InvestMacro

By ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

The latest economic data showed that durable goods orders fell by 4.5%, more than the expected 3.7%. This data has somewhat lessened the nervousness about the impending interest rate hike. As the stock market closed on Monday, the Dow Jones Index (US30) increased by 0.22%, while the S&P 500 Index (US500) added 0.31%. The NASDAQ Technology Index (US100) gained 0.63%.

The January euphoria based on expectations that major economies will avoid recession this year has given way to something close to realism about the prospects for interest rates to rise more and stay high longer than many had previously expected. Economists at Barclays (BARC) and NatWest believe the Fed may increase the pace of interest rate hikes in March by 0.5%. At the same time, Morgan Stanley (MS) said it expects a slower pace of hikes of 25 basis points at each of the next three meetings. Fed funds futures show that traders expect rates to peak at 5.4% by September.

Tesla (TSLA) led growth in the consumer products segment yesterday. Analysts expect the company to unveil a master plan and a new long-term growth strategy, particularly its 3rd generation automotive platform.

Pharmaceutical company Pfizer (PFE) is in preliminary talks to acquire cancer drugmaker Seagen (SGEN).

Stock markets in Europe were mostly up on Monday. German DAX (DE30) gained 1.13%, French CAC 40 (FR40) added 1.51%, Spanish IBEX 35 (ES35) gained 1.23%, and British FTSE 100 (UK100) closed up by 0.72% yesterday.

Britain and the EU are on the verge of a Brexit deal on Northern Ireland. Key politicians in Northern Ireland have set the bar high for a deal. Parts of the new UK government remain permeated by the Brexit controversy that has paralyzed British politics after the country’s vote to leave the EU in 2016. As part of its withdrawal agreement, Britain signed an agreement with Brussels known as the Northern Ireland Protocol to avoid imposing politically contentious checks along the 500-kilometer (310-mile) land border with EU member Ireland. But the protocol effectively created a border for some goods moving from Britain because it left Northern Ireland in the EU’s single market for goods.

Russia has suspended oil shipments to Poland through the “Druzhba” pipeline, Polish oil refiner PKN Orlen said Saturday. Earlier this month, Russia announced plans to cut oil exports from its western ports by 25% in March compared with last month, exceeding a previously discussed production cut of 5%. Nevertheless, most analysts believe the European Union’s ban on Russian oil imports by sea and international price caps will have only a marginal effect on overall global supplies.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.11% for the day, China’s FTSE China A50 (CHA50) was down by 0.12%, Hong Kong’s Hang Seng (HK50) fell by 0.33%, India’s NIFTY 50 (IND50) lost 0.41%, and Australia’s S&P/ASX 200 (AU200) was down by 1.12%.

According to a Bloomberg survey, about 70% of economists forecast a tightening by the Central Bank of Japan by July, with 26% expecting such a move at Ueda’s first meeting in April and June, respectively. Some have warned of the risk that the bank could change its yield curve control program in March before Kuroda leaves office to give Ueda more time. Incoming Bank of Japan (BOJ) Governor Kazuo Ueda said Monday that he had ideas about how the central bank could abandon its massive stimulus but that the shift to tighter policy would only happen when the country’s trend inflation picks up significantly.

S&P 500 (F) (US500) 3,982.24 +12.20 (+0.31%)

Dow Jones (US30)32,889.09 +72.17 (+0.22%)

DAX (DE40) 15,381.43 +171.69 (+1.13%)

FTSE 100 (UK100) 7,935.11 +56.45 (+0.72%)

USD Index 104.65 -0.56 (+0.63%)

• – Japan Retail Sales (m/m) at 01:50 (GMT+2);
• – Japan Industrial Production (m/m) at 01:50 (GMT+2);
• – Australia Retail Sales (m/m) at 02:30 (GMT+2);
• – Japan BOJ Gov-Designate Ueda Speaks at 06:10 (GMT+2);
• – Switzerland KOF Leading Indicators (m/m) at 10:00 (GMT+2);
• – Switzerland GDP (q/q) at 10:00 (GMT+2);
• – Indian GDP (q/q) at 14:00 (GMT+2);
• – Canada GDP (q/q) at 15:30 (GMT+2);
• – US Richmond Manufacturing Index (m/m) at 17:00 (GMT+2);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By George Prior

The deal on the Northern Ireland protocol today will help “significantly revive” business investment into the UK from global investors, says the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The bullish observation from deVere Group chief executive Nigel Green comes as Prime Minister Rishi Sunak unveiled a Brexit deal with the EU on Monday that aims to overhaul Northern Ireland’s post-Brexit trading arrangements, brings a bitter dispute between the two sides to an end, restores devolved government in Belfast, and eases concerns from the US about the Northern Ireland situation.

The deVere CEO says: “Since the 2016 Brexit referendum, and the intense political wranglings it has caused, business investment into the UK from global investors has faltered.

“The possibility of an all-out trade war between the UK and the EU, plus the multifaceted political fallout, has triggered major uncertainty – which investors avoided due to the risks involved. Companies are never going to heavily invest where there are high levels of uncertainty.

“This deal will help unleash business investment that has been held back by global investors.”

Brexit has been the direct cause of £29bn in business investment being lost and fuelled the slowdown in productivity, according to a Bank of England interest rate setter.

Jonathan Haskel noted the lack of business investment growth since the Brexit referendum was equivalent to 1.3% of UK gross domestic product (GDP).

“The deal announced on Monday settles the dispute that has been raging since 2021 when the UK left the EU single market and customs union through changes to the workings of the Northern Ireland protocol, which was part of the Brexit agreement signed by Boris Johnson back in 2019,” says Nigel Green.

“We expect this new development will help significantly revive business investment into the UK from global investors.”

The deVere Group CEO also notes that the British pound is likely to be given a much-needed bounce now a political agreement between the UK and the EU on the Northern Ireland protocol has been reached.

“We expect the pound will enjoy a bounce amid hopes for improved trading relations between the UK and the EU, which bolsters investor sentiment on Britain’s economic outlook.”

Since Brexit, the pound has been out of favour with FX traders, with the UK currency falling nearly 18% against a basket of currencies since the referendum.

It has also been dragged down in recent months by fears over slowing economic growth and multi-decades high inflation.

“We could now be heading past peak pound pessimism.”

The deVere Group CEO concludes: “Investors need certainty to invest. This deal on the Northern Ireland protocol helps bring that back.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets

The January PCE data released Friday, one of the Fed’s favorite inflation indicators, showed an unexpected increase in price pressures. The PCE index rose by 0.6% in the last month, and the annual rate was 5.4%. This is negative data, indicating that inflationary pressures remain high. Thus, Fed policymakers have no choice but to maintain an aggressive stance longer. At the close of the stock market on Friday, the Dow Jones Index (US30) decreased by 1.02 (-2.55% for the week), and the S&P 500 (US500) fell by 1.05% (-2.63% for the week). The NASDAQ Technology Index (US100) was down by 1.69% on Friday (-3.25% for the week).

Cleveland Fed President Loretta Mester said that the latest inflation report is consistent with the fact that policymakers need to “do a little more” to make sure inflation is down. Her Boston colleague, Susan Collins, said the Central Bank needs to keep raising rates to get them to a restrictive level, and the Fed may have to hold them at that level for an “extended” period.

Strong labor market data combined with persistently elevated price pressures have increased expectations for the Fed’s interest rate cap, raising it to 5.39%, which suggests three additional 25 basis point hikes during the spring and summer. The higher peak in borrowing costs is supporting Treasury yields, which in turn is driving the dollar index higher and stock indices lower. And the current dynamics are unlikely to change anytime soon.

The Bank of Canada predicts that inflation in the country will fall to about 3% by mid-2023 and fall back to the 2% target in 2024. Most private sector economists also forecast similar numbers. But the forecasts come with a major caveat: Canada must be protected from unexpected global events that could cause a new rise in inflation.

Equity markets in Europe were mostly down on Friday. German DAX (DE30) shed by 1.72% (-2.03% for the week), French CAC 40 (FR40) lost 1.78% (-2.36% for the week), Spanish IBEX 35 (ES35) was down by 0.11% (-1.40% for the week), British FTSE 100 (UK100) fell by 0.37% (-1.57% for the week).

On March 16, the ECB will almost certainly raise the interest rate by 0.5%. And it is already in the price. But what is important is how the ECB will behave at the next meetings. Analysts believe that another likely decline in the overall level of inflation in the euro area caused by energy is unlikely to reassure ECB policymakers, as core price pressures are still elevated. Deutsche Bank analysts are now forecasting the ECB rate to peak at 3.75% in June. Bank of France Governor François Villeroy de Galhau tried to refute such expectations. Still, his German colleague Joachim Nagel said Friday he did not rule out further “significant” rate hikes after March.

The United Kingdom marked the anniversary of Russia’s invasion of Ukraine with new sanctions against Russia. A ban on Russian iron and steel products followed the ban on oil exports. The British government also said it would target aircraft parts, radio equipment, and electronic components. This could severely damage Russian airlines, which mostly have European and American planes. The US would also impose a 200 percent duty on all imports of Russian-made aluminum, which could affect global supply chains. Treasury Secretary Janet Yellen warned China and other countries against providing material support to Russia, saying any such action would amount to sanctions evasion and would “prove very serious consequences.”

Gold prices were under pressure last week due to the prospect of higher interest rates and a stronger US dollar. Gold and silver are inversely correlated to government bond yields. In periods of rising interest rates, government bond yields are rising, putting downward pressure on precious metals. For the resumption of a trend for gold and silver, it is necessary that government bond yields at least stop rising and, at the most, start to fall. And for that, the US Federal Reserve should stop tightening its policy. Considering the time lag, the bullish trend in gold will return when the market is dominated by the sentiment that the US Federal Reserve is about to “press pause.” And that won’t happen until late spring or early summer.

Asian markets mostly declined last week. Japan’s Nikkei 225 (JP225) decreased by 0.11% for the week, China’s FTSE China A50 (CHA50) lost 1.16%, Hong Kong’s Hang Seng (HK50) fell by 3.25%, India’s NIFTY 50 (IND50) was down by 2.61%, and Australia’s S&P/ASX 200 (AU200) was negative by 0.54% for the week.

Australian Prime Minister Anthony Albanese called on the country’s major banks to raise deposit rates for depositors amid fears that higher interest rates are being passed on entirely to borrowers. The country’s competition watchdog began investigating the issue this month, saying that the deposit interest rate hikes were “smaller and less consistent” than the mortgage interest rate hikes. This means that ordinary people in Australia are caught on two fronts. This has also led to criticism of RBA Governor Philip Lowe, whose term expires in September, and there is a high chance Lowe will not be re-elected.

In the commodities market, futures on natural gas (+13.71%), gasoline (+7.24%), orange juice (+6.36%), lumber (+4.82%), and cotton (+4.36%) showed the biggest gains last week. Futures on wheat (-7.31%), palladium (-6.4%), silver (-4.49%), corn (-4.17%), and copper (-3.7%) showed the biggest drop.

S&P 500 (F) (US500) 3,970.04 −42.28 (−1.05%)

Dow Jones (US30)32,816.92 −336.99 (−1.02%)

DAX (DE40) 15,209.74 −265.95 (−1.72%)

FTSE 100 (UK100) 7,878.66 −29.06 (−0.37%)

USD Index 105.26 +0.66 (+0.63%)

• – US Durable Goods Orders (m/m) at 15:30 (GMT+2);
• – US Pending Home Sales (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By ForexTime

As we close out the month and head into the first days of March, here are the scheduled economic data releases and events that could move markets over the coming week:

Monday, February 27

• EUR: Eurozone February economic confidence; ECB Chief Economist Philip Lane speech
• GBP: Bank of England Deputy Governor Ben Broadbent speech

Tuesday, February 28

• JPY: Japan January industrial production, retail sales
• AUD: Australia January retail sales
• CAD: Canada December GDP
• USD: US February consumer confidence; Chicago Fed President Austan Goolsbee speech

Wednesday, March 1

• AUD: Australia 4Q GDP
• CNH: China February PMIs
• EUR: Eurozone February manufacturing PMI (final)
• GBP: UK February manufacturing PMI (final); BOE Governor Andrew Bailey speech
• USD: US February ISM manufacturing

Thursday, March 2

• EUR: Eurozone February CPI, ECB minutes, January unemployment
• GBP: BOE Chief Economist Huw Pill speech
• USD: US weekly jobless claims

Friday, March 3

• JPY: Japan January unemployment; February Tokyo CPI
• CNH: China February services PMI
• EUR: Eurozone January PPI, February services PMI (final)

With month-to-date declines of 2.4%, EURUSD is set to bring the curtains down on a winning run of four consecutive monthly gains (October – January).

Following February’s flop, here are three reasons why Euro bulls will be eager to start off March on the front foot:

1. Still-elevated Eurozone inflation could strengthen EUR

Recall that central banks around the world have been aggressively raising their respective interest rates to try and cool down inflation.

Since July 2022, the European Central Bank (ECB) has lifted its benchmark rates by a cumulative 300 basis points.

Yet the Eurozone’s January inflation number (as measured by the CPI – consumer price index) came in at 8.6%, which is more than four times the ECB’s 2% target.

The Eurozone’s core CPI (inflation figure that excludes more volatile items such as energy, food, alcohol, and tobacco) still printed at a record high of 5.3% in January!

In other words, the ECB is likely to keep hiking its benchmark rates higher and longer, in order to drag inflation meaningfully lower towards 2%.

And the prospects of higher interest rates tends to translate into currency strength.

Hence, if we are presented with fresh evidence on March 2nd of stubborn Eurozone inflation (say, a number that isn’t noticeably lower than January’s 8.6%), that could help the euro unwind its near-1% of year-to-date declines against the resurgent US dollar.

READ MORE: (September 2022) Why FX markets react to central banks?

2. Bloomberg model: EURUSD slightly likelier to touch 1.070 than 1.050

From current levels of 1.060 flat at the time of writing, Bloomberg’s FX forecast model points to a 40% chance that we’ll see the world’s most popular FX pair touch 1.070.

Compare that with the slightly lower 36% chance of EURUSD touching 1.05 over the next one-week period.

While both price levels are accorded less-than-even odds, it remains to be seen whether the CPI print or other fundamental factors could trigger such a massive move.

3. EURUSD may see technical rebound if “oversold” levels reached

This FX pair’s 14-day relative strength index has been careening closer towards the 30 mark, which is the threshold that denotes oversold conditions.

Note how in previous episodes, once the RSI drops below the 30 line, EURUSD then duly bounces back up.

Of course, that means that EURUSD has to fall further in order for its RSI to actually hit the 30 threshold at least, before it can even get a chance of seeing a technical rebound.

And that EURUSD decline may even happen later today (Friday, February 24t ), if the US PCE deflator (the Federal Reserve’s preferred metric for measuring inflation) comes in higher than the market forecasts for a 5% year-on-year advance.

Such an event (higher-than-expected US PCE deflator) later today should translate into more US Dollar strength (i.e. lower EURUSD), and could just pave the way for EURUSD’s technical rebound next week.

Key levels for EURUSD in the week ahead:

SUPPORT

• 1.050 region: psychologically-important area
• 1.04832: January 2023 cycle low
• 1.040 region: psychologically-important line

RESISTANCE

• 50-day simple moving average (SMA)
• 1.07365: mid-December cycle high
• 1.08045: mid-February high

At the time of writing, Bloomberg’s FX model forecasts a 74% chance that EURUSD will trade within the 1.0476 – 1.0729 range, using current levels as a base, over the next one week.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com