Canada is slated to unveil the always-relevant inflation-related figures on Tuesday. Statistics Canada will release the Consumer Price Index (CPI) for the month of February, with expectations pointing towards a year-on-year rise of 3.1% in the headline print, slightly surpassing January’s 2.9% increase. Monthly projections anticipate a 0.6% increase in the index compared to the previous month's flat reading.
Alongside the CPI data, the Bank of Canada (BoC) will release its Core Consumer Price Index gauge, which excludes volatile elements like food and energy costs. In January, the BoC Core CPI indicated a monthly uptick of 0.1% and a year-on-year rise of 2.4%.
These statistics will be closely monitored as they could influence the trajectory of the Canadian Dollar (CAD) and shape outlooks regarding the Bank of Canada's monetary policy. Speaking about the Canadian Dollar (CAD), it has shown weakness against the US Dollar (USD) in past sessions and presently hovers around multi-session lows well past the 1.3500 yardstick.
Analysts expect a pick-up of price pressures throughout Canada during last month. In fact, inflation measured by annual changes in the Consumer Price Index, is forecast to resume its upward trajectory in February, mirroring trends observed in many of Canada's G10 counterparts, notably its neighbour, the US. After reaching 4% in August, the CPI has shown a downward trend, with the exception of the bounce recorded in the last month of the year. All in all, inflation indicators still remain well above the Bank of Canada's 2% target.
Should the forthcoming data confirm the anticipated increase in inflationary pressures, investors might consider the possibility of the central bank keeping the current restrictive stance in place for a longer duration than originally predicted. Still, any additional tightening of monetary conditions seems unlikely, as per comments from the bank’s officials.
The latter situation would necessitate a sudden and sustained resurgence of price pressures and a rapid increase in consumer demand, both of which seem improbable in the foreseeable future.
During his remarks at the latest BoC meeting, Governor Tiff Macklem expressed optimism about the ongoing battle against inflation, noting current progress and anticipating further advancements. He highlighted the significance of core inflation measures, suggesting that if they remain unchanged, the forecasts for overall inflation reduction may not come to fruition. He assessed the risks to the inflation outlook as reasonably balanced and noted that well-anchored inflation expectations are aiding efforts to bring inflation back under control.
On Tuesday at 12:30 GMT, Canada is set to release the Consumer Price Index for February. The Canadian Dollar's potential response is tied to changes in monetary policy expectations by the Bank of Canada. However, barring any real surprise in either direction, the BoC is unlikely to change its current cautious monetary policy stance, in line with other central banks such as the Federal Reserve (Fed).
The USD/CAD has started the new trading year in quite a bullish fashion, although the uptrend appears to have met a decent barrier around the 1.3600 zone.
Pablo Piovano, Senior Analyst at FXStreet, says: “There is a strong likelihood of USD/CAD maintaining the constructive bias as long as it remains above the significant 200-day Simple Moving Average (SMA) at 1.3479. The bullish sentiment is expected to strengthen even more if there is a sustained break above the so-far yearly tops around 1.3600. On the flip side, the breach of the 200-day SMA could open the door to extra losses and a potential move to the January low of 1.3358 (January 31). South from here, there are no support levels of note prior to the December 2023 bottom of 1.3177, which occurred on December 27”.
Pablo adds: "Significant increases in volatility around CAD would require unexpected inflation figures. If the numbers fall below expectations, it could strengthen the argument for potential interest rate cuts by the BoC in the next few months, further appreciating USD/CAD. However, a rebound in the CPI, similar to trends observed in the US, might provide some support to the Canadian Dollar, although to a limited extent. A higher-than-anticipated inflation reading would intensify pressure on the Bank of Canada to maintain elevated rates for an extended period, potentially resulting in prolonged challenges for many Canadians dealing with higher interest rates, as highlighted by Bank of Canada Governor Macklem."
The Consumer Price Index (CPI), released by Statistics Canada on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.
Read more.The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies in the last 7 days. Canadian Dollar was the weakest against the .
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.48% | 0.96% | 0.44% | 0.93% | 1.69% | 1.46% | 0.86% | |
EUR | -0.50% | 0.46% | -0.06% | 0.43% | 1.20% | 0.98% | 0.37% | |
GBP | -0.97% | -0.48% | -0.53% | -0.03% | 0.74% | 0.52% | -0.09% | |
CAD | -0.44% | 0.07% | 0.52% | 0.48% | 1.22% | 1.03% | 0.39% | |
AUD | -0.94% | -0.45% | 0.03% | -0.50% | 0.77% | 0.55% | -0.06% | |
JPY | -1.69% | -1.22% | -0.49% | -1.27% | -0.76% | -0.21% | -0.83% | |
NZD | -1.48% | -0.99% | -0.52% | -1.05% | -0.54% | 0.22% | -0.61% | |
CHF | -0.89% | -0.40% | 0.08% | -0.43% | 0.05% | 0.81% | 0.59% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The S&P/ASX 200 Index continues its upward momentum, marking the third consecutive session of gains. Trading higher around 7700, up approximately 0.27% on Tuesday. Meanwhile, the Reserve Bank of Australia (RBA) has maintained the policy rate at 4.35% for the third consecutive meeting, as announced during its March policy meeting.
The Australian equity market is buoyed by gains in the energy and real estate sectors. Mining and energy stocks are primarily on the rise due to stronger commodity prices. The top-performing stocks are Nickel Industries Limited and Bellevue Gold Limited, which have surged by 7.43% and 6.71%, respectively.
On the other hand, companies with the lowest percentage returns include Reward Minerals Ltd, which plummeted by 40.0%, Oldfields Holdings Ltd down by 27.27%, and Resource Mining Corporation Ltd, which fell by 21.74%.
The S&P/ASX200 VIX is notably lower today, decreasing by 4.35% to 10.85, reaching a new 50-day low. Conversely, the All Ordinaries Index is on the rise, gaining 32.60 points to reach 7,961.40.
RBA Governor Michele Bullock addressed the policy outlook during a press conference following the monetary policy decision on Tuesday. She noted progress in the fight against inflation, citing recent data indicating the country is on the right track.
However, Governor Bullock emphasized the importance of closely monitoring employment numbers. She highlighted that risks to the outlook are finely balanced and cautioned that the battle against inflation is not yet won. Additionally, markets are cautiously awaiting policy decisions from the Federal Reserve.
The EUR/USD pair trades on a negative note during the early European session on Tuesday. The major pair moves in a narrow range between 1.0866 and 1.0876 as traders prefer to wait on the sidelines ahead of the Federal Reserve's (Fed) interest rate decision on Wednesday. At the press time, EUR/USD is trading at 1.0871, down 0.01% on the day.
Technically, EUR/USD maintains the bearish outlook unchanged as the major pair is below the key 50- and 100-period Exponential Moving Averages (EMA) on the four-hour chart. Furthermore, the downward momentum is further confirmed by the Relative Strength Index (RSI), which lies below the 50-midline, indicating that further downside looks favorable.
The first downside target for the major pair is located near the lower limit of the Bollinger Band at 1.0852. Further south, the next contention level is seen at the 1.0800 mark, representing the confluence of a low of February 22 and a psychological mark. A breach of this level will expose a low of February 20 at 1.0761, and finally a low of February 15 at 1.0725.
On the other hand, the initial resistance level will emerge at the 100-period EMA at 1.0882. The critical upside barrier to watch for EUR/USD is the 1.0900-1.0905 region, portraying the 50-period EMA, psychological figure, and a high of March 18. A bullish breakout above the latter will see a rally to the upper boundary of the Bollinger Band at 1.0926, followed by a high of March 14 at 1.0955.
West Texas Intermediate (WTI) US Crude Oil prices edge lower during the Asian session on Tuesday and revers a part of the previous day's strong gains to the $82.45 area, or the highest level since early November. The commodity currently trades around the $82.00/barrel mark, though the downside seems limited in the wake of worries about tightening supply.
Ukrainian drone strikes on Russian oil refineries over the last week could lead to higher crude oil exports from Russia. This, in turn, prompts bullish traders to take some profits off the table after the recent strong run-up witnessed over the past week or so and slightly overstretched conditions on short-term charts. Apart from this, sustained US Dollar (USD) buying, bolstered by bets that the Federal Reserve (Fe) will stick to its higher-for-longer interest rates narrative to bring down inflation, exerts downward pressure on the commodity.
Furthermore, growing concerns about a global economic slowdown, which could dent fuel demand, turn out to be another factor weighing on Crude Oil prices. Meanwhile, lower crude exports from Saudi Arabia and Iraq, along with disruptions caused by Houthi attacks in the Red Sea, could act as a tailwind for the black liquid and help limit the corrective slide. Hence, it will be prudent to wait for strong follow-through selling before confirming that the commodity has topped out in the near term and positioning for deeper losses.
Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking on the policy outlook at a press conference following the announcement of the March monetary policy decision on Tuesday.
Bullock is responding to questions from the media, as part of a new reporting format for the central bank.
We are making progress in fight against inflation.
Recent data suggest we are on right track.
Keeping keen eye on employment numbers.
Risks to outlook are finely balanced.
War isnt yet won on inflation.
Change statement language in response to data.
Labour market still slightly on tight side.
Board sees risks on both sides for policy.
Unemployment rate not only thing we look at.
Need to be much more confident on inflation coming down to consider rate cut.
Easing in energy prices is really positive for inflation outlook.
The board considers a range of possibilities on policy.
developing story ....
AUD/USD is holding lower ground near 0.6530 on the above comments, down 0.31% on the day.
The EUR/JPY cross gains traction above the mid-162.00s during the Asian trading hours on Tuesday. The cross drifts higher after the Bank of Japan (BoJ) decided to end a negative interest rate era that began in 2016, in line with market expectations. At press time, EUR/JPY is trading at 162.77, adding 0.37% on the day.
After the two-day monetary policy meeting on Tuesday, the BoJ decided to raise the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007. The decision was in line with market expectations. The BoJ policy statement showed that, given the current outlook for economic activity and prices, the BoJ anticipates accommodative financial conditions to be maintained for the time being. In response to the interest rate decision, the Japanese Yen attracts some sellers as the hawkish policy was widely priced in by the markets.
The European Central Bank (ECB) held the interest rate steady at its March meeting. However, the ECB policymakers signaled progress in easing inflation and started discussions about the timeline of the rate cut. The ECB Pablo Hernandez de Cos said that the central bank may start lowering interest rates in June if inflation in the eurozone continues to cool down. The ECB Governing Council member Klaas Knot penciled in June for a first-rate cut and expects three rate cuts this year.
Moving on, market players will focus on the German and Eurozone ZEW Survey, due later on Tuesday. Later this week, the German Producer Price Index (PPI) and the ECB's Lagarde speech will be in focus on Wednesday. On Thursday, the Eurozone HCOB PMI data for March will be released. These events could give a clear direction to the EUR/JPY cross.
GBP/JPY has rebounded from intraday losses to extend its winning streak, which commenced on March 12. The pair trades higher around 190.30 during Asian trading hours on Tuesday. The Bank of Japan (BoJ) board members opted to raise the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007.
This decision marks the end of a negative interest rate era. It aligns with market expectations. The much stronger-than-expected pay hikes by major Japanese firms have already laid the groundwork for the BoJ to shift away from the decade-long stimulus measures.
In the United Kingdom (UK), inflation is showing signs of moderation, yet the Bank of England (BoE) maintains a cautious stance until Consumer Prices return to the 2% target. It is expected that the BoE will keep interest rates unchanged at 5.25% during Thursday's meeting. Traders are eagerly awaiting consumer and producer price data scheduled for release on Wednesday.
Due to softer Consumer Inflation Expectations on Friday, which increased by 3.0% but slightly lower than the previous uptick of 3.3%, market speculation arose regarding a potential Bank of England (BoE) rate cut. Investors anticipate the BoE to commence rate cuts in August, with one or two additional cuts by year-end. Such sentiment could have weakened the Pound Sterling (GBP) and undermined the GBP/JPY cross.
The AUD/JPY cross continues with its struggle to find acceptance above the 98.00 mark and surrenders Asian session gains to over a one-week high. Spot prices drop to a fresh daily low after the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ) announced their policy decisions, albeit manage to attract fresh buyers in the vicinity of mid-97.00s.
As was unanimously expected, the Australian central bank decided to keep the Official Cash Rate (OCR) unchanged at the end of the March policy meeting. The Australian Dollar (AUD), however, started losing traction in the absence of any fresh hawkish signals, though signs of improving relations between Australia and China – the former's biggest trading partner – help limit further losses.
Meanwhile, the BoJ announced lifting the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007, ending the negative interest rate era that began in 2016. The BoJ also scrapped its Yield Curve Control (YCC) policy at the conclusion of its two-day monetary policy meeting. The decision, however, was broadly in line with the market expectations and did little to influence the JPY.
Investors now look forward to the post-meeting press conference, where comments by BoJ Governor Kazuo Ueda will play a key role in influencing the JPY price dynamics and provide some meaningful impetus to the AUD/JPY cross. The mixed fundamental backdrop, meanwhile, makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move.
The AUD/NZD cross holds below the 1.0800 mark during the Asian session on Tuesday. The cross edges lower following the Reserve Bank of Australia (RBA) interest rate decision. The Australian central bank decided to leave the interest rate unchanged on Tuesday. Traders will take more cues from the RBA press conference. AUD/NZD currently trades around 1.0770, losing 0.07% on the day.
On Tuesday, the RBA held the Official Cash Rate (OCR) steady at a 12-year high of 4.35% for the third meeting in a row after its March monetary policy meeting. The markets will focus on the fresh catalysts offered by the RBA on the timing and the scope of a policy pivot. The hawkish remarks from the central bank might lift the Australian Dollar (AUD) against the New Zealand Dollar (NZD).
On the Kiwi front, the Reserve Bank of New Zealand (RBNZ) decided to keep the policy rate steady at 5.50% for the fifth meeting in a row in February. However, the RBNZ tones down its hawkish stance and reduces the risk of further tightening. The central bank lowered its forecast cash rate peak to 5.6% from a previous projection of 5.7%. This, in turn, exerts some selling pressure on the New Zealand Dollar (NZD) and acts as a tailwind for the AUD/NZD cross.
New Zealand’s Westpac Consumer Survey for the first quarter (Q1) will be due on Wednesday, followed by the Current Account. On Thursday, traders will closely monitor the New Zealand Gross Domestic Product (GDP) for Q4 and the Australian Judo Bank PMI for March.
Gold price (XAU/USD) struggles to capitalize on the previous day's bounce from the $2,145 region, or over a one-week low and oscillates in a range during the Asian session on Tuesday. The robust US consumer and producer inflation figures released last week fuelled speculations that the Federal Reserve (Fed) could modify its forward guidance to two 25 basis points rate cuts in 2024 instead of the three projected previously. This, in turn, remains supportive of elevated US Treasury bond yields, which underpin the US Dollar (USD) and act as a headwind for the non-yielding yellow metal.
The markets, however, are still anticipating that the Fed will begin its rate-cutting cycle as early as the June policy meeting. This, combined with ongoing geopolitical tensions, might continue to provide a floor to the Gold price and help limit the downside. Traders might also prefer to wait on the sidelines ahead of the crucial two-day FOMC monetary policy meeting starting this Tuesday. The Fed is scheduled to announce its decision on Wednesday and investors will look for fresh cues about the rate-cut path, which will play a key role in driving the USD and provide a fresh impetus to the precious metal.
From a technical perspective, the recent pullback from the record peak stalled near the $2,145-2,144 support zone, which should now act as a key pivotal point for the Gold price. A convincing break below will expose the next relevant support near the $2,128-2,127 zone before the XAU/USD extends the corrective decline further towards the $2,100 round figure.
On the flip side, the $2,175-2,176 region now seems to have emerged as an immediate strong barrier, which if cleared should allow the Gold price to challenge the record peak, around the $2,195 area touched last week. Some follow-through buying beyond the $2,200 mark will set the stage for the resumption of the uptrend witnessed since the beginning of this month.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
USD/CAD continues its upward trend for the fourth consecutive session, trading near the significant level of 1.3540. The US Dollar (USD) advances, propelled by higher US Treasury yields. Bond markets are facing selling pressure as additional signs of resilience in the United States (US) economy emerge, prompting traders to revise their expectations for fewer interest rate cuts this year.
According to the CME FedWatch Tool, the probability of a rate cut in March stands at 1.0%, and 8.7% for May. The likelihood of rate cuts in June and July is lower, at 55.1% and 73.7%, respectively.
The US Dollar Index (DXY) continues its upward trajectory, with 2-year and 10-year US yields at 4.73% and 4.32%, respectively. Investors are eagerly awaiting the interest rate decision from the US Federal Reserve (Fed), expected to be announced on Wednesday. The Fed is anticipated to uphold its elevated interest rates in response to recent inflationary pressures.
The Canadian Dollar (CAD) might have found support from the surge in Crude oil prices, considering Canada's status as the largest oil exporter to the United States (US). West Texas Intermediate (WTI) hovers around $82.10 per barrel, nearing its highest levels since early November, bolstered by ongoing supply-side worries.
On Monday, the Canadian stock market closed slightly lower as investors awaited Canada's Consumer Price Index (CPI) data scheduled for Tuesday. There are expectations for an uptick in Canadian consumer prices.
Indian Rupee (INR) weakens on Tuesday on US Dollar (USD) purchases by state-run banks. The lower speculation that the US Federal Reserve (Fed) may cut interest rates in June provides some support to the Greenback and lifts the USD/INR pair. The Fed is widely anticipated to hold rates steady for a fifth straight time at its March meeting on Wednesday and maintain a data approach to ensure inflation returns sustainably to its 2% target. Nonetheless, there is still a possibility that Fed officials might reduce the number of rate cuts to two from the three rate cuts they expected earlier this year.
Looking ahead, the US February Building Permits and Housing Starts are due on Tuesday. Investors will closely watch the US Fed interest rate decision on Wednesday and take more cues about the future trajectory of interest rates from Fed Chair Jerome Powell during the press conference. On Thursday, India’s S&P Global Manufacturing and Services PMI will be released.
Indian Rupee trades on a weaker note on the day. USD/INR sticks to the range bound theme within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023.
From a technical perspective, the bearish outlook of USD/INR remains intact in the near term as the pair is below the key 100-day Exponential Moving Average (EMA) on the daily timeframe. However, the 14-day Relative Strength Index (RSI) returns above the 50.0 midline, indicating that further upside cannot be ruled out.
The first upside barrier will emerge near the 100-day EMA and a psychological mark at 83.00. Further strength could draw in USD/INR bulls and inspire another upswing to the upper boundary of the descending trend channel near 83.15. A decisive break above this level will see a rally to 83.35 (high of January 2), followed by the 84.00 round figure.
On the flip side, the initial support level for USD/INR is seen near a low of March 14 at 82.80. The key contention level is located at the lower limit of the descending trend channel at 82.60. Any follow-through selling could extend the pair’s downtrend to 82.45 (low of August 23), en route to 82.25 (low of June 1).
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.01% | 0.01% | 0.03% | -0.02% | 0.08% | 0.07% | 0.08% | |
EUR | 0.00% | 0.01% | 0.02% | -0.02% | 0.10% | 0.07% | 0.09% | |
GBP | -0.01% | -0.02% | 0.02% | -0.03% | 0.07% | 0.05% | 0.07% | |
CAD | -0.03% | -0.03% | 0.00% | -0.05% | 0.07% | 0.04% | 0.06% | |
AUD | 0.02% | 0.01% | 0.03% | 0.05% | 0.12% | 0.09% | 0.10% | |
JPY | -0.10% | -0.06% | -0.09% | -0.08% | -0.10% | 0.01% | 0.00% | |
NZD | -0.06% | -0.08% | -0.06% | -0.04% | -0.09% | 0.03% | 0.01% | |
CHF | -0.09% | -0.10% | -0.08% | -0.06% | -0.11% | 0.00% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
Raw materials | Closed | Change, % |
---|---|---|
Silver | 25.034 | -0.21 |
Gold | 2160.106 | 0.32 |
Palladium | 1029.36 | -4.14 |
The Japanese Yen (JPY) drifts lower for the sixth straight day on Tuesday and weakens to a nearly two-week low against its American counterpart during the Asian session. Growing acceptance that the Bank of Japan (BoJ) will wait until April to exit the negative interest rate policy and the Yield Curve Control (YCC) turns out to be a key factor undermining the JPY. Apart from this, a modest US Dollar (USD) strength, bolstered by reduced bets for steep interest rate cuts by the Federal Reserve (Fed), lifts the USD/JPY pair closer to mid-149.00s.
Meanwhile, the much-stronger-than-expected pay hikes by major Japanese firms already seem to have set the stage for the BoJ to pivot away from the decade-long stimulus measures, which should act as a tailwind for the JPY. Traders might also refrain from placing aggressive directional bets and prefer to move to the sidelines ahead of the key central bank event risks. The BoJ is scheduled to announce its highly-anticipated decision in a short while from now, which will be followed by the crucial two-day FOMC monetary policy meeting starting later today.
From a technical perspective, the USD/JPY pair is holding above the 61.8% Fibonacci retracement level of the February-March downfall and seems poised to climb further. The constructive outlook is reinforced by the fact that oscillators on the daily chart have just started gaining positive traction. Hence, some follow-through strength towards the 149.75-149.80 horizontal barrier, en route to the 150.00 psychological mark, looks like a distinct possibility. A sustained strength beyond the latter might trigger a fresh bout of a short-covering move towards the 150.65-150.70 region before bulls aim to retest the YTD peak, around the 151.00 mark touched on February 13.
On the flip side, the 149.00 round-figure mark now seems to have emerged as an immediate support. Any further slide is more likely to attract some dip-buying and remain limited near the 148.30 region. This is followed by the 148.00 round figure, below which the USD/JPY pair could accelerate the downfall towards the 100-day Simple Moving Average (SMA), currently pegged near the 147.65 region. A convincing break below might shift the bias in favour of bearish traders and drag spot prices further towards the 147.00 mark en route to the monthly swing low, around the 146.50-146.45 region.
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’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 BoJ’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 Yen’s value against other currencies seen as more risky to invest in.
The Australian Dollar (AUD) hovers around the key level of 0.6550 amid subdued trading activity as market participants exercise caution ahead of the Reserve Bank of Australia's (RBA) interest rate decision on Tuesday. Investors will closely monitor RBA Governor Michele Bullock's press conference for further insights. The central bank is widely anticipated to maintain interest rates at their current levels.
The Australian equity market, the benchmark S&P/ASX 200 Index, has edged higher after starting the session positively, driven by gains in the energy and real estate sectors. This upward movement in the stock market may provide support for the Australian Dollar (AUD). Australia's economy expanded less than anticipated in the fourth quarter of 2023, leading to speculation that the Reserve Bank of Australia could initiate rate cuts later this year.
The US Dollar Index (DXY) strives to extend its gains for the fourth consecutive session, bolstered by an uptick in US Treasury yields. Bond markets have experienced a sell-off following additional evidence of resilience in the United States (US) economy, compelling traders to adjust their expectations for fewer interest rate cuts this year. Investors are eagerly awaiting interest rate decisions from both the People's Bank of China (PBoC) and the US Federal Reserve (Fed), which are anticipated to be announced on Wednesday.
The Australian Dollar remains close to the significant threshold of 0.6550 On Tuesday. A breach below this level might prompt downward momentum for the AUD/USD pair, with additional support anticipated around the 61.8% Fibonacci retracement level of 0.6528, and thereafter at the psychological support level of 0.6500. On the upside, the AUD/USD pair could encounter resistance near the nine-day Exponential Moving Average (EMA) at 0.6571, followed by the psychological hurdle at 0.6600.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.03% | 0.06% | 0.08% | 0.11% | 0.12% | 0.17% | 0.11% | |
EUR | -0.03% | 0.02% | 0.04% | 0.08% | 0.09% | 0.12% | 0.08% | |
GBP | -0.04% | -0.01% | 0.02% | 0.06% | 0.06% | 0.09% | 0.05% | |
CAD | -0.08% | -0.04% | 0.00% | 0.03% | 0.05% | 0.09% | 0.04% | |
AUD | -0.09% | -0.08% | -0.06% | -0.04% | 0.02% | 0.08% | -0.02% | |
JPY | -0.13% | -0.07% | -0.07% | -0.06% | 0.01% | 0.06% | 0.00% | |
NZD | -0.14% | -0.11% | -0.09% | -0.06% | -0.03% | -0.01% | -0.05% | |
CHF | -0.10% | -0.07% | -0.05% | -0.03% | 0.01% | 0.02% | 0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate, and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Chinese Foreign Minister Wang Yi, during his visit to New Zealand on Tuesday, said that “China is ready to work with New Zealand to implement an upgraded version of the China-New Zealand free trade agreement.”
Two sides should launch negotiations on negative list of service trade as soon as possible, so as to push bilateral cooperation to a new level.
China-New Zealand relations maintain a leading position among China's relations with developed countries.
Despite the upbeat headlines, NZD/USD is losing 0.17% on the day to trade at 0.6071, as of writing.
On Tuesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.0985 as compared to the previous day's fix of 7.0943 and 7.2056 Reuters estimates.
Index | Change, points | Closed | Change, % |
---|---|---|---|
NIKKEI 225 | 1032.8 | 39740.44 | 2.67 |
Hang Seng | 16.23 | 16737.12 | 0.1 |
KOSPI | 19 | 2685.84 | 0.71 |
ASX 200 | 5.5 | 7675.8 | 0.07 |
DAX | -3.97 | 17932.68 | -0.02 |
CAC 40 | -16.21 | 8148.14 | -0.2 |
Dow Jones | 75.66 | 38790.43 | 0.2 |
S&P 500 | 32.33 | 5149.42 | 0.63 |
NASDAQ Composite | 130.28 | 16103.45 | 0.82 |
The EUR/USD pair edges lower to multi-day lows around 1.0870 on the firmer US Dollar (USD) during the early Asian session on Tuesday. The Federal Reserve (Fed) monetary policy meeting on Wednesday will be in the spotlight, with no change in rates expected. Meanwhile, the cautious mood in the market might lift the Greenback against the Euro (EUR). The major pair currently trades around 1.0872, unchanged for the day.
The recent US economic data showed inflation in the US economy remains elevated, and this pushed out market expectations for the first rate cut in June. The Fed Chairman Jerome Powell said two weeks ago that the central bank is not far from the confidence it needs to cut rates, while some Fed officials expect the first rate cut could happen later this year or during the summer.
The Fed will announce its interest rate decision on Wednesday, which is anticipated to hold benchmark interest rates steady in the range of 5.25%–5.50% at its March meeting. Investors have priced in a nearly 73% chance that the Fed will cut rates in July, according to the CME FedWatch Tools.
The European Central Bank (ECB) decided to keep borrowing costs at a record high at its March meeting. Nonetheless, the central bank policymakers signaled progress in easing inflation and began discussions about the rate cut. The ECB Governing Council member, Pablo Hernandez de Kos, said that the central bank may start lowering interest rates in June if inflation in the eurozone continues to decline. Meanwhile, ECB policymaker Mario Centeno stated that cutting borrowing costs could help prevent a euro area recession.
Additionally, ECB Governing Council member Klaas Knot penciled in June for a first-rate cut and expects three rate cuts this year, while ECB President Christine Lagarde said that June is the earliest it is likely to cut interest rates after the ECB lowered its forecasts for inflation and estimated it will reach its 2% target in 2025.
Looking ahead, market players will keep an eye on the German and Eurozone ZEW Survey on Tuesday. Also, the US Building Permits and Housing Starts will be released later in the day. The attention will shift to the Fed interest rate decision and press conference on Wednesday. Traders will take cues from this event and find trading opportunities around the EUR/USD pair.
Pare | Closed | Change, % |
---|---|---|
AUDUSD | 0.65573 | -0.06 |
EURJPY | 162.128 | -0.09 |
EURUSD | 1.0873 | -0.16 |
GBPJPY | 189.786 | -0 |
GBPUSD | 1.27271 | -0.07 |
NZDUSD | 0.60824 | -0.06 |
USDCAD | 1.35337 | -0.05 |
USDCHF | 0.88759 | 0.52 |
USDJPY | 149.113 | 0.06 |
Japanese Finance Minister Shunichi Suzuki said on Tuesday that it depends on the Bank of Japan (BoJ) to decide the details of monetary policy. Suzuki further stated that he saw positive economic signs, including wage growth and corporate spending.
“Won't comment on any BOJ policy steps to be taken.”
“It’s up to the Bank of Japan to decide specifics of monetary policy.”
“This year's wage negotiations yielding record-high wage growth so far.”
“We are clearly seeing good signs in the economy such as robust corporate spending appetite.”
“The government will deploy various policies so that positive momentum in wages continues.”
At the time of writing, USD/JPY is trading 0.02% lower on the day at 149.13.
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus 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 BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
CURRENCY MARKET DEFINITION
The concept of currency market has several definitions:
Simply put, currency market is the market where currency transactions are made, that is, the currency of one country is exchanged for the currency of another country at a certain exchange rate. The exchange rate is the relative price of currencies of two countries or the currency of one country expressed in another country's monetary units.
Currency market is part of the global financial market, where many operations related to the global movement of capital take place.
TYPES OF MARKETS. RUSSIAN AND INTERNATIONAL CURRENCY MARKETS
There are international and domestic currency markets.
Domestic currency market — is a market within a single country.
The international currency market — is a global market that covers currency markets of all countries in the world. It does not have a specific site where trading is carried out. All operations within it are carried out through a system of cable and satellite channels that link the world's regional currency markets. Regional markets today include the Asian (with centers in Tokyo, Hong Kong, Singapore, and Melbourne), the European (London, Frankfurt am Main, and Zurich), and the American (New York, Chicago, and Los Angeles) markets.
Currency trading on the international currency market is carried out on the basis of market exchange rates, which are set on the basis of supply and demand in the market and under the influence of various macroeconomic data. Forex is the international currency market.
Currency markets can also be divided into exchange and over-the-counter markets. Exchange currency market is an organized market where trading is carried out through an exchange—a special company that sets trading rules and provides all the conditions for organizing trading under these rules.
Over-the-counter currency market — is a market where there are no certain trading rules, and purchase and sale operations are not linked to a specific place of trade, as opposed to the case of an exchange.
As a rule, an over-the-counter currency market is organized by special companies that provide services for the purchase and sale of currencies, which may or may not be members of the currency exchange. Trading operations in this market are now carried out mainly via the Internet.
The over-the-counter currency market is much larger than the exchange market in terms of trading volume. The Forex international over-the-counter currency market is considered the most liquid in the world. It operates around the clock in all financial centers of the world (from New York to Tokyo).
CURRENCY MARKET FUNCTIONS
Currency market— is the most important platform for ensuring the normal course of all global economic processes.
The main macroeconomic functions of the currency market are:
NEWS IMPACT
Various currencies are the main trading tool in the currency market. Exchange rates are formed under the influence of supply and demand in the market.
In addition to that, currency rates are influenced by many fundamental factors related to the global economic situation, events in national economies, and political decisions.
News about these factors can be found in various sources:
The more stable an economy is developing, the more stable its currency is. Accordingly, it is possible to predict how the currency will behave in the near future, based on statistical data published in official sources of countries with a certain regularity.
This data includes:
Interest rate level, set by national authorities regulating credit policy, is an equally important indicator. In the European Union, this is ECB–the European Central Bank, in the US, this is the Federal Reserve System, in Japan—the Bank of Japan, in the UK—the Bank of England, in Switzerland—the Swiss national Bank, etc.
The interest rate level is determined at meetings of the national central bank. Then, the decision on the rate is published in official sources. If the central bank of a country reduces the interest rate, the money supply in the country increases, and the national currency depreciates against other world currencies. If the interest rate increases, the national currency will strengthen.
A speech or even a separate statement by a country's leader can reverse a trend. Speeches on these topics may change the currency exchange rate:
All this news is published in various sources. Major international news is more or less easy to find in Russian, but news related to the domestic economic policy and the economy of foreign countries is much less common in the Russian press. Mostly, such news is published by the national media and in the language of the country where the news is published.
It is very difficult for one person to follow all the news at once, and they are likely to miss some important event that can turn the whole situation on the market upside down. Guided by our main principle—to create the best trading conditions for our customers—we try to select the most important news from all over the world and publish them on our website.
The TeleTRADE Department of Analytics monitors news on most national and international news sources on a daily basis and identifies those that can potentially affect exchange rates. These are the main news items that are included in our news feed.
In addition, all our clients have free access to the Dow Jones news feed. This is a joint project of Dow Jones Newswires, the world's largest news agency, and the leading Russian news agency Prime-TASS. The news feed is created specifically for currency traders and those who are interested in getting information about the world's currency markets.
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