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On September 18th, Bank of America Corp. predicted that the Bank of Canada would lower its policy rate below the "neutral rate" relatively quickly, reducing it to 2% by the end of the year. Economist Carlos Capistran said this goal would be achieved through a 25 basis point rate cut in October and December, a move that follows the central banks monetary policy easing initiative launched this week. Capistran noted that the specific pace of rate cuts will depend on how quickly core inflation responds to weak economic activity; however, he currently forecasts inflation of 1.9% by the end of both this year and next, compared to BofA Securities previous inflation forecast of 2% for both dates.On September 18th, strategists at Swedens Nordic Bank SEB wrote that Norways central bank may cut interest rates once more next year, ultimately lowering its key rate to a "terminal rate" of 3.75%. SEB expects the bank to pause rate cuts for now, assessing the impact of the two previous cuts and determining whether further stimulus is needed based on subsequent economic data. "We continue to forecast that inflation will slow faster than the Norges Bank anticipates," the bank said, adding that it believes another rate cut is possible next year—perhaps as early as June. SEB also believes the bank will maintain a "restrictive" policy stance to avoid exacerbating inflation risks.Intel (INTC.O) shares were on track for their biggest one-day percentage gain since October 1987.On September 18th, the Bank of England (BoE) announced a slowdown in its quantitative tightening program, sending 30-year gilt yields higher. The BoE announced plans to reduce its bond holdings by £70 billion over the next 12 months, starting in October. This represents a decrease from the £100 billion reduction it had made over the past year. Some analysts, including TD Securities strategists, had expected a significant slowdown in quantitative tightening, with estimates of a reduction of between £60 billion and £65 billion. The BoE also indicated a preference for increasing sales of short- and medium-term government bonds and reducing long-term debt.Nike (NKE.N) rose about 1 percent after Royal Bank of Canada upgraded the apparel company to outperform.

The EUR/USD rise is getting close to 1.0200 as investors await US inflation data

Daniel Rogers

Aug 09, 2022 14:58

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The EUR/USD moves in the 1.0200 range during Tuesday's Asian session after falling from 1.0221 as traders look for fresh data. The major currency pair gained over the first part of the week but lost some of those gains by Monday's close. Recent price fluctuations, however, seem to be constrained by a lack of noteworthy data or events and a cautious attitude ahead of Wednesday's release of the US Consumer Price Index (CPI) for July.

 

Gains in the EUR/USD the day before are shown by higher readings of the Eurozone Sentix Investor Confidence Index and a drop in US Treasury yields. The primary sentiment indicator Index, however, increased in August from -26.4 to -25.2, which was projected to be the value. According to specifics, the eurozone's present state has improved from this month's lowest position since March 2021, when it was -16.5, to -16.3. The expectations index is at its lowest level since December 2008, despite a little increase to -33.8. It is still very close to that level. The US Dollar Index (DXY), in contrast, saw a daily decrease of 0.19 percent to 106.37.

 

The moderate Azione's resignation from the newly formed alliance ahead of the September elections looks to have put negative pressure on the Euro elsewhere due to Italian political worries.

 

The moderate Azione has backed out of its coalition with the Democratic Party and the +Europe party after only agreeing to do so last week. According to party leader Carlo Calendar, "the parts didn't fit." According to Reuters and Market News Publishing US, the alliance was formed in an effort to stop a more conservative government from taking office after the election on September 25.

 

Notably, gains in the EUR/USD the day before appeared to have been constrained by US President Joe Biden's displeasure of China's efforts to retake Taiwan and his censure of House Speaker Nancy Pelosi's trip to Taipei.

 

These actions caused the 10-year US Treasury rates, which had increased by 14 basis points (bps) the day before, to fall by around seven basis points (bps) to 2.75 percent. Wall Street also started Monday's trading day on a positive one before ending on a mixed note, albeit as of press time, S&P 500 Futures are showing minor gains.

 

Participants in the EUR/USD market may be interested in the second quarter's (Q2) US Nonfarm Productivity and Unit Labor Costs data. Forecasts suggest that US Nonfarm Productivity may rise to -4.6% from -7.3%, while Unit Labor Costs may decrease to 9.5% from 12.6%. The news regarding Taiwan and Russia will also be important for determining direction.


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