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November 6th - ING analysts stated that the pound is likely to remain weak, but a significant drop from current levels is unlikely in the short term. They pointed out that with the market recently raising its expectations for interest rate cuts, the Bank of Englands easing cycle has been largely priced in, suggesting that the terminal interest rate could be as low as 3.25% next summer. Analysts said, "Unless the budget includes significant fiscal tightening, further lowering the price-cutting cycle for the Bank of England, a credible budget might be sufficient to slightly reduce the risk premium in UK government bonds and the pound." ING expects the euro to remain around 0.88 against the pound before the budget announcement on November 26th.A U.S. federal appeals court has given Trump a new opportunity to present evidence again that the hush money criminal case should fall under the jurisdiction of a federal court.On November 6th, TD Securities strategists stated in a report that the pound is expected to underperform other G10 currencies as the UK budget meeting on November 26th approaches. The strategists pointed out that the UKs fiscal maneuvering space is extremely limited, and the dollar is likely to maintain its recent strength for some time during the ongoing US government shutdown. The report stated, "The pound appears structurally undervalued around the 1.30 level, but a reversal in dollar sentiment is needed for it to strengthen again after the budget risk event." A catalyst for a weaker dollar could be the end of the US government shutdown and the resumption of official economic data releases, which could signal a potential Fed rate cut in December.The German DAX index fell by 1% during the day.U.S. stocks opened lower and continued to decline, with the Nasdaq falling by 1%, the S&P 500 down 0.68%, and the Dow Jones down 0.65%.

US DOLLAR FUNDAMENTAL FORECAST: BULLISH

Alice Wang

Jul 18, 2022 15:20

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After a US inflation data boosted expectations for a Federal Reserve rate rise this week, the US dollar increased and reached levels not seen since September 2002. In June, the consumer price index (CPI) increased by 9.1% as compared to the same month a year before, above the consensus estimate of 8.8%. Core inflation, which excludes the cost of gasoline and food, increased more than was predicted.


According to Fed Funds futures, this raised the likelihood of a 100 basis-point rate rise at the July 27 FOMC meeting to above 50%. These wagers decreased over the weekend but were still larger than they were before to the CPI report. Before the FOMC blackout period started on July 16, representatives from the Federal Reserve assisted in lowering such expectations.


According to the CFTC's most recent Commitments of Traders report, traders reduced their long bets on the US dollar for a second consecutive week. Despite the two-week fall, traders' net long positions in the USD have mainly not changed. The reference period for the data concluded on July 12, leaving markets in the dark about post-CPI positioning.

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