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The New Zealand economy grew more than expected in the second quarter, as today’s data showed and the pair consolidates just off Wednesday’s 2+ years low
The US interest rate is a crucial driver of financial markets in the current environment. This dynamic is despite the communication out of the ECB. I.e., the chart above shows the US real rate and its correlation coefficient (cc) with the EURUSD. The cc is at -58% and has been robust since the real rate turned positive at the end of April (green dashed line). Therefore, the current upswing in…
Yesterday’s acceleration in US core inflation led to another resurgence, but Japanese officials provide renewed verbal support to the battered Yen, sending the pair lower today
Whilst the greenback has pulled back over the last two weekly candlesticks (green square), it has a high correlation coefficient to real rates, at 77%. As such, we are interested in the real rate's reaction to any news release that may impact expected Fed monetary policy, such as today's CPI release.
The common currency rallies today, in the aftermath of last week’s “jumbo” rate hike by the European Central Bank and the hawkish rhetoric by policy makers
The pair remains upbeat, without any big reaction to today’s somewhat mixed economic data from the UK, after last week’s rebound form the multi-decade lows
The Japanese Yen manages to elicit support from the verbal interventions we have seen over the last few days, sending the pair lower today
The ECB has front-loaded and communicated that it is fully determined to do more, but the market may not be buying into the narrative. If the central bank cannot significantly impact Eurozone inflation, the higher rates won't bring inflation down to its target but will adversely affect economic activity.
Initially, the deficit spending and tight monetary policy may add support for GBPUSD. However, PM Truss has also promised to slash taxes, costing £38bn pa. This deficit increase may adversely affect the UK risk premium as gilts feel the pressure, ultimately exerting pressure on GBPUSD.
The real rate has been appreciating since its low in Nov 2021. However, the Fed March statement (red dashed vertical) was the first confirmation of quantitiative tightening (QT). Six weeks later, the real rate turned positive.
The pair extends this week’s rally to levels not seen since August 1998, as USD strength persists and markets brush aside JPY verbal intervention
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