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Inflation

What Happens When the BoJ Kills its Yield Curve Control?Yield Curve Control (YCC) has kept interest rates on ten-year Japanese government bonds within a narrow range close to zero percent since 2016. The Bank of Japan (BOJ) employs YCC to target short-term interest rates at -0.1% and to maintain the 10-year government bond yield within 0.5% above or below zero. In 2016, Japan was grappling with over a decade of sluggish growth and the issue of deflation, where prices of goods decline. To avoid purchasing huge amounts of the bond market, Yield Curve Control (YCC) was introduced to maintain interest rates at their existing levels. But now, Japanese annual inflation has reached 3.3% as of February, which suggests that Yield Curve Control (YCC) may no longer be needed. The Bank of Japan (BoJ) has faced criticism for distorting markets with the YCC while inflation has exceeded its 2% target. As a result, the BoJ is considering phasing out YCC, which could have significant consequences for US and Japanese bonds and the USD/JPY exchange rate. So, what will happen when the Boj decides to Kill its YCC? Japanese investors have been disappointed for the past seven years in the returns on domestic bonds since interest rates have been fixed close to zero. This has prompted many to consider investing in US bonds which have become highly appealing, resulting in trillions of Yen being invested in them. A relaxation of the YCC by the Bank of Japan on the 10-year rate could potentially make Japanese government bonds more appealing to domestic investors. This could result in a significant amount of money repatriating to Japan and have a major impact on global markets. There are two potential outcomes if Japanese investors repatriate their funds and invest more in Japanese bonds. Firstly, the interest rates for US bonds may increase, leading to tighter financial conditions and a slowdown in US economic activity. Secondly, there may be a weakening of the US dollar, especially the USD/JPY, as investors sell their USD to buy JPY for repatriation. The USD/JPY is currently in the range bound between around 138.00 and 129.500. But a downside potential to a level like 116.00, which has not seen since early 2022 if a knee-jerk reaction eventuates. Ultimately, how drastic these outcomes turn out will depend on the selling pressure and timing of Japanese investors in reaction to a relaxation of the YCC. But how likely is it that the BoJ will loosen its control of the yield curve? Japan's new central bank Governor, Kazuo Ueda, has suggested that the policies of his dovish predecessor, Haruhiko Kuroda, will eventually be phased out. However, the BOJ is likely to avoid changing its policies until it is certain that inflation will reach and maintain its 2% target. Next week, On April 27-28, Ueda will preside over his first BOJ policy meeting, during which the board will release new quarterly growth and inflation forecasts that will be scrutinized for indications of how soon the central bank anticipates inflation will reach its target sustainably. Speaking last week, on April 10th, Ueda emphasized the need for the BOJ to make proactive decisions regarding the timing of policy normalization. He warned that delaying the adjustment could lead to disruptive consequences.
by BlackBull_Markets
DXY (Long) - Temporary bottom for the dollar The dollar has fallen significantly on the back of falling interest rates and the bank crisis Currently sitting at a crucial support going back several years My thesis is a temporary bounce up to the 50SMA on the weekly Bullish engulfing candle on the daily suggesting a temporary reversal The yields on bond have also slightly reversed, hitting a 50SMA on the weekly; yields and the dollar collerate This strategy could be also used for any of the USD pairs of your choice, whichever one shows the more strength relative to the dollar It is a short-term trade with very good risk/reward I would use the support line as a stop-loss Follow me for more analysis & Feel free to ask any questions you have, I am happy to help If you like my content, Please leave a like, comment or a donation , it motivates me to keep producing ideas, thank you :)
ICEUS:DX1!Long
by jurajholik
us10y 4-14-23gm, called the top on the us10y last year as well. (view post at the bottom of this thread). swinging by to actually adjust my public bias, after a few recent discoveries. --- jerome powell explicitly mentioned in a few of the recent talks that the fed is going to raise the interest rates above 5%, and keep them there for some time. what this tells me, is they're expecting inflation to tick back up - or they're taking the extra precautions to ensure that this indeed doesn't take place. --- what i am implying here in my count - is an extension to 5.9% (at the bare minimum). this could mark a top, unless we pull back in three waves (the same we did from the recent top). 👇
TVC:US10Y
by notoriousbids
2
GBP/USD - Another strong week for the British poundThe British pound is poised to post its fifth successive winning week. During this time, the GBP/USD has sparkled, rallying almost 500 points. This week's UK releases have not been as positive as the pound's upswing. GDP was flat in February on a monthly basis, down from 0.4% in January and unable to hit the estimate of 0.1%. Manufacturing Production was also flat and Industrial Production came in at -0.2%. Inflation remains in double digits, despite the Bank of England's aggressive rate policy, which has raised the benchmark cash rate to 4.25%. The combination of high inflation and rising interest rates has created a cost-of-living crisis and is weighing on businesses as well. To make things even worse, the country has been hit by widespread strikes in the public sector, as workers protest the drop in real income due to soaring inflation. An IMF forecast released this week indicated that the UK economy is projected to be the worst performer in the G20, which includes Russia. The economic situation isn't pretty, and the government and the BoE are under strong pressure to right the ship, and fast. Finance Minister Hunt has said he'll cut inflation in half and a recession can be avoided, but it's hard to share his optimism. This week pointed to further deceleration in inflation levels in the US. Headline CPI fell to 5.9%, down from 5.0%, although the core rate nudged up to 5.6%, up from 5.5%. The Producer Price Index declined to 2.7%, down sharply from 3.4%, and the core rate eased to 3.4%, down from 4.8%. Will the drop in inflation be accompanied by a decline in consumer spending? The markets are bracing for a soft retail sales report for March. Headline retail sales is expected to fall by 0.4% y/y and the core rate is projected to decline by 0.3% y/y.  A weak release could push the US dollar lower, as there will be more pressure on the Fed to consider pausing its rate hikes at the May meeting. GBP/USD touched resistance at 1.2537 earlier. The next resistance line is 1.2656 There is support at 1.2405 and 1.2282
by OANDA
Will we see a News Correction? 🙊 Inflation Data EU has been moving quite violently and was expected with inflation data. We took advantage of the momentum and took 4 buys as price left the 1.0922 key level. We originally took Sells from this level which played out nicely. However, just as we did last week, Price dips hard early in week. Then soars as the week progresses using news as a catalyst for a continuation of momentum. With new 4hr candle here, we may anticpate a top wick on the next 4hr candle. We may stretch to 1.103 daily/weekly wick fill today or tomorrow. That's short term target with this momentum. Most of the time the news corrects but also the market is very sensitive to cpi data . especially in recent months for obvious reasons. More Analysis: It is a good for bulls that the 4hr candle is closing above our daily Level at 1.09885. We also have clean traffic to the left hand side on the 4hr for bulls. For Bears we have the argument that we already have significant engulfing daily bullish candle. Additionally , fomo after some missed the entry from 1.0922 pre-news. Also 1.10 is a psycholigcal level for bulls and bears. So we may see some profit taking before heading any more north to Weekly wickfill at 1.103
Long
by ShrewdCatfx
2
AUD/USD - Australian dollar jumps on sizzling jobs reportAustralia posted a blowout employment report today, giving the Australian dollar a strong boost. The economy created 53,000 new jobs in March, after a downwardly revised 63,600 a month earlier. This crushed the estimate of 20,000 and especially impressed as full-time employment increased by 72,000 (part-time decreased by 19,200). Unemployment was unchanged at 3.5%, below the forecast of 3.6%. What can we expect from the RBA? The central bank paused in March for the first time in the current rate-tightening cycle and Governor Lowe made clear that another pause was data-dependent. The next meeting is on May 2nd and the odds of a pause have eased to 78%, compared to 94% before the employment release. Australia releases the March inflation report less than a week prior to the meeting, and if inflation is higher than expected, the RBA will have to consider a 25-basis point increase in order to cool down the job market and inflation. The recent bank crisis, which roiled the global financial markets, appears to have eased. Still, the extent of the fallout of the collapse of four US banks and Credit Suisse is not yet clear, and central banks need to give consideration to the crisis in mind as they determine their rate path. RBA Deputy Governor Bullock addressed this issue on Wednesday, saying the RBA had considered a pause well before the bank crisis, and the bank decided on the non-move in order to protect job gains and to take into account lags in rate policy. Bullock maintained that there were no signs that the bank crisis had caused a tightening in financial conditions in Australia. There is resistance at 0.6897 and 0.6791 AUD/USD tested support below 0.6700 earlier today. The next support level is 0.6608
by OANDA
DXY Potential Forecast | Post CPI | 13th April 2023Fundamental Backdrop 1. CPI m/m printed 0.1% compared to forecasted at 0.2% 2. Fed hikes effects really slowing inflation down 3. USD fell shorting after, signifying the slowing down of inflation at a faster pace than what the market has been pricing in. Technical Confluences 1. Price rejected off resistance at 102.8. 2. Price looks good to form a new higher timeframe low and continue its bearish trajectory. 3. There has not been a strong confluence for any longs on the DXY thus far. Idea We are looking for price to continue its bearish trajectory till 101.67 and the probability of it forming a new low is now high. NOT FINANCIAL ADVICE DISCLAIMER The trading related ideas posted by OlympusLabs are for educational and informational purposes only and should not be considered as financial advice. Trading in financial markets involves a high degree of risk, and individuals should carefully consider their investment objectives, financial situation, and risk tolerance before making any trading decisions based on our ideas. We are not a licensed financial advisor or professional, and the information we are providing is based on our personal experience and research. We make no guarantees or promises regarding the accuracy, completeness, or reliability of the information provided, and users should do their own research and analysis before making any trades. Users should be aware that trading involves significant risk, and there is no guarantee of profit. Any trading strategy may result in losses, and individuals should be prepared to accept those risks. OlympusLabs and its affiliates are not responsible for any losses or damages that may result from the use of our trading related ideas or the information provided on our platform. Users should seek the advice of a licensed financial advisor or professional if they have any doubts or concerns about their investment strategies.
TVC:DXYShort
by OlympusLab
DXY Outlook 13 April 2023The DXY broke down from the 102 support level (now turned resistance) following the release of the US CPI data overnight. CPI y/y was released at 5% which indicated a consistent slowdown in inflation growth for the US, leading to increasing market expectation that the Federal Reserve is likely to pause on further interest rate hikes (hence the significant move lower on the DXY. Currently trading at the 101.50 price level, the DXY is likely to consolidate along this price level before continuing with the downtrend toward the next key support level of 100.85. However, watchout for a brief bounce on the DXY, with the 23.6% fib retracement at the 101.77 price level providing possible interim resistance.
TVC:DXYShort
by JinDao_Tai
1
BLDR (Long) - lovely chart, lovely fundamentalsFundamentals Builders FirstSource is in a robust financial situation and very cheaply valued (P/E = 4.6, P/S = 0.6) Since the start of 2011, its revenue has tripled and earnings grew by almost 900%! Even last year when the market was puking, its earning grew by 60% Their profitability is also good with ROE = 55.4% (Industry = 17.9%) and net profit margins at 12.5% The stock is very much tied to the housing sector (which is also the main caveat), so if the housing market were to absolutely fall off the cliff (which is not completely unlikely), the stock would suffer. However, estimates already show BLDR's earnings falling in the next two years (meaning they have already been priced) and the stock is still rising, suggesting a lot of internal strength Additionally, the managers announced a share buyback program and we might see them buying 10% of the public shares by the end of 2023, which would serve as a strong tailwind for the stock price However, be mindful of the housing market (I suggest watching the chart of house builders - ticker: XHB) Technicals Technicals look like from a textbook On a weekly we can see a massive rounding base , suggesting a long-term accumulation; the break was not the cleanest, but the price action of the last few days suggest a follow-through in price Relative strength to the overall industry is also pretty impressive and the stock clearly outperforms the rest of its industry Trade The stock has gone a bit further from the breakout point , but it pulled back today and it is yet not too far as for it to be unprofitable to enter As a stop-loss , I would use the most recent low on a daily The stock seems very suitable for a short-term trade as well as a longer term investment As i mentioned before, be mindful of the housing market and commodity prices (lumber, copper etc.). The stock is correlated to both Follow me for more analysis & Feel free to ask any questions you have, I am happy to help If you like my content, Please leave a like, comment or a donation , it motivates me to keep producing ideas, thank you :)
NYSE:BLDRLong
by jurajholik
1
EUR/USD - Euro gains ground as investor confidence improvesThe Eurozone economy continues to recover, but there is plenty of work ahead. The Sentix Investor Confidence index improved to -8.7 in April, above the March read of -11.1 and better than the estimate of -11.7 points. The concerns over an energy crisis in Europe this winter failed to materialize and Germany and the rest of the eurozone came out of the winter better than many had expected, given the weak global economy and the Russia-Ukraine war. Still, the economic outlook remains pessimistic, as Sentix Investor Expectations remain negative in both Germany and the eurozone, at -13 and -11.5, respectively. Still, the markets were pleased with the slight improvement in investor confidence and the euro has responded with gains of around 0.60%. Eurozone retail sales slipped to -0.8% in February, matching the forecast but contracting after an upwardly revised 0.8% gain in January. Consumers are struggling with high inflation, rising interest rates and uncertain economic conditions and are keeping a tight grip on their wallets and purses. The ECB meets next on May 4th and all indications are that it will deliver another oversize rate hike. The central bank has been aggressive, raising rates by 50 and 75 basis points in recent months. The ECB was very slow to join the rate-hiking party and the benchmark rate is only 3.50%, compared to 4.25% for the Bank of England and 5.00% for the Federal Reserve. Inflation in the eurozone has proven to be a tougher foe than expected, and core inflation surprised by accelerating in February. The US releases the March inflation report on Wednesday. Inflation has been falling, albeit at a slower pace than the Fed had expected. This has necessitated additional rate hikes, with a 25-bp increase expected at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%. EUR/USD is testing support at 1.0889. Below, there is support at 1.0804 There is resistance at 1.0989 and 1.1074
by OANDA
DXY Potential Forecast | Pre CPI | 11th April 2023Fundamental Backdrop 1. CPI tomorrow will give greater clarity to the direction of the USD. 2. Last week's NFP result was positive and bullish for the USD, with unemployment rate falling to 3.5% yet again. 3. CPI m/m forecasted at 0.2% compared to previous 0.4%, market has been pricing in a further slow down in CPI. 4. CPI reading would provide insights to the next FOMC meeting and whether Fed continues to hike or pauses. 5. Core CPI m/m forecasted at 0.4% compared to previous 0.5%. 6. All in all, inflation has been slowing down and Olympus Labs forecast that the road to inflationary cooling will be a smooth one from here on out. Technical Confluences 1. Price rejected off resistance at 102.8. 2. DXY still bearish on H4 timeframe. 3. Price could potentially tap into the support at 101.67. Idea We are looking for price to continue its bearish trajectory till 101.67 and potentially form a new low. NOT FINANCIAL ADVICE DISCLAIMER The trading related ideas posted by OlympusLabs are for educational and informational purposes only and should not be considered as financial advice. Trading in financial markets involves a high degree of risk, and individuals should carefully consider their investment objectives, financial situation, and risk tolerance before making any trading decisions based on our ideas. We are not a licensed financial advisor or professional, and the information we are providing is based on our personal experience and research. We make no guarantees or promises regarding the accuracy, completeness, or reliability of the information provided, and users should do their own research and analysis before making any trades. Users should be aware that trading involves significant risk, and there is no guarantee of profit. Any trading strategy may result in losses, and individuals should be prepared to accept those risks. OlympusLabs and its affiliates are not responsible for any losses or damages that may result from the use of our trading related ideas or the information provided on our platform. Users should seek the advice of a licensed financial advisor or professional if they have any doubts or concerns about their investment strategies.
TVC:DXYShort
by OlympusLab
US Inflation Alert: How Will Markets React?Investors are facing a busy week of economic data that includes the release of consumer price and producer price index data for March on Wednesday and Thursday (US time), respectively. The results of these reports will help determine whether or not the Fed will pause or end its rate-hiking campaign. While investors are leaning towards a continuation of the Fed's tightening campaign, the possibility of a pause should not be underestimated. In February 2023, the annual inflation rate in the US decreased to 6%, the lowest since September 2021, compared to January's 6.4%. Market expectations for this March's data predict a significant drop to 5.2%. Importantly, if inflationary pressures do not weaken as anticipated, traders may increase their bets on additional rate hikes beyond the predicted 25-basis-points in May (or even revise their expectations for the May hike). At the beginning of the week, investors responded to the March jobs report, which was released on Good Friday, with nonfarm payrolls growing by 236,000 for the month. This was roughly in line with the market estimate of 230,000, and the unemployment rate fell to 3.5% compared to the previous month's 3.6%. As a result, the US dollar lost ground in early Monday trading, with the EUR/USD double peaking before traders lost confidence, causing the euro to fall below Monday's opening and crash through 1.0885. This level has served as the pair's bottom several times this month, as well as acting as a barrier for a longer-term rising trendline. Traders might now focus on 1.0822 and 1.0800 as the next downside targets. Following the release of CPI data, the Federal Reserve is expected to issue the latest Federal Open Market Committee (FOMC) meeting minutes.
by BlackBull_Markets
USD/JPY - Yen slides as Ueda says no plans for policy shiftBank of Japan Governor Ueda spoke at his first news conference as head of the central bank today. It wasn't quite a State of the Union address, but Ueda's message was clear - the current monetary policy was appropriate and he had no plans to make any major shifts. There has been strong speculation that Ueda will make some significant moves, perhaps not right away but in the next few months. After years of battling deflation, Japan is facing inflation which has risen above the BoJ's 2% target. The US/Japan rate differential has been widening as the Fed continues to raise rates while the BoJ has capped yields on 10-year government bonds and interest rates remain negative. The changing of the guard at the BoJ seemed to some as an opportunity for BOJ policy makers to take some steps toward normalization, such as tweaking or even removing yield curve control. Ueda poured cold water on this sentiment, stating that, “Right now, the yield curve control is considered most appropriate for the economy while tending to market functionality”. Ueda's message of "stay tuned for more of the same" has lowered expectations of a policy shift at the April 28th meeting and the yen has responded with sharp losses. Japan's consumer confidence gave policy makers something to cheer about, rising to 33.9 in March, vs. 33.1 prior and 30.9 anticipated. This was the highest level since May 2022, although consumer confidence remains deep in negative territory, below the 50-level which separates contraction from expansion. The week ended with a solid US employment report. The economy added 236,000 jobs last month, within expectations and softer than the upwardly revised 326,000 reading in February. The labour market is cooling but has been surprisingly resilient to relentless rate hikes and the odds of a 25-bp rate hike have increased to 68% according to the CME Group, compared to around 50% prior to the employment report release. There is resistance at 133.74 and 135.31 132.18 and 131.67 are providing support
by OANDA
The end of an era.This week, the Bank of Japan governor’s Kuroda’s decade long term comes to an end. As such we would like to take some time to review what this means for the Yen and in particular, the AUDJPY. Firstly, central bank timings. In case you missed it, last Tuesday the Reserve Bank of Australia (RBA) snapped its consecutive 10 rate hikes, being the second major central bank in developed markets to pause after the Bank of Canada. On the other hand, the Bank of Japan’s (BOJ) inaction thus far, is in stark contrast to the rest of the world. Kuroda officially ends his second 5-year term. With the new Governor Ueda at the helm, we think a move away from the current policy stance is very likely for BOJ as inflation remains uncharacteristically high for Japan and unemployment still relatively contained. A shift in the BOJ’s policies could mean the end of the largely debatable Yield Curve Control (YCC) policies, either in the form of abandonment or yet another change to the policy band or target yield as it repeatedly trades close to the upper limit of the currently allowed range. In fact, the OIS Implied rates for the 10-year Japanese gov yields show a huge disparity from the BOJ’s policy ceiling of 0.5%. While it has corrected from the high, it still trades north of the 0.5% cap by a clear margin, indicating market participants’ expectations that the yield cap is likely to be abandoned or shifted higher again. Coincidentally, the BOJ can take a page out of the RBA’s book, where RBA faced an almost identical situation, when in 2021 it was forced to abandon its three-year yield target. Once it lost control, yield quickly shot up there after. If or when the BOJ lose control of its YCC program, this warrants a peek into what might happen to Japanese Yields. Market expectations of forward rates are completely opposite for these two countries, with participants expecting the RBA to execute multiple rates cut through 2023, while Japan is expected to hike rates. So what does this mean for the currency pair? Well one way to look at this is the real yield differential between Japan (JP) and Australia (AU). When the AU – JP yield differential collapses, the AUDJPY tends to follow suit. If RBA is to hold rates, while the BOJ is to raise, we could see this yield differential collapse from here, paving the path for the next downward move in the currency pair. On the technical front, the AUDJPY is trading near its upper resistance of a four decade long descending triangle. On a daily timeframe, although the pair's first attempt to break below the 88 handle was short-lived, it now sits just above this support, which could lead to a second coming. Of course, such a trade might take a while to play out given the decade long chart pattern as well as fundamental factors such as central banks’ policy shifts. Looking ahead, the next potential catalyst could be the Bank of Japan’s first meeting under a new leadership on the 27/28th of April, while the RBA’s next meeting is scheduled for 2nd of May. To express this view, one option is to use the CME AUDJPY currency pair, which allows you to short the currency pair directly. Alternatively, if liquidity and contract size are of concern, the same view can be expressed by selling one Micro USDJPY Futures and buying two Micro AUDUSD Futures to construct a synthetic AUDJPY pair. Setting up the AUDJPY currency pair this way allows a more palatable trade as the notional amount is on roughly 20,000 AUD or 10,000 USD. This synthetic set-up allows us to access a more liquid market in both contracts compared with the full sized one. Using the descending triangle structure as a guide, we set our stops at 94, close to the previous resistance and our take profit at 70. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com
Short
by inspirante
CADJPY - The Perfect Breakdown!CADJPY has been one of our favourites. It's been following the Elliott wave schematic perfectly. We posted a SHORT setup in October 2022, which played out perfectly. We are in a 5 wave impulse and currently on the 4th wave. We have one last move up before we complete the wave 4 ABC correction. Trade idea: - Watch for a break up of the current correction - Target the highs of wave 4, 100.5 (400pips) See below for our VIP setups on CADJPY. Goodluck and as always, trade safe! 1. 2. 3. 4.
by WicktatorFX
2
USD/JPY jumps after solid nonfarm payrolls releaseUSD/JPY has posted gains in the North American session after a solid showing from US nonfarm payrolls. Japan's real wages continued to fall, while household spending rebounded. In the North American session, USD/JPY is trading at 132.24, up 0.36% on the day. In the US, nonfarm payrolls was within expectations, easing concerns that the US labour market is in trouble. The economy added 236,000 in March, close to the market consensus of 240,000. This was a solid reading, although weaker than the February reading of 311,000. The US dollar posted gains against the majors after the release, after concerns that a soft reading might force the Fed to take a pause in its rate hikes. Japan's real wages fell in February for the 11th straight month, falling by 2.6%. Household purchasing power continues to drop, but this was an improvement over the -4.6% release in January, as government energy subsidies helped curb inflation. Household spending rose 1.6% in February, rebounding from -0.3% in January but well off the market consensus of 4.3%. The Bank of Japan doesn't meet until April 28th, but Governor Ueda will be under the magnifying glass, as he chairs his first meeting at the helm of the central bank. The economy is showing signs of improvement, with retail sales and industrial production accelerating in February. Inflation remains very low compared to other major economies but is still high for Japan. In February, CPI fell to 3.3%, down from 4.3% in January but above the BoJ target of 2%. There has been considerable speculation that Ueda could shift policy and tweak or even abandon the Bank's yield curve control policy. This move could have huge significance for the yen - when the BoJ widened the yield target band in December, the yen posted sharp gains. Ueda hasn't revealed any cards about what he might do at his first meeting. He has toed the line of the previous Governor, Haruhiko Kuroda, that the BoJ won't tighten until inflation is sustainable, and that would require higher wage growth. Wage growth has been falling, so any tightening moves such as raising interest rates do not appear imminent. USD/JPY is testing resistance at 132.27. Above, there is resistance at 133.45 130.94 and 129.09 are providing support
by OANDA
NZD/USD surges briefly after RBNZ hikes by 50 basis pointsThe New Zealand dollar is showing sharp movement on Wednesday after the Reserve Bank of New Zealand shocked the markets and raised rates by 50 basis points. In the US, JOLTS Jobs Openings was below expectations, raising concerns about the strength of the US labour market. In the European session, NZD/USD is trading at 0.6296, down 0.24%. The RBNZ gets the prize for shocker of the week, after the central bank delivered a 50-bp hike, bringing the benchmark cash rate to 5.25%. Most analysts were expecting a modest 25-bp increase and ahead of the decision, the markets had priced in such a move at a massive 86%. The New Zealand dollar climbed over 1% following the decision, but has pared all of the gains and fallen into negative territory. The RBNZ statement noted that inflation remains too high, and there's no arguing that point, as CPI was unchanged in the fourth quarter at 7.2%. The reason that the markets were completely blindsided was that the economy is sputtering. GDP declined by 0.6% in the fourth quarter. The uncertain global outlook doesn't bode well for the export-dependent economy, and high interest rates and red-hot inflation are hurting domestic demand. This writer suggested yesterday that it seemed a sensible time for the RBNZ to take a breather, but instead, the Bank pushed the rate pedal down even harder than expected. In the US, a soft JOLTS Job Openings release has the markets abuzz about the strength of the US labour market. JOLTS slipped to 9.93 million, down from 10.56 million and its lowest level since May 2021. The nonfarm payrolls report on Friday will have added significance, as a soft reading would put pressure on the Fed to take a pause at its meeting in May. NZD/USD tested resistance at 0.6362 earlier. Above, there is resistance at 0.6425 0.6308 and 0.6245 are providing support
by OANDA
Will The U.S Dollar Collapse ?OANDA:XAUUSD Currencies fall for various reasons and they include: 1. Political or economic disorder 2. Hyperinflation 3. War 4. A labor market decline 5. Recession, among various other reasons. 1.The United States has weathered several political and economic disorders since its formation in 1776. The country was on the brink of collapse during the Great Depression in 1929 but successfully weathered the storm in 1939. Not only did it withstand the Great Depression, but it also fought World War II with valor the same year. The will to overcome all odds is in the blood of Americans come hell or high water. Therefore, the US has more chances to overcome political or economic disorder due to this very spirit. 2 Hyperinflation Inflation in the US is high but has not reached hyperinflation yet. The Federal Reserve managed to bring down rates from 8% to 6.5% and are rowing the boat, despite muddy waters. Hyperinflation taking over the country with daily essentials becoming 50 times more expensive might never be a reality. 3. War The US is technically not at war but funds wars overseas, be it Ukraine, Syria, and Yemen, among other countries. A rogue nation attacking the US since 9/11 is nil, and the country is not at war today. The US is more equipped to handle and thwart terrorist attacks today than it was ever before. 4. Labor Market Decline The job markets remain robust despite several leading tech firms firing thousands of employees since 2020. Businesses are thriving, and jobs for small and big-level employees remain open for hire. Though the job markets remain on shaky grounds, it managed to sustain and grow, even in muddy conditions. 5. Recession While talks of a recession are growing louder, a recession has technically not hit the markets yet. Both the stock and cryptocurrency markets are doing favorably well in 2023 and generating decent returns for investors. However, a recession cannot be ruled out, as there’s pressure on the financial markets. Considering all the above points, the US stands in a favorable position with the only recession being its weak point. Moreover, since a recession is yet to arrive (or might not arrive), the weak point can be removed for now. In conclusion, the other sore spots can be worked upon and brought under control in the coming years. So Will The US Dollar Collapse? BRICS is yet to finalize a new currency in the upcoming summit in South Africa. The problem with BRICS nations is that decisions are not made swiftly and quickly due to various factors. Asian countries working with each other is not as easy as said. The factors involve India’s broken relations with China and vice-versa. India and China have always been on the wrong ends, and the bitter political disputes could only make things worse. Technically, the US dollar is backed as the default global reserve currency with billions worth of trades being executed each day. The US dollar has a special status globally and is considered one of the safest currencies. The United States is still the biggest economy in the world with an annual GDP of around $23 trillion. Even if the US falters, it always has and will find a way to remain at the top and be an undisputed global leader. The Great Depression is one big example of how nothing is impossible for Americans to succeed in troubled times.
OANDA:XAUUSDEducation
by INVESTRONE
Gold Update Urgent Gold Price Forecast in Light of Finland's NATO Membership and Potential Conflict in Europe With Finland's recent entry into NATO, there is increasing speculation about the potential for conflict in northern and eastern Europe. As tensions continue to rise between Russia and NATO, the price of gold is likely to see a significant increase. As a safe-haven asset, gold has historically been a popular investment during times of geopolitical uncertainty and global conflict. With the threat of war looming, investors may turn to gold as a way to protect their wealth. Furthermore, the increase in demand for gold could be further fueled by the weakening of the U.S. dollar, which typically leads to a rise in the price of gold. As investors seek to hedge against inflation and currency devaluation, the demand for gold may increase, driving up its price. It remains to be seen how the situation in Europe will unfold, and whether the tensions will escalate into a full-blown conflict. However, if the worst-case scenario does occur, it is likely that the price of gold will continue to rise as investors look for a safe haven amidst the chaos. In summary, the recent developments in Europe have the potential to significantly impact the price of gold. Investors should closely monitor the situation and consider adding gold to their portfolios as a hedge against geopolitical risks and inflation.
OANDA:XAUUSD
by Htback