It seems that the Fed’s appetite for a rate hike is still open
It seems that the Fed’s appetite for a rate hike is still open,
The Fed did not care about any risks related to raising interest rates to this extent in that short time
and continued to tighten in the short term to reach its goal of curbing inflation and bringing it to satisfactory levels.
The Fed appears to have begun to recognize the magnitude of the danger that the rush to increase interest rates entails,
and it is evident from them that the Fed is still indecisive about rising interest rates in the near future.
This division was evident in the vote to keep rates unchanged at the meeting,
with seven members voting for a rate hike and five against it.
The minutes also showed that there was a discussion among members
about changing the language in their statement to signal a potential rate hike later this year,
However, no agreement was achieved on this point.
where a large number of participants indicated the need to complete the march
and go in the direction of raising interest rates and tightening economic policies,
but this must be done gradually. To avoid the economic and financial risks that the world is going through at present.
Many participants agreed that the cost of taking a few measures to reduce inflation
is likely to outweigh the cost of taking more extensive measures,
as the impact of the attempts to rein in inflation that the Fed is now making,
the meeting resulted in the approval of the US central bankers to boost the
borrowing rate by 75 basis points for the third time in a row,
the target range was raised from 3% to 3.25%,
as stated in today’s publication of the Federal Reserve meeting.
The expectations of federal officials and policymakers came as many
participants noted that as policy moves into a restrictive area,
risks will become more bilateral,
indicating the development of the negative risk that the cumulative limitation on
aggregate demand would be greater than what is necessary to bring inflation to levels close to two
The notion of rising it to 4.4% by the end of the year has become plausible,
It is also expected to grow to 4.6 million in the coming year.
Last month’s participant expectations and projections were also made public.
These subsequent actions had a considerable influence on the stock market,
especially when the minutes of this meeting were made public.
Bond yields remained low, and traders wagered that the Fed will hike interest rates by another 75 basis points next month.
It is also expected to raise the unemployment rate to 4.4% due to
high borrowing costs and a significant growth slow that may reach 1.2% during 2023.
Japanese investors dumping the Yen, Investors in Japan are increasingly turning to foreign currency deposits as a way to diversify their portfolios and take advantage of higher yields.
Bank of Japan data shows that foreign currency deposits at domestic banks surged 8.3% in the first eight months of this year, to 26.58 trillion yen ($182.38 billion).
This is the highest level since 2015, suggesting that investors are becoming more comfortable investing in overseas markets.
One key reason for this shift is that interest rates remain low in Japan, despite increases by other major central banks around the world.
This has made Japanese government bonds less attractive, especially compared to bonds from countries with higher yields.
For example, 10-year U.S Treasury yields are currently around 4 percentage points higher than equivalent Japanese government bond yields.
Investing in foreign currency deposits offers investors a chance to both diversify their portfolios and earn greater returns on their investment than they would by keeping their money in yen-denominated assets.
In addition, with the Bank of Japan unlikely to raise interest rates any time soon, the appeal of these investments is likely to continue.
The yen has weakened about 7% against the dollar this year and is trading near a two-year low.
Yen Weakness Impacting Japan
Some Japanese investors have been turning to foreign exchange margin trading to bet on further yen weakness.
The value of outstanding margin loans in yen terms hit a record high of $40.3 billion in August, up from $37.6 billion at the end of last year, according to data from the Tokyo Stock Exchange, “Foreign-currency deposits, a focus for relatively long-term investment,
increased along with yen depreciation this year and may have contributed to an extent to this year’s decline in the yen,”
said Lhamsuren Sharavdemberel, Barclays Bank analyst.
Foreign currency deposits have risen in popularity in recent months as the yen has fallen to 24-year lows.
Because retail investors may borrow up to 25 times their funds as leverage, margin trading volume increased to a record 1,229 trillion yen in June.
Given the current context of low-interest rates and prolonged yen weakening, analysts anticipate a significant rise in foreign currency deposits. At the end of June, households had a record 1,102 trillion yen in cash and savings, indicating that there is plenty of idle capital available for investment.
The increase in interest rates comes at a time when Japan’s central bank is attempting to arrest the yen’s slide with harsh interventionist measures.
Japan’s foreign reserves declined to $1.238 trillion at the end of September as a result of these measures, “Most of the increase, of course, is attributable to the change in valuations due to the weaker yen,” he said. But there was a big increase even after adjusting for nominal exchange rate changes in the yen”, said Lhamsuren.
Against the Dollar
The yen has been one of the biggest casualties of the dollar’s surge.
It is down 6% against the greenback this year and is now trading at its weakest level since early 2017.
While the yen originally rose following the intervention, it has now fallen back to roughly 145 against the dollar,
back to where it was before Japan’s major currency move.
The Japanese currency had recovered somewhat following intervention by the Bank of Japan in late September,
but it has since given up those gains and is back to where it was before the central bank’s move.
There are a few reasons for the yen’s weakness.
One is that Japan relies heavily on exports, so a strong dollar makes its products more expensive overseas and hurts demand.
The US dollar has been on a tear this year, thanks mostly to interest rate rises by the US Federal Reserve.
As a consequence of a dramatic market decline that has seen the S&P 500 drop 24% since the beginning of 2022, investors have sought refuge in secure assets such as dollars.
Additionally, with interest rates in Japan still near zero, there isn’t much incentive for investors to hold onto yen-denominated assets.
And finally, as China’s currency reserves have declined, there has been less demand for the yen as a funding currency.
The Chinese foreign currency declined from $3.055 trillion in August to $3.029 trillion in September.
Chinese officials blamed the drop on declining asset prices driven by the rising dollar.
What the future holds for the yen?
All things considered; it looks like the yen could continue to weaken against the dollar in the near term.
However, given that Japanese officials are likely to intervene if they feel that further depreciation would be harmful to their economy,
investors should keep an eye on developments in this situation.
Metal commodities are Taking a Dive, in early U.S. trade Monday, Gold and Silver prices are sliding dramatically, dragged down by a higher dollar index, rising Treasury rates, and lower crude oil prices.
The United States Federal Reserve’s severely restrictive monetary policy hovers over the precious metals markets. At the time of writing, December gold was down $19.20 at $1,666.10, while December silver was down $0.40 at $19.86.
Global stock markets were mostly lower overnight.
US market indexes are projected to open slightly lower when the New York day session begins. Monday is Columbus Day, and many government agencies and banks are closed in the United States.
This week’s stock market traders will be paying close attention to a wave of firm earnings reports.
Gold prices have been under pressure in recent days as the US dollar continues to strengthen.
The gold price fell to a one-week low of $1,661 early Monday morning in Europe and is currently trading at $1,667, down 0.3% on the day.
As a result, the bullion investigates the two-week bounce from the annual low amid a dull day in the US, Japan, and Canada.
Fundamental View
The gold price (XAU/USD) has fallen for the fourth day in a row, as bears prepare for a new annual low around a one-week low.
However, the yellow metal’s recent decline might be connected to the strength of the US dollar,
which is supported by multi-year high Treasury rates and hawkish Fed expectations.
It’s worth noting that worries of an economic slowdown and recently muddled Fedspeak haven’t deterred dollar bulls,
with markets pricing in 75 basis points (bps) of the Fed’s rate rise in November.
Russia
Worrying statements from the World Bank (WB) and the International Monetary Fund (IMF) combine the recent
Russia-Ukraine spat deepened the risk-off attitude and led traders towards the US dollar,
weighing on the XAU/USD prices, also what should be highlighted is that Russian
President Vladimir Putin’s displeasure with the Crimean bridge explosion also calls into question the mood and weighs against gold prices.
USD and Jobs Data
Moreover, the US central bank’s upbeat predictions contrast with the market’s recent
projections of a stop in the rate rise trajectory amid an economic downturn.
The cause also might be tied to the more robust September US jobs data and aggressive Fedspeak.
China
Furthermore, contradictory news from China and geopolitical concerns from Moscow and Beijing put downward pressure on XAU/USD values.
Due to Beijing’s prominence as a significant commodities user, China’s September PMIs join worries of rising Sino-American squabbles drowning out gold prices.
Technical levels
Since last week pressure has been mounting on gold prices as the US dollar continues to grow stronger.
The US dollar index (DXY) is currently trading at 92.50, up 0.3% for the week, and gold may struggle to find direction in the short term as investors seek new triggers.
Today’s economic schedule in the United States is light but technical levels are worth watching.
The bulls in gold, a push over the $1680 resistance mark could give prices some traction with a move towards $1700, possible if this level is breached convincingly enough.
On the downside, support lies around 1660 dollars per ounce and a break below here could see selling pressure intensify with a move back towards last week’s lows around 1640 dollars per ounce.
The silver bulls have lost their tiny overall near-term technical edge.
The next price target for silver bulls is to close over sturdy technical resistance at the October high of $21.31.
The bears’ next negative price target is to close below sturdy support at $18.00.
The first resistance level is $20.00, followed by today’s high of $20.21.
The next level of support is expected at today’s low of $19.62, followed by $19.25. Wyckoff’s Market Score: 4.5.
The nonfarm payroll report’s publication can have a substantial influence on financial markets that comes out on
the first Friday of every month highlighting the previous one.
Investors and traders regularly monitor this data to gain a sense of where the economy is headed.
A healthy labour market often leads to increased consumer spending, which promotes economic growth.
According to the most recent nonfarm payroll data, employment growth slowed in August but remained strong overall.
The unemployment rate stayed stable at 4%, close to historic lows. Wages increased as well,
but at a slower rate than in prior months. Overall, this was regarded as good news for the economy,
indicating that, despite some slowing in employment creation at the time of writing, there was still robust demand for workers.
The US Dollar is strengthening as unemployment rates fall to a five-decade low,
it has reached its highest level in more than two years, as the US economy continues to improve,
the US dollar index, which measures the greenback against a basket of six major currencies, rose 0.4% to 97.74. In July, the US economy added 164,000 jobs, and the unemployment rate fell to 3.9%, its lowest level since December 1969.
Strong US Dollars
The robust jobs data has increased the likelihood that the Federal Reserve will hike interest rates again in November, with a string of solid economic data releases, including retail sales and inflation, which has also strengthened the US dollar.
Market Speculations
If US nonfarm payrolls exceed expectations in October 2022, the EUR/USD might fall below $0.97, the nonfarm payrolls in the United States are predicted to rise by about 1.5 million by October 2022, which makes the EUR/USD under pressure after a continuation of the bearish trend from earlier this week, as the exchange rate approaches the October low 0.9640. If this happens, it could mean big things for investors and traders alike, the EUR/USD may continue to reverse the previous week’s gains as it approaches the October low (0.9640), but a lack of momentum to test the 0.9700 to 0.9720 area may prompt a larger correction as it approaches the Fibonacci overlap around 0.9760 to 0.9770. Otherwise, a move below the 0.9640 regions may open up the downside targets of 0.9610 and 0.9570, but the Fibonacci overlap around 0.9530 to 0.9550 may offer a near-term floor for EUR/USD as it approaches the monthly range’s bottom.
US Stocks are at their lowest
Stock index futures are typically volatile early Friday as Wall Street anticipates the September employment data for 2022. Equity bulls are probably expecting weaker-than-expected payroll data, which would provide the Fed with some breathing room. This week, authorities have emphasized the hawkish stance, and one of the key reasons is a tight labour market. The employment data comes at a key time in the stock market too, the S&P 500 Index is trading at a record low, and the Dow futures fall 200 points as rates pop on September’s jobs report.
Weak Euro
The EUR/USD lost early gains as German data came into play as well. Figures from the US labour market may reflect more of the same, weak industrial production and retail sales provide further evidence that the German economy continues to slide into a recession
After increasing by 0.3% in July, industrial production fell by 0.6% in August, and the EUR/USD erased early gains and was trading at 0.9758 at the time of writing, despite economists’ predictions of a 0.4% decrease. Today, the labour market numbers in the United States have been reviewed, and they may offer further information on the state of the US economy and the Fed’s next move.
President Ilham Aliyev of Azerbaijan was also present at what looked to be a casual gathering of the three leaders.
Turkey and Armenia, which have no diplomatic relations, agreed last year to begin negotiations to end decades of
hostility and reconnect their shared border. Since then, the two countries’ special envoys have had four rounds of discussions.
A ceasefire between Azerbaijan and Armenia has been in effect since 1994 and agreed
last year to start talks aimed at putting decades of enmity behind them and reopening their joint border. On the European side Liz Truss, Macron and Dutch Prime Minister Mark Rutte held talks on migration since the
The U.K. is facing an issue and seeking further help in preventing migrants from reaching its shores without authorization.
Macron was even cautiously optimistic that the EU and the U.K. might be able to put their Brexit differences behind them.
“I do hope this is a new phase of our common relations and that this is the beginning of the day after,” he said,
U.K. Prime Minister Truss added “Leaders leave this summit with a greater collective resolve to stand up to Russian aggression.
What we have seen in Prague is a forceful show of solidarity with Ukraine,
and for the principles of freedom and democracy,”
Russian Heat Is Rising
Russian heat is rising, In his first public remarks since the poisoning of a Russian opposition leader,
Putin said he “didn’t understand” what had happened in Salisbury, England.
But he added that it was “unacceptable” to level accusations against Russia without providing evidence.
The EU has been working on an energy union for years, but progress has been stymied by disagreements between member states.
Leaders hope the summit will help break that impasse and allow them to move forward on projects like the
Nord Stream 2 gas pipeline, which would bring Russian gas directly to Germany. “We have demonstrated the solidarity of 44 European nations, who have clearly stated, all 44, that we condemn
Russian aggression and defend Ukraine,” Macron added. That bears a lot of significance.”
Leaders have marketed the meeting as an opportunity to advance energy infrastructure projects and reduce the
number of refugees wanting to enter Europe.
Macron underlined the topics
on which leaders have agreed to engage before the next summit in Moldova,
including the safeguarding of “critical infrastructure” such as pipelines, underwater cables, and satellites.
“We need a European approach to protect them,” he said after two gas pipes in the Baltic Sea were vandalized. “There are no representatives of Russia with us here — a state that geographically appears to belong to Europe but is the most
anti-European state in the world in terms of values and behaviour,” Ukrainian President Volodymyr Zelenskyy said, adding,
“We are now in a strong position to direct all possible powers of Europe to end the war and ensure long-term peace.”
“For Ukraine, Europe, and the rest of the world.” The meeting focused on the Balkans crisis, with Macron asking EU leaders to maintain their pledges to
Western Balkans countries are keen to join the EU. “We must keep our promises,” he said, adding that
France will continue to support the EU’s efforts to foster regional stability, peace,
and development in the Western Balkans.
This is a very important issue for all investors and traders because if there is instability in this
the region it could lead to problems in other parts of Europe as well.
Cold Winter is Incoming
Cold winter is incoming, The European Union is made up of many different countries, each with its own unique needs and interests.
As such, it can be difficult to find consensus on important issues like energy policy.
The EU is currently facing disagreements over how to address high energy prices. Some member states
believe that the best way to reduce energy costs is through increased efficiency. The EU has proposed an
energy efficiency rule that would require businesses to reduce their energy use by 1.5 percent each year.
This would help the EU meet its climate change goals, but other nations believe that it would be too
expensive and place them at a competitive disadvantage… There are differing opinions on how best to approach this issue within the European Union.
However, leaders must remember that they are representatives of all member states and not just those
who share their particular viewpoints. For the EU to make progress on this issue,
leaders will need to find a way to compromise and come up with a solution that works for everyone involved.
Long debates
are sure to ensue about whether and how a petrol price ceiling may help ease the issue.
Several member nations support gas price caps, while others, particularly Germany, warn of the dangers. Ursula von der Leyen, President of the European Commission, has expressed interest in temporarily restricting gas prices,
but did not elaborate on how this could be accomplished.
Regulating the price of Russian gas imports
lowering the price of other gas imports, and restricting the price of gas used for
power production, and capping the price of gas transactions within the bloc are all ideas for gas pricing measures. The proposal has been criticized for potentially providing Germany and its industry an edge since other nations
cannot afford such national policies. Energy costs in the EU are increasing as Russia reduces its energy exports
dramatically and EU members race to acquire gas and other commodities elsewhere. These high energy costs
place a greater burden on businesses, which must be passed along to consumers in the form of higher prices.
Critics argue
Critics argue that this policy would only benefit Germany, as other nations would not be able to afford to
implement similar policies. This could create an unfair advantage for German industry, as they would have access to
cheaper energy while their competitors would not. Additionally, this policy could further increase tensions between
EU member states, as those who are unable to implement similar policies, may resent Germany for having an advantage. Supporters of the policy argue that it is necessary to protect German jobs and industries from being outsourced
to countries with lower energy costs. They argue that if implemented correctly,
this policy could help reduce overall energy costs across the EU by encouraging competition among suppliers.
US job openings drop significantly, and the number of job openings in the United States fell sharply in February, pointing to a cooling labor market that could boost risk appetite among investors.
The Labor Department said on Tuesday that job openings, a measure of labor demand, declined by 10% from the 11.17 million reported in July and more than a million less than expected.
Economists had expected job openings to fall since reaching a record high of 7.63 million in July 2019 as businesses cut back on hiring amid a slowing economy.
The decline in job postings suggests that companies are starting to feel less confident about their business outlooks and may be more hesitant to add workers.
As the Fed maintains its stance, stocks stage a tremendous surge but may have hit a wall.
As a result of the Fed’s pledge to keep rates low for the foreseeable future, stocks had a significant surge today on the stock market. In the first hour of trade, the Dow Jones Industrial Average increased by more than 400 points or 1.6%. The Nasdaq Composite and the S&P 500 both increased by roughly 2%.
However, the Fed’s policy statement may have caused the rally to falter. The central bank indicated that it would “keep a careful watch” on inflation and employment, indicating that it was not in a rush to hike rates.
The central bank indicated that it would “keep a careful watch” on inflation and employment, indicating that it was not in a rush to hike rates.
The Dow fell more than 100 points from its day’s highs as a result of the remark. The Nasdaq and S&P 500 both declined.
Investors were closely monitoring the most recent developments in the U.S.-China trade dispute. The two nations will pick up their trade negotiations again the following week, and there are rumors that the United States is considering a partial agreement that would suspend some duties.
The US dollar drops
The US dollar retraced some of its losses on Thursday but the kiwi bucked the trend after the Reserve Bank of New Zealand hiked interest rates. The RBNZ raised rates by 25 basis points to 1.75% as expected, but signaled that it was in no hurry to raise rates further. This weighed on the kiwi, which fell against most major currencies except for the Australian dollar and Japanese yen.
Against the greenback, NZD/USD fell to a low of 0.7273 before recovering somewhat to trade at 0.7300 in early European trading hours. The pair is likely to find support at 0.7250 and resistance at 0.,7350 Traders will be closely watching Friday’s release of US non-farm payroll data for clues about future Fed rate hikes. A strong jobs report could give the dollar a boost while a weak report could see the kiwi resume its rally.
