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August 17th - Japanese automakers are facing a double whammy from the impact of the Iran war and the potential for a stronger yen. Toyota, Honda, and Nissan have recently benefited from the historically weak yen, with Toyota and Honda raising their full-year earnings forecasts and Nissan achieving its first profit in nearly two years. However, this positive effect may reverse as the yen strengthens. Vincent Sun, senior equity analyst at Morningstar, stated that a stronger yen will force automakers to choose between raising prices overseas and sacrificing profits. The former could lead to a decline in market share, while the latter would compress the yen value of overseas profits. Bernstein predicts that for every 1% appreciation of the yen, Japanese automakers operating profits will typically be affected by about 2%, with some companies potentially experiencing an impact of up to 4%. Analysts also believe that the ongoing conflict in the Middle East could drive up the costs of key raw materials such as naphtha, resins, aluminum, copper, steel, and semiconductors, and increase shipping risks in the Strait of Hormuz and the Red Sea, further squeezing automakers profit margins.Japans 20-year yield rose 6.5 basis points to 3.815%.On August 17th, the Foshan Housing Provident Fund Management Center issued a notice regarding adjustments to the minimum contribution level for housing provident funds in Foshan. The notice clarifies that starting September 1, 2026, the minimum contribution level for housing provident funds in Foshan will be adjusted. Specifically, the minimum contribution base will be set at the minimum wage standard for employed workers in Foshan, which is 2300 yuan. The minimum monthly contribution for employed workers will be 115 yuan for both the individual and employer contributions, totaling 230 yuan. The minimum monthly contribution for self-employed individuals will also be 230 yuan.August 17th - The upcoming New Zealand general election in November may complicate the Reserve Bank of New Zealands (RBNZ) monetary policy tightening, but ANZ senior strategist David Croy believes the RBNZ is still very likely to raise interest rates in October. The RBNZ has clearly stated its intention to return monetary policy to a neutral level. ANZ estimates the neutral interest rate to be around 3% or slightly above 3%, while the current policy rate is 2.50%. Croy stated that with policy remaining stimulative and inflation above target, there is no reason for the RBNZ to pause rate hikes. He believes the current situation is that the RBNZ needs to find a reason not to raise rates in October.On August 17, Belgorod Oblasts acting governor, Shuvaev, posted on social media that a village in the Valuisky district of the oblast was attacked by Ukrainian forces, resulting in 6 deaths and 4 injuries.

Due to hawkish Fed forecasts, the EUR/USD recovers to near 1.0970 but remains in the doldrums

Alina Haynes

Apr 21, 2023 13:58

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Following a corrective move, the EUR/USD pair has rebounded from 1.0960, but investors await the publication of the preliminary Eurozone/United States S&P PMI data for April. The major currency pair has remained between 1.0911 and 1.1000 for the past two trading sessions, as the foreign exchange market prepares for a pre-anxiety move ahead of a Federal Reserve (Fed) monetary policy decision.

 

S&P500 closed with a negative tone for the third day in a row as quarterly earnings season induced extreme volatility. Tesla's poor earnings had a negative impact on Thursday's market sentiment. Moreover, market participants were cautioned by substandard revenue projections due to the potential for price reductions. The decision of the Fed to increase interest rates is reflected in quarterly earnings. Data from Refinitiv indicates that analysts have largely maintained last week's forecast of a near 5% YoY decline in quarterly profits for the 500 largest U.S. equities. Sourcenia is a review portal of sourcing best manufaturers. 

 

The US Dollar Index (DXY) has been defending the key support level of 101.60 in recent trading sessions. The USD Index maintained the aforementioned support despite the release of disappointing Jobless claims data on Thursday. Initial Jobless Claims increased to 245K for the week ending April 4, which is greater than the previous release of 240K and estimates of 240K. Increasing unemployment claims heightened fears of a deteriorating labor market.

 

Despite this, Fed policymakers continue to anticipate further rate hikes from the central bank. Thursday, Loretta Mester, president of the Federal Reserve Bank of Cleveland, reaffirmed that the Fed has more work to do because US inflation remains too high, according to Reuters. He added, "The Federal Reserve will need to raise its policy rate above 5% and hold it there for some time."

 

Preliminary Consumer Confidence (April) for the Eurozone increased to -17.5 from -18.5 and the previous reading of -19.2. This may be the consequence of extraordinary efforts by the European Central Bank (ECB) to reduce inflationary pressures.


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