InvestMacro

By CentralBankNews.info

The central bank of Belarus cut its benchmark interest rate for the third time, saying domestic inflation was slowing faster than expected while inflation in trading partners was also slowing down more rapidly, leading other central banks to actively lower their interest rates.
The National Bank of the Republic of Belarus (NBRB) cut its refinancing rate by another 25 basis points to 7.75 percent and has now cut it 125 points this year following cuts in February and May.
Since April 2016 NBRB has been easing its monetary policy and cut the rate 19 times by a total of 17.25 percentage points.
The rate cut was decided at an extraordinary meeting of NBB’s board today, ahead of the scheduled meeting on Aug. 12, with the rate cut taking effect on July 1.
In addition to cutting the refinancing rate, the overnight loan rate was also cut 25 basis points to 8.75 percent and the overnight deposit rate to 6.75 percent.
The board meeting comes after Belarus President Alexander Lukashenko on Friday asked the central bank to look into lowering the refinancing rate at a meeting to discuss economic support measures, according to local press reports.
According to BelTA, the state-owned national news agency, Lukashenko said all countries are lowering their interest rates to revive economic activity, inflation is within forecasts, and the central bank should carry out this rate cut before the end of June.
Belarus, formerly known as White Russia or Belorussia, became independent of the Soviet Union in 1991 and Lukashenko has been president since 1994.
Headline inflation in Belarus eased to 4.9 percent in May from 5.4 percent in April, just below NBRB’s target of 5.0 percent, while core inflation slowed to 3.9 percent from 4.5 percent in April.
Under these conditions, the central bank said continued easing its monetary policy, with moderately soft monetary conditions would allow it to maintain an acceptable level of price and financial stability.
After depreciating sharply in February and March, the Belarus ruble has risen since April though it remains well below its level at the start of the year.
In January Belarus’ government and the central bank adopted a major strategy to improve trust in the Belarusian ruble by pushing a coordinated policy to reduce reliance of foreign currency in the country and ensure the domestic currency had a leading role in transactions.
The government’s debt is around 97 percent denominated in foreign currency. A new Belarusian ruble was introduced in July 2016.
This strategy includes full transition to inflation targeting by 2021, a reduced footprint by NBRB in the foreign exchange market, reduced monopolies in the economy, lower state debt, regular issues of debt in Belarusian rubles, and ensuring that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
The Belarusian ruble was trading at 2.37 to the U.S. dollar today, up 10.5 percent from a record low of 2.62 on March 24 and down 11.4 percent this year.

 www.CentralBankNews.info
 

By Lukman Otunuga, Research Analyst, ForexTime

Article by ForexTime

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

By IFCMarkets

Preparing for the meeting of the Central Bank of Sweden

The upward movement means the weakening of the Swedish krona. Since February 2015, the rate of the Swedish Central Bank had been negative. In December last year, it rose to 0%. Thus, Riksbank kept rate unchanged during the coronavirus pandemic, while almost all the world’s central banks reduced it. Theoretically, the Central Bank of Sweden could return the rate to the negative area in order to stimulate the recovery of the national economy after Covid-19. A meeting of the board of directors of Riksbank will take place on June 23, at which some views on the rate can be expressed. Inflation in Sweden in May was 0% in annual terms. Unemployment reached a 6-year high of 9%. Year-on-year GDP in the 1st quarter fell by 0.4%.

Summary of technical analysis

Market Analysis provided by IFCMarkets

By Orbex

– As the reality of the COVID situation in March set in, the markets took a steep nosedive.

It didn’t halt until the Fed held an extraordinary meeting to announce unprecedented measures to help the economy. Many argue that it’s thanks to the Fed that the market crisis wasn’t worse.

But, now the Fed is in an open-ended asset purchasing program that has led to a never-before-seen expansion in the balance sheet. Not even in the worst part of the Great Financial Crisis did anyone expect the Fed to feel the need to take such drastic action.

And it’s not a tenable position for the Fed. Their current policy can’t continue forever, and now the debate is just when the changes will be made.

What To Do?

Equity markets have recovered healthily in the last couple of months.

Now, we’ve started getting encouraging economic data as retailers reopen. Evidently we are not out of the woods, yet. And the data for June is largely going to be a determinant of whether we can expect a recovery, or if the economy is too scared and will need more time to recover.

It’s time to get ahead of events and think about what the Fed could do in the near future.

There are still policy options in case of a worsening scenario, and there are other concerns in case of an improving scenario. Some of the key ones are as follows.

Negative Rates & Yield Control

The Fed has been notably pessimistic about economic recovery, even in its most recent meeting. Part of this is explained by the need to justify continuation of their policy, It’s also because they don’t want to get caught by any negative surprises.

Too much QE is seen as a better alternative to too little.

Should the Fed decide that the economy needs more stimulus, the two options being considered are:

Negative interest rates

As used (with dubious success) by the BOJ and SNB, we would expect this to weaken the dollar and prop up markets. However, most FOMC members have shown to be quite opposed to this option.

YCC

Yield Curve Control has had some positive comments from FOMC members. This is where the Fed buys more long-term bonds in order to depress longer-term interest rates (the tail of the curve).

Notably, in this latest version of QE, the Fed has been buying less at the tail of the curve than in prior stimulus programs. This option is seen as less likely to cause a recession.

Another Taper Tantrum

As the economy recovers, eventually the Fed is going to have to put a limit to its asset purchases.

It is already starting to slow the pace but hasn’t given an official number. Some analysts say the balance sheet could expand to up to $10T, from the over $7.1T currently.

The last time the Fed warned of an impending tapering of the money printer, it riled up markets considerably, and they are likely to try to avoid that with cautious language in an upcoming meeting.

By then, Q2 will be over, and we will have better data to judge.

By Orbex

By CentralBankNews.info

By Orbex

Trump The Mediator

Donald Trump has confirmed that he is involved in the dispute between China and India. This spooked equity markets late last week.

The US President told reporters at the White House that he is acting as a mediator between the two nations in an attempt to help them resolve the current friction.

Speaking with reporters briefly before heading to his first election rally over the weekend, Trump said

“It’s a very tough situation. We’re talking to India. We’re talking to China. They’ve got a big problem there. They’ve come to blows, and we’ll see what happens. We’ll try and help them out”.

PLA Land Grab Foiled

India has received widespread support from the global community over an incident last week where Indian soldiers were killed by Chinese troops during an illegal incursion into the Eastern Ladakh region.

The Chinese Army has reportedly made a string of such incursions across the Line of Actual Control. This was all in an effort to claim part of the Himalayan region as its own.

Reports indicate that as many as 20 Indian soldiers died during the clashes in the Galwan Valley. India reported that as many as 35 Chinese soldiers were killed by its troops defending the border.

Chinese Aggression Criticised

In a speech made last week, the US secretary of state, Mike Pompeo, said:

“The PLA (People’s Liberation Army) has escalated border tensions with India, the world’s most populous democracy. It’s militarising the South China Sea illegally and claiming more territory there, threatening vital sea lanes”.

Senate Majority Leader Mitch McConnell also commented on the situation saying, in the senate, last week:

“On land, for the sake of grabbing territory, the PLA appears to have instigated the most violent clash between China and India since those nations went to war in 1962…Needless to say, the rest of the world has watched with grave concern this violent exchange between two nuclear states. We are encouraging de-escalation and hoping for peace”.

Risk sentiment weakened in response to the clashes. This is because there are fears of a broader conflict developing. The allegiance between the US and India has strengthened over recent years as India has sought the US to act as an ally against Chinese aggression.

The market now waits to hear if the US is able to help resolve the situation without any further bloodshed.

Potential Head & Shoulders in USDINR

The Indian Rupee has weakened materially against USD over the year so far. However, there are signs now that a potential reversal could develop.

The move up into the 77 level highs came with a strong bearish divergence on the RSI indicator. The correction to that level looks to be forming a head & shoulders reversal pattern with a supporting neckline at 75.

Bears will need to see a break of the level to confirm the reversal. And this would put focus on the 72.4196 level as the next main support.

By Orbex

By Orbex

GBPCAD Drops on Brexit Uncertainty

Encouraging signs are emerging at the end of Britain’s lockdown with retail sales jumping by 12% in May. Nevertheless, the pound sterling drifts lower as markets have shifted their attention to Brexit talks.

With only six months left before the end of the transition period, both London and Brussels seem to be kicking the can down the road unless one side blinks. The threat of a ‘no deal’ is again on the table in an attempt to put pressure on the negotiating parties. As a result, the pound may remain the collateral damage.

The pair has met stiff selling pressure near 1.7150. Last March’s low of 1.6600 would be the next target in sight.

EURAUD Struggles as Rescue Details Diverge

Following the European Commission’s 750 billion euro recovery proposal, initial optimism in regard to the common currency has faded away across markets. The euro is still struggling against a flamboyant Australian dollar as markets await the plan’s adoption by the 27 states. The battle between proponents of loans i.e. Netherlands, Denmark, Sweden, and Austria and grants is likely to wage on for the next few weeks.

The euro could stay under pressure as long as there is no unanimous approval. The pair is about to test last February’s low of 1.6100 for a second time. On the upside, 1.6800 is a major resistance.

USDJPY Near Breakout as Risk-off Bets Mount

After spending a week moving sideways amidst cautiousness across markets, the US dollar may break out of its range soon. The re-emergence of coronavirus hotspots has raised the fear of a second wave, undermining markets’ latest optimism. Doubts about the foundation of the V-shaped rebound have triggered profit-taking in risky assets like equity and commodities.

USDJPY’s consolidation is a sign of flight for safety as both strive for the status of a safer haven. 106.00 is a major support from last May. On the upside, bulls will need to push through 109.90 to extend the rally.

NZDJPY Retreats on Risk Aversion

Riskier currencies like the New Zealand dollar has had a bumpy ride lately as investors tempered their risk appetite. A surge in new COVID-19 cases across the US and new clusters of infections in China act as a reminder that the global health risk is still omnipresent.

As the first major economy to reopen, New Zealand is yet to stand the test of time. The GDP shrank 1.6% in the first three months, the largest quarterly contraction since 1991. The RBNZ is expected to hold its interest rates at the upcoming policy meeting, and markets will look into its guidance on how to relaunch the economy.

The pair is hovering above 68.00 near the 20 and 30-day MAs. The previous high of 71.50 is the next target should bulls retain their momentum.

By Orbex

Article By RoboForex.com

XAUUSD, “Gold vs US Dollar”

The H4 chart shows a new wave inside the uptrend; XAUUSD has reached the high at 1764.86. If the price breaks it, the pair may continue growing towards the post-correctional extension area between 138.2% and 161.8% fibo at 1800.60 and 1822.70 respectively. However, if the asset fails to break the high, the instrument may continue the correction. Hence, one can expect a new decline towards 38.2%, 50.0%, and 61.8% fibo at 1645.06, 1608.00, and 1570.90 respectively.

As we can see in the H1 chart, after breaking the consolidation range, XAUUSD is quickly growing towards the high at 1764.86. The key support here is at the short-term fractal low (1670.60). At the same time, there might be a divergence on MACD to indicate a possible rebound from the high.

USDCHF, “US Dollar vs Swiss Franc”

As we can see in the H4 chart, after finishing the first rising wave, USDCHF is correcting within a Triangle pattern around 23.6% fibo. If the price breaks the pattern’s upside border, the pair may continue trading upwards towards 38.2%, 50.0%, and 61.8% fibo at 0.9577, 0.9639, and 0.9700 respectively. The support is the low at 0.9376.

The H1 chart shows a more detailed structure of the current correction after the ascending impulse. The first rising wave has been corrected by 50.0%. Later, the pair may continue falling towards 61.8% fibo at 0.9444. However, if the instrument breaks the high at 0.9553, the mid-term uptrend may resume.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

By Orbex

Last Week’s Highlights

Canada’s factory sales in April fall 2.58%

Canada’s factory sector posted the biggest monthly decline on record so far in April 2020. According to official data, factory sales fell 28.5% on a month over month basis in April. This was during the time social distancing and lockdown was in full force.

Factory sales were at their lowest level in 22 years. In terms of volume, manufacturing sales were down by 26%. The data for March was revised to show a 9.2% decline compared to the initial reports of a 9.8% decline.

US retail sales rebound sharply in May

The monthly retail sales report from the US showed that American consumers were back with a bang in May. Official data from the Commerce Department revealed that retail sales grew at a monthly pace of 17.7% on a seasonally adjusted basis.

This keeps the yearly retail sales in the negative territory at -6.1%. The increase in US retail sales in May marks the biggest monthly jump since 1992. However, retail spending was tepid.

BoJ keeps interest rates steady but boosts pandemic lending program

The Bank of Japan left interest rates unchanged at its latest monetary policy meeting last week. This was widely expected as economists forecast that Japan’s interest rates will be steady at -0.10%.

The central bank, however, boosted its COVID-19 spending program. It raised its spending to 110 trillion yen, up from 75 trillion earlier. Meanwhile, it left its asset purchases steady while committing to keep the yields near zero.

The Bank of England raises asset purchases but keeps rates steady

The Bank of England left interest rates unchanged at its meeting last week with just one dissenting vote from chief economist Andy Haldane. Elsewhere, the central bank voted to raise its asset purchases by 100 billion GBP to 745 billion.

The BOE said that it would continue to monitor the markets and will strive to keep inflation sustained near its 2% goal. The bank also stated that the labor market will take a while to recover due to the COVID-19 lockdown.

Upcoming Economic Events

RBNZ to keep interest rates unchanged

The Reserve Bank of New Zealand will be holding its monetary policy meeting this week. No changes are expected from the central bank as interest rates will be unchanged at 0.25%. This will be the third consecutive meeting where interest rates remain steady.

The central bank will, of course, take into account the recent GDP reports. New Zealand’s GDP fell 1.6% in the quarter ending March. This was the biggest dip in over three decades. Hence, we could expect RBNZ officials to continue to take a dovish stance in its forward guidance.

US durable goods orders to rebound in May

Monthly durable goods orders from the US are due this week. Forecasts point to a rebound in the sector. Excluding transportation, durable goods are forecast to rise 2.8%, marking a recovery from a 7.7% slump previously.

Meanwhile, headline durable goods orders are forecast to rise 10.3%, following a 17.7% decline in the month before. The forecasts remain consistent with the fact that the US economy was quick to jump back on the rails.

US GDP to show a 5% decline in Q1 2020

The revised first-quarter GDP figures are due on the same day as the durable goods report. Data forecasts show that there will be no change to the revised GDP.

As a result, the US economy is confirmed to show that it contracted 5% in the three months ending March. No revisions are forecast even for the GDP price index which is at 1.6% during the quarterly period.

Eurozone private sector to show a modest recovery

The flash or preliminary PMI figures are due out for the Eurozone this week. Forecasts show that overall, private sector business will recover slightly in the month of July.

The PMI composite is forecast to rise from 31.9 in June to 41.00 in July. Although this still keeps the data below the 50-level of the index marking a contraction, the underlying data is expected to show a slow but steady recovery in the private sector business for the eurozone.

By Orbex

Article By RoboForex.com

EURUSD, “Euro vs US Dollar”

EURUSD continues forming the third descending wave towards 1.1100; right now, it is consolidating above 1.1170. Possibly, the pair may correct to reach 1.1220 and then fall towards 1.1155. Later, the market may test 1.1170 from below and then resume trading downwards with the short-term target at 1.1100.

GBPUSD, “Great Britain Pound vs US Dollar”

GBPUSD continues forming the third wave within the downtrend towards 1.2250. right now, it is consolidating above 1.2340. Today, the pair may correct to test 1.2470 from below and then resume trading downwards with the short-term target at 1.2250.

USDRUB, “US Dollar vs Russian Ruble”

USDRUB is falling towards 69.00. After that, the instrument may correct to reach 69.50 and then resume falling with the short-term target at 68.40.

USDJPY, “US Dollar vs Japanese Yen”

USDJPY continues falling towards 106.60; right now, it is consolidating above 106.80. Possibly, the pair may correct to test 107.00 and then resume trading downwards with the target at 106.60.

USDCHF, “US Dollar vs Swiss Franc”

USDCHF is still consolidating around 0.9500 without any particular direction. There are two equally possibly scenarios: growth towards 0.9540 and decline to reach 0.9450. After reaching 0.9450, the instrument may form one more ascending structure to break 0.9550 and then continue trading upwards with the short-term target at 0.9650.

AUDUSD, “Australian Dollar vs US Dollar”

After completing the descending wave at 0.6808, AUDUSD is correcting towards 0.6900. Later, the market may form a new descending wave to break 0.6800 and then continue trading downwards with the short-term target at 0.6720.

BRENT

After finishing the ascending wave at 42.77 and the correction towards 41.00, Brent has completed the ascending impulse to reach 42.40; right now, it is consolidating below this level. If later the price breaks this range to the upside, the market may resume growing to reach 43.43; if to the downside – start a new correction towards with the target at 41.66.

XAUUSD, “Gold vs US Dollar”

Gold is moving upwards; it has broken 1736.60 to the upside and may continue growing to reach 1760.10. Later, the market may correct towards 1737.22 and then form one more ascending structure with the target at 1768.45.

BTCUSD, “Bitcoin vs US Dollar”

After finishing the correction at 9150.0, BTCUSD is growing to break 9450.00. After that, the instrument may continue trading upwards to reach 9700.00. Later, the market may form a new descending structure to break 9150.00 and then continue falling inside the downtrend with the short-term target at 8800.00.

S&P 500

After completing the descending wave at 3060.1, the Index is expected to grow towards 3114.9, thus forming a new consolidation range. If later the price breaks this range to the downside, the market may resume trading downwards to reach 2958.5; if to the upside – form one more ascending structure with the target at 3222.2.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.