11 May

Inflationary pressure in the US continues to decline. Chinese inflation data disappointed investors

By JustMarkets

The US Consumer Price Index rose by 0.4% last month, but a deeper look at the data showed a slowdown in core services inflation. According to the CME FedWatch Tool, the likelihood of a Fed pause in June rose from 79% to 96%. But analysts at Morgan Stanley don’t share that and believe that a slight rise in core inflation with a significant slowdown in core services should prompt the Fed to leave the door open for a June hike. While US inflation fell more than expected annually, there are concerns that the impact of higher interest rates on the US economy is only now beginning to show. And the dynamics of the stock indices show it well. At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.22%, while the S&P 500 Index (US500) added 0.24%. The NASDAQ Technology Index (US100) lost 0.63% on Wednesday.

The Walt Disney Company (DIS) Co cut its streaming loss by $400 million quarter-on-quarter but also cut subscriber numbers. The quarterly profit was in line with Wall Street expectations. DIS stock fell nearly 5% after the stock market closed.

Stock markets in Europe were mostly down on Wednesday. Germany’s DAX (DE30) decreased by 0.37%, France’s CAC 40 (FR40) fell by 0.49% yesterday, Spain’s IBEX 35 index (ES35) was down by 0.18%, and the British FTSE 100 (UK100) closed lower by 0.41%.

ECB spokesman Centeno indicated yesterday that ECB policy will remain tight for some time after rates peak, with rates set to start falling in 2024. Speaking Tuesday night, Isabel Schnabel, another ECB executive board spokeswoman, said the ECB would continue to raise borrowing costs with full determination until there are signs that core inflation is also falling steadily.

Today, the Bank of England will likely raise interest rates for the 12th time in a row. The market is almost unanimous in expecting the Monetary Policy Committee to choose another 25 basis point hike. But the outlook diverges further as the Bank of England faces a tougher situation: the UK is projected to be the worst major economy over the next two years, and inflation is still twice as high as in the US and the Eurozone.

Thomas Jordan, head of the Swiss National Bank (SNB), pointed out yesterday that inflation is above the price stability range. Meanwhile, the nominal appreciation of the Swiss franc is mainly due to inflation abroad. This increases the likelihood of another rate hike at the next SNB meeting.

Oil prices rebounded Thursday after falling more than a dollar a barrel the day before, helped by stronger US fuel demand data. A sharper-than-expected drop in US gasoline inventories pushed prices higher, reflecting more robust demand for transportation fuel in the United States.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.41% for the day, China’s FTSE China A50 (CHA50) fell by 0.99%, Hong Kong’s Hang Seng (HK50) was down 0.53% for the day, India’s NIFTY 50 (IND50) added 0.27%, and Australia’s S&P/ASX 200 (AU200) closed negative 0.12%.

China’s consumer price inflation fell short of expectations and has been declining for four straight months this year. The consumer price index was 0.1% year-on-year in April. The weak Consumer Price Index indicates that consumer spending has remained sluggish despite lifting COVID-19 restrictions earlier this year. Measures taken by the Chinese government to increase domestic spending have had little effect on inflation, as the economy has weakened after three years of lockdowns. Although levels of retail spending and travel demand in China have risen slightly in recent months, they remain well below levels seen before the COVID-19 pandemic. A weak inflation reading in April would likely entail additional stimulus and potentially looser monetary conditions in the country.

S&P 500 (F) (US500) 4,129.20 +10.03 (+0.24%)

Dow Jones (US30)33,487.87 −73.94 (−0.22%)

DAX (DE40) 15,896.23 −59.25 (−0.37%)

FTSE 100 (UK100) 7,732.09 −32.00 (−0.41%)

USD Index 101.44 −0.17 −0.16%

Important events for today:
  • – China Consumer Price Index (m/m) at 04:30 (GMT+3);
  • – China Producer Price Index (m/m) at 04:30 (GMT+3);
  • – UK BoE Interest Rate Decision at 14:00 (GMT+3);
  • – UK BOE Monetary Policy Report at 14:00 (GMT+3);
  • – UK BoE Gov Bailey Speaks at 14:30 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US Producer Price Index (m/m) at 15:30 (GMT+3);
  • – US FOMC Member Waller Speaks at 17:15 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

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.

Economics & Fundamentals Financial News
11 May

GBPUSD Slips Ahead Of BoE Rate Decision

By ForexTime

Our focus falls on the pound ahead of the Bank of England (BoE) rate decision this afternoon.

The BoE is widely expected to raise interest rates for the 12th consecutive meeting thanks to stubborn double-digit inflation. While a 25-basis point hike is pretty much a certainty, the key question is whether the BoE will signal more hikes like the European Central Bank (ECB) or hint at a pause like the Federal Reserve (Fed).

A spicy combination of hot inflation and strong wage growth may force the central bank to keep the doors open for more rate hikes down the road. Nevertheless, the minutes, quarterly Monetary Policy Report, and BoE Governor Andrew Bailey’s press conference may offer fresh clues on the BoE’s next move.

In the previous trading session, the GBPUSD jumped to a fresh 2023 high around 1.2680 before giving back some gains. If the BoE sends a hawkish message and hints of more hikes in the future, this could boost the currency pair. Alternatively, a dovish-sounding BoE that hints at pausing rates could drag prices lower. Whatever the outcome, it will certainly have a strong impact on the GBPUSD.

Taking a deep dive into the technicals… 

The GBPUSD is in an established uptrend on the daily timeframe with multiple impulse waves already showing clearly on the chart. On 9 May at 1.26799 a higher top was recorded but the bears also sent a clear signal that they want another decent innings here soon.

Two bearish pin bars forming in the last few days was a clear warning for alert technical traders that a shift in momentum might be on the books. This is being confirmed currently with a strong bearish candle and a possible correction wave in progress.

If the bears continue to pull the price lower, they might reach a weekly support level and then two scenarios are possible from there.

One is that the bulls get back into the game and start driving prices upward to start a possible new impulse wave.

Two is that the bears keep the upper hand and although some lower time frame ranging can be expected as the weekly support level exerts it’s influence on the price, the correction wave may continue or even, after a potential short bullish stint, a lower top and then lower bottom might form on the D1 chart to give the bears full control of the market.

As long as the bulls keep on making higher top and bottoms, the outlook for GBPUSD on the D1 time frame will remain bullish as confirmed by the price currently being above the 15 and 34 Simple Moving Averages and the Momentum oscillator hovering above the 100-base line in bullish terrain.

Forex-Time-LogoArticle by ForexTime

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

Financial News Forex and Currency News
11 May

RoboMarkets Chosen as Europe’s Most Trusted Broker in 2023

RoboMarkets, a brokerage company that provides financial markets trading services to European clients, has won the Safest European Broker 2023 title. This award was presented at the prestigious London Trader Show 2023 event in London.

The London Trader Show (formerly the London Forex Show) has been running every year since 2010. It is one of the most important events for the industry in Europe and the UK, providing investors and traders with the opportunity to interact with industry peers and gain new knowledge. A variety of training sessions and hands-on workshops are organised as part of this one-day event.

The highlight of the show’s programme is the awarding of The London Trader Show Awards 2023. During the voting, which was conducted on the organiser’s official website until 28 February 2023, everyone could take a poll and vote for their favourites in the 8 nominated categories.

How does RoboMarkets Ltd protect its clients’ funds?

Protection against negative balance

RoboMarkets clients can have peace of mind thanks to negative balance protection, as they can be sure they will not be charged more than they intended to invest in any case.

Membership in the Investor Compensation Fund (ICF)

The fund provides insured clients of CySEC-registered companies with compensation of up to €20,000.

Market-leading insurance policy

RoboMarkets has taken additional steps to protect its obligations to clients and third parties for up to €2,500,000 through a public liability insurance policy for brokerage companies. This programme includes market-leading insurance coverage for risks that can lead to financial losses for clients, such as fraud, omissions, negligence, errors and others.

About RoboMarkets

RoboMarkets is a financial brokerage company licensed by CySEC, operating under licence number 191/13. It provides access to more than 3,000 stocks and other instruments. Trading is performed using the latest technology and proprietary products on the MetaTrader 4, MetaTrader 5, R MobileTrader, R StocksTrader and R WebTrader platforms. View more information about the company’s products and services on www.robomarkets.com.

“Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69.88% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.”

Financial News Forex and Currency News
10 May

US CPI: Brace! Brace! Markets set to get turbulent this summer: deVere CEO

By George Prior

Markets are going to get volatile this summer as investors ramp up speculation about the US Federal Reserve’s interest rate policy as fresh inflation data is released, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning from deVere Group’s Nigel Green comes as the US government releases the consumer price index for April on Wednesday, showing that US CPI fell to 4.9%.

He says: “The US CPI data is out and, at 4.9%, came in lower than expectations.

“Investors will be asking ‘Where do we go from here?’

“Many senior analysts will now insist that this will be enough for the Federal Reserve to pivot at their meeting in June and pause the hiking agenda.

“Some will go further and argue that the central banks will cut rates as early as July.

“Others, however, believe that the Fed will remain cautious about inflation flaring up again and that officials will ultimately insist upon at least another interest rate hike. This could cause jitters in the markets as some investors, concerned about short-term profits, will move into panic-selling mode.”

He continues: “What we do know for certain are two things.

“First, speculation is going to increase and that this triggers market volatility. Investors should brace for a turbulent summer fuelled by uncertainty.

“Second, the US economy is cooling quicker than had been anticipated.  We put this down to the Fed being too aggressive with their rate hikes.

“As I said last week, the failing Fed made another mistake with the latest interest rate hike, which could push the world’s largest economy not only into a short-term but a longer-term recession. Clearly, this would not only be a huge issue for the US, but the global economy too.”

The deVere CEO goes on to add: “The reality is investors must be vigilant and not become complacent due to the potential of no more imminent hikes and/or the possibility of rate cuts.

“Plus, we have the Republicans and Democrats failing to agree on to how to deal with the major issue of the US debt crisis. Last time this happened we had a 20% drop in the market.

“It’s essential for investors to take good advice and realise that in a fast-changing world the underlying importance of being in the right sectors at the right time still applies, in fact more now than ever.”

He concludes: “We expect markets to be in for a wild ride this summer. But, as ever, where there’s volatility, there is also considerable opportunity.”

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.

Economics & Fundamentals Opinions
10 May

What is hydrogen, and can it really become a climate solution?

By Hannes van der Watt, University of North Dakota 

Hydrogen, or H₂, is getting a lot of attention lately as governments in the U.S., Canada and Europe push to cut their greenhouse gas emissions.

But what exactly is H₂, and is it really a clean power source?

I specialize in researching and developing H₂ production techniques. Here are some key facts about this versatile chemical that could play a much larger role in our lives in the future.

So, what is hydrogen?

Hydrogen is the most abundant element in the universe, but because it’s so reactive, it isn’t found on its own in nature. Instead, it is typically bound to other atoms and molecules in water, natural gas, coal and even biological matter like plants and human bodies.

Hydrogen can be isolated, however. And on its own, the H₂ molecule packs a heavy punch as a highly effective energy carrier.

It is already used in industry to manufacture ammonia, methanol and steel and in refining crude oil. As a fuel, it can store energy and reduce emissions from vehicles, including buses and cargo ships.

Hydrogen can also be used to generate electricity with lower greenhouse gas emissions than coal or natural gas power plants. That potential is getting more attention as the U.S. government prepares new rules that would require existing power plants to cut their carbon dioxide emissions.

Because it can be stored, H₂ could help overcome intermittency issues associated with renewable power sources like wind and solar. It can also be blended with natural gas in existing power plants to reduce the plant’s emissions.

Using hydrogen in power plants can reduce carbon dioxide emissions when either blended or alone in specialized turbines, or in fuel cells, which consume H₂ and oxygen, or O₂, to produce electricity, heat and water. But it’s typically not entirely CO₂-free. That’s in part because isolating H₂ from water or natural gas takes a lot of energy.

How is hydrogen produced?

There are a few common ways to produce H₂:

  • Electrolysis can isolate hydrogen by splitting water – H₂O – into H₂ and O₂ using an electric current.
  • Methane reforming uses steam to split methane, or CH₄, into H₂ and CO₂. Oxygen and steam or CO₂ can also be used for this splitting process.
  • Gasification transforms hydrocarbon-based materials – including biomass, coal or even municipal waste – into synthesis gas, an H₂-rich gas that can be used as a fuel either on its own or as a precursor for producing chemicals and liquid fuels.

Each has benefits and drawbacks.

Green, blue, gray – what do the colors mean?

Hydrogen is often described by colors to indicate how clean, or CO₂-free, it is. The cleanest is green hydrogen.

Green H₂ is produced using electrolysis powered by renewable energy sources, such as wind, solar or hydropower. While green hydrogen is completely CO₂-free, it is costly, at around US$4-$9 per kilogram ($2-$4 per pound) because of the high energy required to split water.

Chart showing different colors of hydrogen and how each is made
The largest share of hydrogen today is made from natural gas, meaning methane, which is a potent greenhouse gas.
IRENA (2020), Green Hydrogen: A guide to policymaking

Other less energy-intensive techniques can produce H₂ at a lower cost, but they still emit greenhouse gases.

Gray H₂ is the most common type of hydrogen. It is made from natural gas through methane reforming. This process releases carbon dioxide into the atmosphere and costs around $1-$2.50 per kilogram (50 cents-$1 per pound).

If gray hydrogen’s CO₂ emissions are captured and locked away so they aren’t released into the atmosphere, it can become blue hydrogen. The costs are higher, at around $1.50-$3 per kilogram (70 cents-$1.50 per pound) to produce, and greenhouse gas emissions can still escape when the natural gas is produced and transported.

Another alternative is turquoise hydrogen, produced using both renewable and nonrenewable resources. Renewable resources provide clean energy to convert methane – CH₄ – into H₂ and solid carbon, rather than that carbon dioxide that must be captured and stored. This type of pyrolysis technology is still new, and is estimated to cost between $1.60 and $2.80 per kilogram (70 cents-$1.30 per pound).

Can we switch off the lights on fossil fuels now?

Over 95% of the H₂ produced in the U.S. today is gray hydrogen made with natural gas, which still emits greenhouse gases.

Whether H₂ can ramp up as a natural gas alternative for the power industry and other uses, such as for transportation, heating and industrial processes, will depend on the availability of low-cost renewable energy for electrolysis to generate green H₂.

It will also depend on the development and expansion of pipelines and other infrastructure to efficiently store, transport and dispense H₂.

Without the infrastructure, H₂ use won’t grow quickly. It’s a modern-day version of “Which came first, the chicken or the egg?” Continued use of fossil fuels for H₂ production could spur investment in H₂ infrastructure, but using fossil fuels releases greenhouse gases.

What does the future hold for hydrogen?

Although green and blue hydrogen projects are emerging, they are small so far.

Policies like Europe’s greenhouse gas emissions limits and the 2022 U.S. Inflation Reduction Act, which offers tax credits up to $3 per kilogram ($1.36 per pound) of H₂, could help make cleaner hydrogen more competitive.

Hydrogen demand is projected to increase up to two to four times its current level by 2050. For that to be green H₂ would require significant amounts of renewable energy at the same time that new solar, wind and other renewable energy power plants are being built to provide electricity directly to the power sector.

While green hydrogen is a promising trend, it is not the only solution to meeting the world’s energy needs and carbon-free energy goals. A combination of renewable energy sources and clean H₂, including blue, green or turquoise, will likely be necessary to meet the world’s energy needs in a sustainable way.The Conversation

About the Author:

Hannes van der Watt, Research Assistant Professor, University of North Dakota

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Financial News
10 May

China’s gold buying spree challenges the dollar and may impact your investments

By George Prior

China is increasingly expanding its gold reserves and ditching the dollar in moves that could have implications for your investments, warns the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning from Nigel Green of deVere Group comes as it is revealed that China’s gold reserves increased by 8.09 tons in April, according to data from the State Administration of Foreign Exchange. Total gold stockpiles reached 2,076 tons after the nation added 120 tons in the five months through March.

He says: “Historically, China has been a major buyer of US Treasuries, but this has seen a markedly cooling off as Beijing swaps them out in favour of gold.

“During the last few years, the US has digitally been adding an unprecedented amount of dollars to the US economy which, of course, has the effect of devaluing the greenback over time, potentially making it less of an attractive investment for China, and others.”

“It can also be reasonably expected that this strategic move will limit its dependence on the dollar, as trade and political relations with the US deteriorate further.”

The deVere CEO continues: “Buying gold rather than dollars may also signal moves by China that it is eventually seeking to replace the US dollar as the world’s reserve currency.

“Building stocks of the precious metal and allowing the Chinese yuan to be traded freely would weaken the US dollar’s dominance as the global reserve currency. The move would have enormous implications, making it more expensive for the US government to borrow money and potentially to run perpetual trade and budget deficits.

“The US is used to having the privileged position of having the key reserve currency, but others are eager to take over it.”

Oil is one of the most important and widely traded commodities in the world, and it has traditionally been priced and traded in US dollars. This has given the US dollar a dominant role in global financial markets, as countries that want to purchase oil must first acquire US dollars in order to do so.

As a reserve currency, the dollar is the default for international transactions. For example, an Indian company wants to buy wine from Spain, it’s probable that they will carry out the transaction in dollars. Both companies must then purchase dollars to conduct their business, fuelling greater demand.

The value of global commodities, such as oil, is also generally demarcated in US dollars.

“If oil trading were to shift away from the US dollar, it would dramatically reduce the demand for US dollars, which would lead to a decrease in the value of the US currency. This could have a number of ripple effects throughout the global economy, including hugely increased inflation in the United States and potentially destabilising effects on financial markets,” notes Nigel Green.

With the dollar seemingly losing some of its traditional dominance, investment portfolios could be impacted and might need to be repositioned to seize the opportunities and sidestep the risks.

“As ever, the key will be to seek professional advice from an advisor and to ensure that your portfolio is properly diversified across asset classes, sectors, regions, and currencies.”

He goes on to add that: “Stock markets outside the US, particularly those in emerging markets, typically perform well when the dollar is weaker.

“US large caps and multinationals are also likely to do well as much of their profits are generated in countries where the currencies are becoming stronger.

“Sectors that can be expected to do well with a weaker greenback include energy and industrial commodities because they are traded in dollars and, therefore, as the dollar declines, they become less expensive for non-US-based buyers.

“Tech should also do relatively well, as much of the revenue also comes from outside the United States.”

Nigel Green concludes: “The strategic move by China to increasingly buy more gold and less US dollars could, in the longer-term, have a significant effect on the global financial system and investment planning.”

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.

Financial News Forex and Currency News
10 May

Lack of progress in raising the US debt limit has a negative impact on financial markets

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.17%, and the S&P 500 Index (US500) lost 0.46%. The NASDAQ Technology Index (US100) fell by 0.63% on Tuesday. Discussions over the US debt limit dampened investor sentiment as there was no progress on preventing a US default before the anticipated June 1 deadline.

President Joe Biden will meet with House Speaker Kevin McCarthy today. Both politicians face the need to reach an agreement on the debt ceiling, or else the US will face default as early as June 1. McCarthy is pushing for spending cuts and deficit reduction in exchange for raising the debt ceiling, while Biden wants it raised as a condition for any budget negotiations.

According to a new poll, public confidence in Jerome Powell’s leadership of the Federal Reserve has plummeted and is now at or below the level of his predecessors. A Gallup poll released Tuesday found that 36% of Americans believe they have confidence that the Federal Reserve chairman will do or recommend the right thing for the economy. That’s down from 37% for Janet Yellen during her first year at the helm of the Fed in 2014. Confidence in the Fed usually follows the state of the economy. President Joe Biden has 35% American confidence in the economy, the lowest of any president since George W. Bush got 34% during the 2008 financial crisis.

Shares of PayPal Holdings Inc (PYPL) fell more than -11% as the payments company cut its annual transaction margin forecast. Shares of Palantir Technologies (PLTR) jumped more than 23% yesterday after the analyst company reported better-than-expected first-quarter results and said it expects earnings in every quarter this year.

Stock markets in Europe were mostly down on Tuesday. Germany’s DAX (DE30) added 0.02%, France’s CAC 40 (FR40) decreased by 0.59% yesterday, Spain’s IBEX 35 index (ES35) fell by 0.31%, and the British FTSE 100 (UK100) closed lower by 0.18% on Tuesday. The International Monetary Fund is still concerned about the recent turmoil in the banking sector and believes the risk of a banking crisis remains.

The Bank of England’s monetary policy meeting is due tomorrow. Inflation in the UK is much higher than in the United States and Europe, so the Bank of England will seek to reduce inflationary pressures. Markets expect the Bank of England to raise the interest rate by 0.25% from 4.25% to 4.5%, marking the twelfth consecutive rate hike since December 2021. The Bank of England’s final interest rate is expected to be 4.85% by September 2023.

Crude oil prices rose for the third straight session amid reports that the Biden administration will cancel the remaining withdrawals from the Strategic Petroleum Reserve (SPR) and instead add to it a volume that could reach 200 million barrels. Before the news, oil prices were declining yesterday due to weak data from China. China’s imports fell sharply in April, while exports rose more slowly than expected, adding to signs of a slower-than-expected economic recovery for the world’s biggest crude oil importer. There had been high hopes for the Chinese economy that demand for crude oil would rise sharply in the second quarter, but so far, this has not been seen.

Asian markets traded yesterday without a single trend. Japan’s Nikkei 225 (JP225) gained 1.01% on the day, China’s FTSE China A50 (CHA50) decreased by 0.55% yesterday, Hong Kong’s Hang Seng (HK50) was down by 2.12%, India’s NIFTY 50 (IND50) added 0.01%, and Australia’s S&P/ASX 200 (AU200) was down by 0.17%.

Real wages in Japan fell for the twelfth consecutive month in March as consumer inflation outpaced nominal wage growth. Large companies negotiated wage increases at labor talks in March, and whether this trend spreads to small businesses depends on the outlook for the normalization of monetary policy by the Bank of Japan under new Governor Kazuo Ueda. Inflation-adjusted real wages, a barometer of household purchasing power, fell by 2.9% in March from a year earlier, following the same rate of decline in February.

S&P 500 (F) (US500) 4,119.17 −18.95 (−0.46%)

Dow Jones (US30)33,561.81 −56.88 (−0.17%)

DAX (DE40) 15,955.48 +2.65 (+0.017%)

FTSE 100 (UK100) 7,764.09 −14.29 −0.18%)

USD Index 101.65 +0.27 +0.27%

Important events for today:
  • – Canada Building Permits (m/m) at 15:30 (GMT+3);
  • – US Consumer Price Index (m/m) at 15:30 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
  • – Switzerland SNB Chairman Jordan speaks at 19:00 (GMT+3).

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.

Economics & Fundamentals Financial News
10 May

Mid-Week Technical Outlook: Breakouts

By ForexTime 

Today’s big event and potential market shaker will be the latest US inflation data which could offer fresh insight into the Federal Reserve’s next move.

As the countdown to the April CPI report enters its final hours, here are a selection of technical setups to keep an eye on.

Dollar Index trapped within range

After swinging within a range over the past few weeks, could the Dollar Index be gearing up for a breakout? Support can be found at 100.72 and resistance at 102.34. A bullish break above 102.34 could inspire an incline towards 103.00. If prices slip back under 100.72, bears may take prices towards 100.00.

EURUSD edges towards support level

It is the same old story for the EURUSD with prices trapped within a range. Support can be found around 1.0912 and resistance at 1.1075. Bears seem to be making a move, dragging prices closer toward the support. However, the pending US inflation report could heavily influence the currency pair’s short-term outlook. A bearish breakout under 1.0912 could open the doors toward 1.0845 – where the 50-day SMA resides.

GBPUSD steady above 1.2600

Prices remain firmly bullish on the daily charts as there have been consistently higher highs and higher lows. The recent breakout above 1.2580 has opened the doors to higher levels with 1.2730 and 1.2870 acting as key points of interest. Should prices slip back under 1.2580, bears may target 1.2530 and 1.2380, respectively.

USDJPY lingers above 135.00

Despite breaking above the 135.00 resistance level, the USDJPY looks pressured on the daily charts. More resistance can be found around 137.00, where the 200-day SMA resides, and 137.77. If prices end up slipping back under 135.00, the USDJPY could test 133.70, 132.90, and 131.20.

SPX500_m remains rangebound

The SPX500_m needs a potent fundamental spark to trigger a bullish or bearish breakout. Support can be found at 4050 and resistance at 4180. A break below 4050 may open the doors towards 4000. If bulls push prices beyond 4180, the index may target levels not seen since August 2022 around 4280.

NQ100_m bounces within a range

It feels like most markets are on standby, waiting for the next big catalyst to trigger a big move. The NQ100_m remains in a range with support found at 12800 and resistance at 13300. A breakout could be on the horizon.

Gold remains a choppy affair

The precious metal is likely to be heavily influenced by the pending US CPI report. A move back above $2047 may open the doors toward the 2023 high at $2063. If prices slip back under $2015, this could signal a selloff towards $2000.

Forex-Time-LogoArticle by ForexTime

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

Forex and Currency News Opinions
09 May
Real Estate Investing

US banking crisis in a new stage of contagion

By Dan Steinbock

In view of the Fed, American banking crisis is over. Yet, US and European banks face the most acute stress since 2008 and 2011, respectively. Global economy is exposed to new headwinds.

Last week, as the Federal Reserve pushed ahead with its 10th rate hike since last March, its chairman Jerome Powell declared that the period of U.S. bank failures had come to an end. That’s why Powell assured Americans, “There were three large banks, really from the very beginning, that were at the heart of the stress that we saw in early March — the severe period of stress. Those have now all been resolved, and all the depositors have been protected.”

In other words, the failures of Silicon Valley Bank, Signature Bank and First Republic Bank mark the end, not the spread of the banking crisis. As Powell added, the most recent failure of First Republic, and its subsequent sale to JPMorgan Chase, “kind of draws a line under that period.”

Obviously, such ideas are plain silly. U.S. banking crisis is not over; it has entered a new stage. And it continues to spread.

As dominoes fall

Nearly half (48%) of Americans are concerned about the safety of their bank deposits, according to a Gallup poll last week. Distressingly, the survey results resemble the aftermath of the Lehman Brothers’ collapse.

Recently, Lawrence McDonald, former vice-president at Lehman Brothers, projected that the banking crisis could derail another 50 regional lenders in America if the US fiscal and monetary authorities fail to take steps to resolve structural challenges.

In the U.S. and European banking sector, the rollercoaster ride began in early March, with three weeks of substantial volatility. First, two major US regional banks (Silicon Valley Bank [SVB] and Signature Bank) failed. Then, one of the 30 global systemically important banks, the Switzerland-based Credit Suisse, lost its autonomy after a government-facilitated takeover by UBS.

In the process, market and depositor confidence dissipated in key parts of the sector, with adverse repercussions in investor and consumer confidence.

To prevent the situation from affecting more banks, global industry regulators – including the Federal Reserve, the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank – were compelled to intervene and provide extraordinary liquidity.

How could it all happen – again?

Bank analysts would say that the lead-up period saw many banks invest their reserves in US Treasury securities. So, when the Fed sharply tightened financial conditions last year to rein in surging inflation, companies found it challenging to raise cash, which triggered deposit outflows.

To meet those outflows, SVB sold its long-term Treasuries at great loss. As a capital raise to cover the losses fell apart, a huge run on deposits ensued leading to the largest bank failure since the 2008 financial crisis. What compounded challenges was several banks’ exposure to the bursting cryptocurrency bubble. These events sparked a broad migration of deposits from the banking sector to money market funds while migrating to global systemically important banks, thus forcing some banks to source liquidity from the Fed – the mistakes of which had compounded the challenges in the first place.

After mid-year 2021, when inflation started to climb rapidly, the Fed shunned a timely response. Instead, its chairman downplayed the threat of soaring prices calling them “transitionary.” The stunning complacency proved costly. By mid-2022, US inflation peaked at 9.1%; a four-decade high. And it remains around 5%, more than twice the 2% target. That’s too why the Fed raised the fed funds rate by 25bps to a range of 5%-5.25% in its May meeting.

If the Fed’s monetary pain wasn’t enough, the White House’s foreign policy has contributed to runaway inflation and elevated uncertainty. After years of trade protectionism, the global pandemic and depression, the net effect of the high-cost US/NATO-led proxy war against Russia in Ukraine has been a lethal mix of a global energy crisis and the meltdown of the global food system.

The spread effects

The elusive calm until the demise of First Republic Bank did not reflect the end of the crisis, but its steady progress. As Mohamed El-Erian, chief economic advisor at Allianz, put it last week. “Now we have stage two, where banks that are not particularly badly managed they have issues but they’re not particularly badly managed – are suddenly vulnerable.” In other words, “the cancer within [these banks] is starting to spread.”

As credit conditions are tightening, the risks of further contraction rise with banking contagion. Structural vulnerabilities remain huge. In parallel with the demise of SVB in March, one consequential study indicated that almost 200 more banks may be vulnerable to the type of risk that caused the collapse of SVB. These banks across the US could fail if half of their depositors quickly withdraw their funds. Even insured depositors — those with $250,000 or less in the bank — could have problems getting their cash if these institutions face the kind of run that SVB experienced.

According to the co-author of the study, a banking expert at Stanford University, half of US lenders are underwater: “Let’s not pretend that this is just about Silicon Valley Bank and First Republic,” he said recently. “A lot of the US banking system is potentially insolvent.” Presumably, some 2,315 banks across the US are currently sitting on assets worth less than their liabilities.

Still worse, the lingering banking crisis occurs at a time, when the White House is engaged in the largest war funding in decades and the Congress has wasted half a year failing to agree on a debt limit.

U.S. default risk as an “economic and financial catastrophe”

A week ago, US Treasury Secretary Janet Yellen warned that the US will run out of cash by June 1 if Congress fails to raise or suspend the debt ceiling. She urged Congress to act “as soon as possible” to address the $31.4 trillion limit. President Biden has called a meeting of congressional leaders on the matter on May 9.

The US hit the statutory limit already last December. Since then, Yellen has repeatedly warned that “failure to raise U.S. debt ceiling would lead to “economic and financial catastrophe.” Unsurprisingly, the Biden administration is under mounting pressure to reconcile the conflicting demands.

Historically, the debt ceiling has been raised, extended or revised 78 times since 1960. If this time is different, it will have significant and adverse global repercussions. If, however, a new debt limit arrangement will be achieved, it can only happen by taking more debt. In this case, Washington will delay its default by buying time, which will make the eventual US debt crisis worse.

The economic fundamentals and safety nets that prevailed in 2008 have been largely exhausted. The West is navigating in perilous waters with leaking lifeboats.

About the Author:

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net 

Opinions Stock Market News
09 May

US inflation progress might stall, but Fed must drop rate hikes agenda

By George Prior 

Progress in slowing down US inflation is likely to have stalled, the consumer price index report is expected to show tomorrow – but the Federal Reserve must “resist the temptation” for further interest rate hikes.

This is the warning from Nigel Green, the founder and CEO of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations, ahead of the release of US inflation data on Wednesday that will play a key role in shaping the Fed’s interest rate plans moving forward.

He says: “We expect that The Bureau of Labor Statistics on Wednesday will show higher prices for core goods – fuelled by rising prices of vehicles – which will have the effect of counteracting cooling prices more generally.

“In addition, America’s employers added a sizeable 253,000 jobs in April, showing that the labor market is still surprisingly resilient.

“All this, we believe, will act as a spur to the Federal Reserve to raise rates again at their next meeting in June, after having hiked them last week to a range of 5 to 5.25%, its tenth increase in 14 months, and the highest since 2006.

“I would urge the US central bank to resist the temptation to do so.

“Rate hikes are a blunt instrument as they function by taking the heat down across the board, meaning parts of the US economy, which is already slowing, are likely to get broken.”

The deVere CEO continues: “US inflation has been coming down each month since it hit 9.1% in June 2022.

“We expect headline CPI will come in at an annual rate of 5% for April – the same as in March – meaning that progress to bring down US inflation would have stalled.

“Let’s hope this isn’t a trigger for the Fed to continue on with its rate hike agenda.”

Nigel Green cited three reasons why he believes the US central bank was wrong to have raised rates last week and why it would be wrong to do so next time too.

“First, the crisis within the US financial system is still not over. There remain serious and legitimate concerns that after a string of bank failures, there could be more to come,” he noted.

“The turmoil from the banking crisis is leading to a drop in bank lending, tightening the credit conditions for households and businesses. In turn, this will inevitably lead to a slowdown in economic activity and hiring.

“The Fed’s interest rate hiking agenda has tightened financial conditions which, in part, led to the banking crisis, and now the banking crisis itself is going to put the squeeze on financial conditions even more.

“Second, the time lag for monetary policies is very long. It is said that it takes about 18 months to two years for the full effect of rate hikes to filter fully into the economy.

“Third, the bond market is suggesting a long and/or deep recession with its inverted yield curve. Yields are inversely related to bond prices.”

This is typically the sign of a coming recession – an inverted yield curve has emerged roughly a year before nearly all recessions since 1960.

He concludes: “Investors will pour over the data for clues on the Fed’s policy path on interest rates.

“Regarding the central bank’s future plans, investors will likely be hoping for the best but fearing the worst.”

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.

Economics & Fundamentals Financial News
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