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On March 21, a spokesperson for the Hatem Anbia Central Headquarters of the Iranian Armed Forces stated that the United States and Israel are now targeting private vessels and passenger transport in the Persian Gulf. The Iranian Armed Forces warned the US and Israel that if such actions occur again, Iran will take strong and reciprocal retaliatory action.On March 21, local time, the Iranian Islamic Revolutionary Guard Corps issued a statement saying that at 3:45 a.m. that day, Irans new air defense system struck down Israels third F-16 fighter jet in central Iran. It is claimed that in the first three weeks of the conflict, Iran successfully intercepted and destroyed more than 200 aircraft, including drones, cruise missiles, refueling aircraft, and top-tier fighter jets.On March 21st, HSBC stated that the Federal Reserve maintained its policy rate at 3.50%-3.75% at its March meeting, hinting at a "wait-and-see" approach. Persistent inflation and rising geopolitical risks have created uncertainty for the Fed. We maintain our previous view that the Fed will keep rates unchanged in 2026 and 2027. Inflation risks have increased, particularly due to soaring energy prices, while labor market risks have slightly decreased. Energy price volatility and geopolitical risks should continue to support safe-haven demand and a stronger dollar.Iraq says Iranian natural gas supplies have resumed, with a daily supply of 5 million cubic meters.On March 21, Brazilian President Lula da Silva stated during a visit to an oil refinery in Minas Gerais state on March 20 that the escalating conflict in the Middle East necessitates that Petrobras and the government "establish strategic oil reserves" to cope with any potential consequences of the conflict. He warned that if the war continues, and if the United States were to destroy the Strait of Hormuz, the oil crisis "will only worsen." Previously, on March 12, the Brazilian government announced the exemption of import and sales taxes on diesel fuel, while imposing a 12% export tax on crude oil to mitigate the spillover risks from the Middle East situation.

Factors affecting FOREX

Eden

Oct 25, 2021 13:27

There are many factors affecting the medium and long-term trend of the FOREX market, including interest rates, gross domestic product (GDP), US non-farm payrolls (NFP), consumer price index (CPI), producer price index (PPI), durable goods orders, claims for unemployment benefits, industrial production index, trade balance, unemployment rate, retail sales, etc. Differences between published data and expectations will have different impacts on currency pairs.


The NFP of the US is one of the important factors affecting FOREX. Increases in NFP and average wages indicate that employment growth and potential inflationary pressure have increased. In many cases, the Fed will inhibit them by hiking interest rates, benefiting the US dollar. On the other hand, NFP's continual decline would mean that the economy is slowing down to some extent, leading to an increase in likelihood of reduced interest rates and hurting the US dollar.


In addition, decisions of central banks' in different countries on interest rates are another important factor that affects FOREX. In the US, for example, interest rates are determined by the Federal Open Market Committee (FOMC). Interest rate decisions are important because central banks in different countries will formulate monetary policy and interest rate decisions based on a combination of economic growth, domestic inflation and unemployment. Therefore, interest rate decisions determines a country's path of interest rates for a period of time in the future.


If the central bank in a country decides to lower interest rates, future returns on cash deposits will fall, causing local currency funds to flow from banks to the market, encouraging investment and consumption, and boosting economic growth. At the same time, the market demand for the country's currency will drop due to lower yields, increasing the currency's depreciation pressure. In contrast, a rise in the interest rate will increase borrowing costs, and reduce the liquidity in the market. Therefore, it has the effect of suppressing consumption and curbing inflation. Meanwhile, higher yields will attract more money converted into the country's currency, increasing the likelihood of currency appreciation.


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