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June 26th - European semiconductor companies followed their Asian counterparts lower as investors sold off artificial intelligence-related stocks. Micron Technologys strong earnings and optimistic outlook, reported after Wednesdays close, failed to reignite the rally in AI-related stocks on Thursday. On Friday, South Korean memory chip maker SK Hynix closed down 8.4%, and TSMC fell 2.1%. In European markets, Dutch semiconductor equipment maker ASML fell 0.9%, and ASM International fell 3.3%. German chipmaker Infineon Technologies fell 2.9%, and STMicroelectronics fell 2.5%. Meanwhile, E-mini Nasdaq 100 futures fell 0.8%.According to TASS, Russia is considering a short-term ban on diesel exports lasting several months.On Friday, June 26, the Hang Seng Index closed down 405.05 points, or 1.76%, at 22,671.86; the Hang Seng Tech Index closed down 150.33 points, or 3.41%, at 4,255.59; the H-share Index closed down 147.54 points, or 1.94%, at 7,460.84; and the Red Chip Index closed down 47.94 points, or 1.26%, at 3,749.09.The yield on German two-year government bonds fell to a seven-week low of 2.508% after the release of the European Central Banks consumer expectations survey, down 3 basis points on the day.On June 26th, Fitch Ratings BMI Commodities Research division remained bullish on gold, maintaining its 2026 average gold price forecast of $4,600 per ounce. The firm also believes the Federal Reserve will not make any moves on interest rates this year. As noted last week, the Feds hawkish tone has fueled expectations of rate hikes, posing a significant downside risk to gold. However, as long as inflationary pressures related to the Middle East conflict materialize as expected, and with the recent US-Iran agreement beginning to subside, the most likely outcome is that interest rates will remain unchanged for an extended period. Short-term gold price movements may be driven by Fed policy signals, and precious metals are susceptible to market expectation repricing and a renewed strengthening of the US dollar in the short term.

The euro/dollar exchange rate has dipped below 1.00 as markets await Jackson Hole and the Fed's inflation target

Alina Haynes

Aug 26, 2022 15:19

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Falling below 0.9965 during Friday's Asian session, the EUR/USD emerges from hiding after three days. Reports concerning the European Central Bank (ECB) and the Fed's cautious tone leading up to Chairman Jerome Powell's talk at the Jackson Hole Symposium, not to mention the critical US PCE inflation data, may be to blame for the recent dip in the main currency pair.

 

Bears in the EUR/USD pair, who are worried about higher inflation in the bloc, were faced with a challenge late Thursday when Reuters reported unnamed sources saying that ECB reinvestments could continue alongside rate hikes. The latest developments in China, Taiwan, and Iran might possibly drag the price down.

 

According to Reuters, the United States suspends 26 Chinese carrier flights in retaliation to China's stance, which renews Sino-American antagonism and bolsters demand for the US dollar as a safe-haven currency. The number of American diplomats stationed in Taiwan may have increased in tandem with the island's escalating military spending. In addition, the previously unconcerned attitude was called into question after a letter quoting Vice President Joe Biden said, "The United States bombed Iranian-backed troops in Syria to defend American people both at home and abroad."

 

It should be remembered that the mixed prints of Germany's IFO statistics and an upward revision to the country's Gross Domestic Product (GDP) for the second quarter (Q2) combined with the hawkish European Central Bank's (ECB) July policy meeting tended to favor the bulls prior.

 

On the other side, US dollar bulls were undeterred by higher US numbers and contradicting Fed statements. Furthermore, China's stimulus of nearly a trillion dollars may put downward pressure on the currency.

 

The Dow Jones Industrial Average posted its biggest daily gain in a week, while rates on 10-year US Treasuries declined to 3.03% from a high of 3.100% the day before. Consequently, the S&P 500 Futures are down 0.10 percent intraday as of press time.

 

Going forward, EUR/USD swings will depend on Fed Chair Jerome Powell's ability to defend bold moves during his yearly Jackson Hole address.

 

In addition, the Fed's preferred inflation gauge, the US Core Personal Consumption Expenditures (PCE) Price Index for July, will be quite important. According to projections, annual growth will slow to 4.7% from 4.8%, while monthly growth may slow to 0.3% from 0.6%. It's worth noting that the September GfK Consumer Confidence Survey results for Germany, forecast at -31.8 versus -30.6 previously, could possibly affect the EUR/USD in the short term.

 

The EUR/USD pair is now being capped by a declining trend line that has been in place for the past two weeks at the 1.0000 parity level. The bears are currently looking for the 0.9900 level before focusing on the 61.8% Fibonacci Expansion (FE) of the pair's May-August advances near 0.9855.


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