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Customs data showed that Switzerlands gold exports to the United States in August fell sharply by more than 99% from the previous month to 0.3 tons.1. Decision Background: Wednesdays data showed that UK inflation remained high at 3.8% in August, nearly double the Bank of Englands 2% target. Services inflation remained elevated, while inflation expectations rose. Economic growth slowed in the second quarter, with demand showing signs of weakness. 2. Interest Rate Level: The market generally expects the Bank of England to hold interest rates steady at 4% at this meeting. Key focus will be on guidance for further easing this year. 3. Vote Split: The market expects a 7-2 vote to keep interest rates unchanged (compared to a 5-4 split in August), with Taylor and Dhingra dissenting (Taylor voted for a 50 basis point cut in August); Deputy Governor Ramsden may also join the dissenting vote. 4. Forward Guidance: The Bank of England stated in August that "the restrictiveness of monetary policy has decreased," which the market interpreted as hawkish. This meeting will highlight whether this statement appears again or is removed or weakened. 5. Quantitative Tightening: Due to heightened bond market volatility (earlier this month, 20- and 30-year bond yields rose to their highest levels since 1998), the market expects the Bank of England to reduce its annual bond reduction from £100 billion to £60 billion to £75 billion. It is also likely to limit sales of long-term UK government bonds, favoring shorter-term bonds. 6. Market Expectations: Currently, the market generally expects the Bank of England to maintain interest rates unchanged this year, with a small chance of a 25 basis point cut. A sustained cycle of rate cuts will begin in 2026, with cumulative reductions of approximately 50 basis points.On September 18th, economists at ING Bank stated in a report that downside risks to the US job market were the primary rationale for the Federal Reserves decision to cut interest rates; this rationale is unsurprising given recent weak employment data. Federal Reserve Chairman Powell described the rate cut as a "risk-management-based rate cut" because, on the surface, the US economy appears to be in decent shape. However, economists noted that a deeper analysis reveals a shift in the situation, most notably in the job market. The economists also stated that the Feds upward revision of its growth and inflation forecasts, while simultaneously lowering its unemployment forecast, suggests that policymakers believe that swift and forceful action in the coming months will yield tangible results for the economy. They believe the Fed will ultimately cut interest rates by more than currently implied.Novo Nordisk (NVO.N) continued to rise in pre-market trading, currently up 4.7%, after the company released results of a study on semaglutide.On September 18th, after the Federal Reserve cut interest rates by 0.25 percentage points on Wednesday, market sentiment improved and the cost of insuring euro-denominated credit against default declined. The Feds rate cut is boosting global investment appetite for risky assets. Data from S&P Global Market Intelligence showed that the European Cross Credit Default Swap Index, a measure of credit default swaps on euro high-yield bonds, fell 3 basis points to 248 basis points.

Amidst increasing Fed hawkish bets, the AUD/USD is anticipated to soar over 0.6880

Daniel Rogers

Jul 11, 2022 11:29

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The AUD/USD pair is first seeking to exceed the significant resistance level of 0.6850 since it is expected that the US dollar index (DXY), which was drained on Friday, would perform poorly going forward. The asset is seeking more gains, and greater upside will be due once it clears the important 0.6880 barrier.

 

Even if US Nonfarm Payrolls (NFP) data is upbeat, dollar bulls are expected to do poorly. In June, the US economy added 372k jobs, well above the average estimate of 268k but falling short of the prior figure. The Unemployment Rate remained at 3.6 percent, the same as in the previous report and estimates. The US economy's superior performance on the job market will undoubtedly make it easier for the Federal Reserve (Fed) to announce large rate increases with less reluctance.

 

However, the drop in average hourly earnings (AHE) on Friday will be bad for the US economy. The economic data were 5,1% annually, which was higher than the forecast of 5% but lower than the prior estimate of 5,3%. Reduced AHE does not assist US families when the inflation rate is out of control. Reduced AHEs will have a significant influence on their revenue during times of increasing pricing pressure. The overall demand may go down as a result of this.

 

Investors are focusing on Thursday's release of the employment figures in Australia. It is projected that the Employment Change, which was previously published as 60,6K, will be substantially lower, at 25K. However, from the previously stated 3.9 percent, the jobless rate will drop to 3.8 percent.