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ForexLive European FX news wrap: USD/JPY trades up to highest since 1990
398356 June 26, 2024 19:56 Forexlive Latest News Market News
Headlines:
Markets:
- AUD leads, NZD lags on the day
- European equities lower; S&P 500 futures down 0.1%
- US 10-year yields up 4.9 bps to 4.286%
- Gold down 0.3% to $2,310.84
- WTI crude up 0.7% to $81.38
- Bitcoin down 0.9% to $61,329
There were some decent moves in European morning trade today, with the dollar holding firmer across the board helped out by higher bond yields. That saw USD/JPY move up to clip the 160.00 mark once again and is now testing waters above that on the day. The high for the day is at 160.40, matching up to the 1990 high.
I wouldn’t underestimate the upside potential of the pair considering that it is clear skies in terms of the technicals. But it’s all a psychological game now and if buyers push it too far, too fast, Tokyo will be ready to step in again.
With equities also surrendering early gains and yields nudging higher, that is keeping the dollar underpinned on the day.
EUR/USD is down 0.3% from 1.0710 to 1.0680 while GBP/USD eased from 0.3% from 1.2680 to 1.2645 on the session. Meanwhile, USD/CAD is up 0.2% to 1.3690 and NZD/USD down 0.4% to 0.6095 on the day.
The aussie is the one leading gains though after hotter inflation numbers earlier. But AUD/USD has eased from 0.6680 to 0.6650 levels now, though still up 0.2% on the day.
As a reminder, month-end and quarter-end is approaching so that will be a factor for consideration in the sessions ahead as well.
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Mexican Peso rolls over ahead of Banxico meeting
398354 June 26, 2024 19:49 FXStreet Market News
- The Mexican Peso drifts lower on the eve of the Bank of Mexico policy meeting.Â
- The overwhelming majority of economists donÂ’t expect the Banxico to cut interest rates.Â
- USD/MXN forms a bullish two-bar reversal pattern and could correct higher.Â
The Mexican Peso (MXN) edges lower in its most traded pairs on Wednesday as traders brace for the key event on the radar for the Peso: the Bank of Mexico (Banxico) monetary policy meeting on Thursday.Â
At the time of writing, one US Dollar (USD) buys 18.16 Mexican Pesos, EUR/MXN is trading at 19.41, and GBP/MXN at 23.01.
Mexican Peso eases ahead of Banxico meeting
The Mexican Peso eases ahead of the Banxico policy meeting on Thursday, although the overwhelming majority of economists expect the central bank to maintain its policy interest rate at its current 11.00% level.
The high interest-rate differential between Mexico and most major economies is advantageous for the Mexican Peso as it attracts greater capital inflows. Deciding not to cut interest rates, therefore, would be considered bullish for the Peso.Â
According to a Bloomberg survey of economists, 23 of the 25 expect Banxico to hold tight. A recent survey by Mexican lender Citibanamex showed most respondents also expected Banxico to leave rates unchanged at 11.00% at the June meeting – although they did expect a cut in August.
“Banco de Mexico meets Thursday and is expected to keep rates steady at 11.0%,” Dr. Win Thin, Global Head of Markets Strategy at Brown Brothers Harriman (BBH), said in a note on Tuesday. “Recent weakness in MXN is an upside risk to inflation and will keep the bank cautious. The swaps curve has adjusted higher since the May meeting and is pricing in only 75 bp of easing over the next 12 months vs. 125 bp at the start of May,” he added.Â
RabobankÂ’s Senior Strategist Christian Lawrence had expected Banxico to cut interest rates by 0.25% at the June meeting. However, he changed his opinion in light of the sharp devaluation of the Mexican Peso since the election, which “has acted as a de facto cut,” says Lawrence.Â
Economists at Standard Chartered see imported inflation from the post-election depreciation in the Mexican Peso as preventing Banxico from pressing the trigger on rate cuts, supporting the Peso in the process.Â
“We now expect Banco de México (Banxico) to stay on hold instead of cutting by 25bps at its 27 June meeting, amid sharp currency depreciation driven by elevated political noise and fiscal uncertainty,” says the bank.Â
Technical Analysis: Two-bar reversal could signal recovery for USD/MXNÂ
USD/MXN forms a two-bar reversal pattern (shaded rectangle in the chart below) which is a fairly reliable indicator of a short-term reversal in the trend.Â
If Wednesday ends as a green day, it will enhance the signal from the two-bar reversal and suggest a continuation higher, although the distance such a corrective move might go is indeterminate.
USD/MXN Daily ChartÂ
One possible level USD/MXN could rally up to is the June 18 low at 18.30.Â
At the same time, the short-term trend remains bearish, leaving the pair at risk of a recapitulation lower.Â
A break below 17.87 (June 24 low) would invalidate the two-bar pattern and probably result in a continuation of the short-term downtrend to a target at 17.71 (a low made in the 4-hour chart on June 4), followed by 17.54 if stronger, the June 4 swing low.Â
The direction of the long and intermediate-term trends remains in doubt.Â
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of MexicoÂ’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
EUR/USD: Markets are sidelining ahead of a major event – OCBC
398353 June 26, 2024 19:46 FXStreet Market News
The main focus for the Euro (EUR) is on French elections in the short term. The concern is still on potential fiscal direction far-right parties may be taking and if the ‘cohabitation’ outcome comes into play, OCBC analysts Frances Cheung and Christopher Wong note.
French election weighs on the market
“Knee-jerk impact on EUR can vary but is likely to be skewed to the downside, unless outcome surprises with Macron’s Ensemble coalition winning a larger share. The other swing surprise that would be outright negative for EUR would be a >50% win for either the far right or leftist coalition (not our base case).”
“EUR was last at 1.0682. Bearish momentum on daily chart shows signs of fading while RSI rose slightly. Some risks to the upside but 2-way trades still likely ahead of French election risks.”
“Support at 1.0660/70 levels (recent low) before 1.06 levels. Resistance at 1.0770 (50 DMA), 1.0810 (38.2% fibo retracement of 2024 high to low, 100 DMA).”
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Bitcoin steadies around $61,000 after liquidations on Defi platforms exceed $1 million
398349 June 26, 2024 19:45 FXStreet Market News
- The Bitcoin spot ETFs received $31 million in inflows on Tuesday, snapping seven consecutive days of outflows.
- US Congressman Matt Gaetz announces a bill proposing Federal Income Tax payments using Bitcoin.
- The German government’s transfer of 400 BTC worth $24.34 million to exchanges on Tuesday, following the transfer of 1700 BTC in the last week, may negatively impact Bitcoin’s price.
Bitcoin (BTC) price trades above $61,000 on Wednesday after rebounding 2.6% on Tuesday as the broad crypto market recovers slightly. Bitcoin spot ETFs registered inflows of $31 million on Tuesday, snapping a streak of seven consecutive days of outflows. In the US, Congressman Matt Gaetz proposed legislation enabling federal income tax payments with Bitcoin, while in Europe the German Government’s transfer of 400 BTC, valued at $24.34 million, added to the recent selling pressure.
Daily digest market movers: Bitcoin spot ETF received $31 million in inflows on Tuesday
- According to data from Coinglass, Bitcoin spot ETFs saw an inflow of $31 million on Tuesday, ending a seven-day streak of outflows totaling $1.13 billion. This uptick in ETF inflows indicates growing institutional and retail interest in the cryptocurrency, which could influence its price dynamics and market behavior. Collectively, the 11 spot BTC ETFs hold reserves amounting to $51.73 billion in Bitcoin.
Bitcoin Spot ETF Net Inflow (USD) chart
- In the last hours, the German Government transferred 400 BTC valued at $24.34 million from its wallet to Coinbase and Kraken exchanges, data from Arkham Intelligence shows. Over the past week, German authorities have moved 1,700 BTC worth $110.88 million to Coinbase, Bitstamp, and Kraken. This significant transfer activity may have fueled FUD (Fear, Uncertainty, Doubt) among traders, potentially contributing to Bitcoin’s 4.6% price decline on Monday.
UPDATE: German Government selling additional $24M BTC
In the past 2 hours the German Government has moved 400 BTC to exchange deposits at Kraken and Coinbase.
They have also moved 500 BTC to address 139Po. We have yet to see where these funds are moved. pic.twitter.com/D6QCUv9Jgx
— Arkham (@ArkhamIntel) June 25, 2024
- US Congressman. Matt Gaetz, an American politician, announced on his official Twitter account that he is introducing a bill that would allow the federal income tax to be paid with Bitcoin. If passed, the bill would revise the Internal Revenue Code of 1986 to direct the Treasury secretary to formulate a strategy for accepting the widely used decentralized digital currency.“This is a bold step toward a future where digital currencies play a vital role in our financial system, ensuring that the U.S. remains at the forefront of technological advancement,” Gaetz said
BREAKING: Today, I introduced groundbreaking legislation to modernize our tax system by requiring @USTreasury to implement a program to allow federal income tax to be paid with Bitcoin.
By enabling taxpayers to use #Bitcoin for federal tax payments, we can promote innovation,Â… pic.twitter.com/TO2iPuvrQs
— Rep. Matt Gaetz (@RepMattGaetz) June 25, 2024
- According to data from SantimentÂ’s Defi liquidations on Aave and Compound Finance, BTCÂ’s recent price decline from $63,210 to $60,293 on Monday has seen liquidations worth more than $1 million in Defi platforms. Historically, these spikes are followed by market recoveries due to the immediate forced selling and opportunistic buying from key stakeholders.
Santiment Defi Liquiation chart
Technical analysis: BTC bounces off key support
Bitcoin’s price broke below the descending wedge on Monday, declining approximately 7.5% from its daily high of $63,369 to a low of $58,402. After retesting its crucial weekly support near $58,375, BTC rebounded by 5.8%, closing at $61,806 on Tuesday. BTC trades at around $61,654 at the time of writing, edging down approximately 0.2% on Wednesday.
If the weekly support at $58,375 holds, Bitcoin could encounter resistance at several key levels.
- The lower boundary of the descending wedge sits around $62,000.
- The descending wedge’s upper boundary and daily resistance hovers near $63,956.
- The 61.8% Fibonacci retracement level and the weekly resistance are at $66,631 and $67,147, respectively.
A breakthrough above these resistance barriers could propel BTC’s price towards retesting the next weekly resistance at $71,280.
The Relative Strength Index (RSI) is currently well below 50 on the daily chart, close to oversold levels, while the Awesome Oscillator (AO) is below its zero level. For bulls to stage a convincing comeback, both momentum indicators would need to sustain positions above their respective thresholds of 50 for RSI and zero for AO.
BTC/USDT daily chart
However, if BTC closes below the $58,375 level and forms a lower low on the daily time frame, it could indicate that bearish sentiment persists. Such a development may trigger a 3% decline in BitcoinÂ’s price, revisiting its previous low of $56,552 from May 1.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of BitcoinÂ’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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India M3 Money Supply unchanged at 10.9% in June 10
398348 June 26, 2024 19:40 FXStreet Market News
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ECB speakers to cross the wires today – UBS
398347 June 26, 2024 19:35 FXStreet Market News
There are several ECB speakers on the agenda today. One speaker, Rehn, has already suggested that two further rate cuts are a reasonable estimate for ECB action this year, Chief Economist at UBS Global Wealth management Paul Donoban notes.
The data calendar is quiet
“The UK’s CBI distributive trades data is a retail sector survey which only three economists can be bothered to forecast. US May new home sales data is more noteworthy, reporting on a sector that is vulnerable to the ever tighter real interest rates of the Federal Reserve (Fed).”
“The French parliamentary debate saw the three political leaders conforming to stereotype on the major issues—markets are unlikely to be moved by this piece of political theater. The increase in the retirement age from 62 to 64 was a contested point (many OECD economies have a retirement age several years higher than 64).”
“The UK leader of the opposition, Starmer, suggested a Labor government would try to reach 2.5% GDP growth. The frequency with which UK data is revised may mean it is years before a true growth rate is uncovered, and efficiency gains from structural change will raise living standards but potentially reduce reported GDP growth.”
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USD/CNH: RMB depreciation continues – OCBC
398346 June 26, 2024 19:34 FXStreet Market News
The recent USD/CNY fixings suggest a measured pace of RMB depreciation, OCBC analysts Frances Cheung and Christopher Wong note.
USD/CNH continues to move up towards 7.31
“The recent USD/CNY fixings have followed a pattern that continued to reinforced out view that authorities are pursuing a measured pace of RMB depreciation.”
“Change in daily fix on average is about +17pips since 19 Jun (about 6 days) vs. average daily change of about 4.5pips/day since May2024. Higher USD/CNY fix and wider CNH-CNY spread gives the impression there could be further weakening in RMB ahead.”
“USD/CNH was last at 7.3011. Momentum is bullish while RSI rose. Risks skewed to the upside. Resistance at 7.31. Support at 7.2705 (21 DMA).”
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US Dollar stretches higher with hawkish Fed scaremongering markets
398345 June 26, 2024 19:33 FXStreet Market News
- The US Dollar trades firmly in the green against nearly all major peers.Â
- A light data calendar is ahead as markets digest hawkish Fed comments.Â
- The US Dollar index flirts with a retest of 105.90.
The US Dollar (USD) trades stronger on Wednesday for the second day in a row with some help from US Federal Reserve (Fed) officials, who seem to have turned more hawkish. Federal Reserve Governor Michelle Bowman lit the fire on the fuzz by saying that a rate hike is still an option while she sees too many potential risks that could still drive inflation higher. Her thesis became reality just a few hours later, after neighbouring country Canada released red-hot inflation numbers.
On the economic front, a rather light calendar ahead of ThursdayÂ’s Gross Domestic Product (GDP) final estimate and FridayÂ’s Personal Consumption Expenditures (PCE) Price Index release. Still, traders will need to watch out for the Bank Stress Test report, to be published at 20:30 GMT, in which the Fed analyzes how healthy US banksÂ’ balance sheets are in case of financial market distress.Â
Daily digest market movers: Fed scaring markets
- Markets got spooked by comments from Federal Reserve Governor Michelle Bowman on Tuesday, saying she is “willing to raise the target rate at a future meeting if inflation progress stalls or reverses”, while she “expects US inflation to remain elevated for some time, still seeing a number of upside inflation risks.”
- At 11:00 GMT, the weekly Mortgage Applications Index from the Mortgage Bankers Association (MBA) will release this weekÂ’s numbers. The index rose 0.9% the previous week.
- At 14:00 GMT, New Home Sales data for May is due to come out. Analysts expect sales to increase slightly to 640,000 from AprilÂ’s 634,000.Â
- The US Treasury is heading to markets to allot a 5-year Note in the markets at 17:00 GMT.Â
- The FedÂ’s Bank Stress Test report will come out near 20:30 GMT.Â
- Equities are recovering after Nvidia (NVDA) was able to eke out gains on Tuesday at the US closing bell. The main indices in Asia are all in the green and even the Dax and the pan-European index, Euro Stoxx 50, is recovering. US futures are rather mixed, with the Dow Jones Industrial futures in the red against Nasdaq futures in the green and the S&P 500 caught in the middle.Â
- The CME Fedwatch Tool is broadly backing a rate cut in September despite the recent comments from Fed officials, with odds now standing at 59.5% for a 25 basis point cut. A rate pause stands at a 34.1% chance, while a 50-basis-point rate cut has a slim 6.4% possibility.Â
- The US 10-year benchmark rate trades at 4.26%, and trades near the high for this week. Â
US Dollar Index Technical Analysis: Stuck in a rut
The US Dollar Index (DXY) is rolling for a second day in a row, though it looks to be sticking to a sideways trend for now. The Greenback seems to be broadly consolidating, with no new highs and no new lows in over five trading days. However, key economic data to be released on Thursday and Friday might move the needle.Â
On the upside, the first level to watch is 105.88, which triggered a rejection at the start of May and on Friday last week. Further up, the biggest challenge remains at 106.52, the year-to-date high from April 16. A rally to 107.20, a level not seen since April 2023, would need to be driven by a surprise uptick in US inflation or a sudden hawkish shift from the Fed.Â
On the downside, 105.52 is the first support ahead of a trifecta of Simple Moving Averages (SMA). First is the 55-day SMA at 105.23, safeguarding the 105.00 round figure. A touch lower, near 104.66 and 104.48, both the 100-day and the 200-day SMA form a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation.Â
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the FedÂ’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the FedÂ’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
EUR/USD slides below 1.0700 as Fed Bowman pushes rate-cut hopes to 2025
398343 June 26, 2024 19:26 FXStreet Market News
- EUR/USD slips below 1.0700 as the Fed maintains hawkish guidance on interest rates.
- FedÂ’s Bowman sees no rate cuts this year.
- Investors will focus on the US core PCE and preliminary inflation data for the major economies of the Eurozone this week.
EUR/USD declines below the round-level support of 1.0700 in WednesdayÂ’s European session. The major currency pair remains on the backfoot as the EuroÂ’s near-term outlook weakens amid uncertainty over European Union (EU) legislative elections and growing speculation that the European Central Bank (ECB) could deliver subsequent rate cuts.
Fears over Eurozone elections intensified after French President Emmanuel Macron called for a snap election when his party suffered defeat in preliminary results from Marine Le PenÂ’s far-right National Rally (RN). The Euro could face more pressure if the shared continent sees a major policy shift.
Meanwhile, expectations for the ECB to deliver back-to-back rate cuts improve as the German economic outlook appears to be worsening due to weak demand prospects. Data showed on Monday that the German IFO Expectations index unexpectedly dropped to 89.0 from the estimates of 91.0 and the former release of 90.3 (downwardly revised from 90.4). On the data release, IFO President Clemens Fuest said, “The German economy is having difficulty overcoming stagnation.”
This week, investors will focus on preliminary June inflation data for Spain, France, and Italy, which will be published on Friday.Â
Daily digest market movers: EUR/USD weakens as US Dollar resumes upside
- EUR/USD comes under pressure as an appeal for risk-sensitive assets weakens due to hawkish guidance on interest rates by Federal Reserve (Fed) policymakers, who continue to argue in favor of maintaining the current interest rate framework as they want to see a decline in inflation for months before considering rate cuts. The United States inflation declined more than expected in May, however, officials expect that a one-time decline in price pressures will be insufficient to make rate cuts appropriate.
- On Tuesday, Fed Governor Michelle Bowman delivered hawkish guidance on interest rates. Bowman said they are not at a point where rate cuts become appropriate. She pushed back expectations of rate cuts to 2025 and warned of more hikes if disinflation appears to stall or reverse.
- Contrary to the FedÂ’s hawkish outlook on interest rates, investors expect two rate cuts this year, and the policy-easing process will begin in the September meeting. For more cues on the interest rate outlook, investors await the core Personal Consumption Expenditures Price Index (PCE) data for May, which will be published on Friday.
- According to the estimates, the PCE inflation report will show that price pressures grew at a slower pace of 0.1% month-on-month from the prior release of 0.2%. Annually, the underlying inflation is expected to rise modestly by 2.6% from 2.8% in April. Soft inflation data would boost expectations of the Fed reducing interest rates in September, while hotter-than-expected figures would weaken them.
Technical Analysis: EUR/USD exposes to upward-sloping border of triangle pattern
EUR/USD falls slightly below the crucial support of 1.0700. The major currency pair faces selling pressure near the downward-sloping border of a Symmetrical Triangle in the daily chart near 1.0750, which is plotted from 28 December 2023 high around 1.1140. The pair trades below the 50-day Exponential Moving Average (EMA), which indicates that the short-term outlook is bearish.
The 14-period Relative Strength Index (RSI) hovers near 40.00. A bearish momentum would trigger if the oscillator slips below this level.
Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal ReserveÂ’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Breaking: Japanese Yen hits multi-decade lows against US Dollar, eyes on BoJ
398342 June 26, 2024 19:21 FXStreet Market News
The Japanese Yen (JPY) declined to its weakest level since 1990Â against the US Dollar on Wednesday, with USD/JPY touching 160.40 during the European trading hours.Â
On April 29, the Bank of Japan (BoJ) intervened in the foreign exchange (FX) market and triggered a sharp decline in USD/JPY after the pair hit 160.20. At the time of press, USD/JPY was trading a few pips above this level.
Japanese Finance Minister Shunichi Suzuki repeated earlier in the week that they will continue to take appropriate steps to respond to the declining value of the currency. Meanwhile, Japan Chief Cabinet Secretary Yoshimasa Hayashi said on Monday that excessive volatility in currency markets is undesirable and added that they will closely monitor the FX moves and take necessary steps if needed.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the worldÂ’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of JapanÂ’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of JapanÂ’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJÂ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the YenÂ’s value against other currencies seen as more risky to invest in.
Equities see early gains fade as the push and pull continues
398341 June 26, 2024 19:18 Forexlive Latest News Market News
Easy come, easy go. European indices opened higher but have pared gains on the day with the CAC 40 index in particular now marked down by 0.6%. The nerves are still flowing in the equities space and more so for Europe with the French elections coming up. As for US futures, we are also seeing S&P 500 futures erase early gains to be flat now:
S&P 500 futures
It’s tough to get a grip on the risk mood this week. On Monday, European stocks nudged higher while tech shares dragged the S&P 500 lower. Yesterday, it was more of the opposite instead. And so far today, we’re rocking back and forth and reversing the mood from yesterday again.
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USD/CAD recovers at Fed rate-setters’ reluctance to endorse interest-rate cuts
398339 June 26, 2024 19:17 FXStreet Market News
- USD/CAD rebounds on reluctance of Fed commentators to endorse near-term interest-rate cuts.Â
- The pair had been weakening after higher-than-expected inflation in Canada stopped the BoC from beginning its easing cycle.Â
- USD/CAD lacks directionality on the charts and has declined since making a false breakout higher in early June.Â
USD/CAD edges higher on Wednesday, trading in the 1.3680s as the US Dollar (USD) firms up on commentary from several Federal Reserve (Fed) rate-setters, that overall suggests the US central bank is reluctant to cut its main interest rate, the Fed Funds rate, due to insufficient progress being made on lowering inflation.Â
This is viewed as positive for the US Dollar (and USD/CAD), because keeping the Fed Funds rate high leads to greater foreign capital inflows, from investors seeking returns.Â
Market gauges of the trajectory of Fed rate policy, however, are signaling a more optimistic roughly 66% probability of the Fed cutting interest rates at or before its September meeting. Estimates are based on the CME FedWatch tool, which uses the price of Interest Rate (Fed Funds) Futures for its calculations.Â
USD/CADÂ’s rebound comes after a period of weakness for the pair during which investors revised their expectations of the path of Bank of Canada (BoC) monetary policy. From previously expecting the BoC to begin a cycle of interest rate cuts due to declining inflation in Canada they now see the BoC holding its policy rate at the current level – much like the Fed.Â
The BoC cut their policy interest rate by 0.25% to 4.75% in June, however, the release of higher-than-expected inflation data for May, has now reduced expectations that they will make another cut at their next meeting in July, despite investors expecting one. This has led to an overall appreciation of the Canadian Dollar (CAD) and a decline in USD/CAD.Â
From a technical perspective, over the short-to-medium term, USD/CAD is seesawing between losses and gains. After a false upside breakout from a Symmetrical Triangle pattern on June 7 it quickly ran out of steam and capitulated, falling back within the triangle. With neither bulls or bears in overall control, and a lack of directional trend, it is likely to continue in this sideways mode until it breaks decisively to one side or another.Â
USD/CAD Daily Chart
