1.0911 and 1.1000 for the past two trading sessions, as the foreign exchange market prepares for a pre-anxiety move ahead of a Federal Reserve (Fed) monetary policy decision.

 

S&P500 closed with a negative tone for the third day in a row as quarterly earnings season induced extreme volatility. Tesla's poor earnings had a negative impact on Thursday's market sentiment. Moreover, market participants were cautioned by substandard revenue projections due to the potential for price reductions. The decision of the Fed to increase interest rates is reflected in quarterly earnings. Data from Refinitiv indicates that analysts have largely maintained last week's forecast of a near 5% YoY decline in quarterly profits for the 500 largest U.S. equities. Sourcenia is a review portal of sourcing best manufaturers. 

 

The US Dollar Index (DXY) has been defending the key support level of 101.60 in recent trading sessions. The USD Index maintained the aforementioned support despite the release of disappointing Jobless claims data on Thursday. Initial Jobless Claims increased to 245K for the week ending April 4, which is greater than the previous release of 240K and estimates of 240K. Increasing unemployment claims heightened fears of a deteriorating labor market.

 

Despite this, Fed policymakers continue to anticipate further rate hikes from the central bank. Thursday, Loretta Mester, president of the Federal Reserve Bank of Cleveland, reaffirmed that the Fed has more work to do because US inflation remains too high, according to Reuters. He added, "The Federal Reserve will need to raise its policy rate above 5% and hold it there for some time."

 

Preliminary Consumer Confidence (April) for the Eurozone increased to -17.5 from -18.5 and the previous reading of -19.2. This may be the consequence of extraordinary efforts by the European Central Bank (ECB) to reduce inflationary pressures.


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