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Foreign exchange trading reminder: the fear of Fed policy mistakes has helped the US dollar on a rising track, and the euro is affected by the rising risk of geographical uncertainty

发布时间：2022-08-25 浏览：116

At the beginning of Asian trading on Monday (May 16), the US dollar index was now close to 104.54, and the US dollar rose for the sixth consecutive week last week, reaching 105.0234. Investors were still worried about the slowdown of global economic growth, high inflation and the path of the Federal Reserve's interest rate hike, which raised concerns that policy mistakes might lead to economic recession or stagflation.

Last week's data showed some signs that inflation began to decline, albeit slowly.

US import prices were unexpectedly flat in April, as lower oil costs offset increases in food and other products, further indicating that inflation may have peaked.

Other data released by the University of Michigan showed that the initial value of the consumer confidence index fell to the lowest since August 2011 in early May, as concerns about inflation continued.

Despite the recent inflation data, Loretta mester, chairman of the Federal Reserve Bank of Cleveland, said that inflation needed to fall for "several months" before Federal Reserve officials could safely conclude that inflation had peaked. She added that if the data did not show improvement, she would consider supporting faster interest rate hikes at the September meeting.

Fxstreet, New York Joseph Trevisani, a senior analyst at www.com, said, "the question is where we go to find recovery and how we negotiate what is going to happen.

The Fed is not prepared to cut interest rates to help the economy, but it is raising interest rates, which is a very unusual situation. "

The US dollar is on the track of rising for the sixth consecutive week, which is the longest rising trend this year. It has risen by more than 9% so far in 2022.

The euro fell for the sixth week in a row, hit by concerns that Russia's invasion of Ukraine would hinder the economy and the rise of the dollar. Although the European Central Bank is widely expected to start raising interest rates in July, it is expected that its rate hike will be slower than that of the Federal Reserve.

Finland officially decided to apply to join NATO on the 15th local time, and the paper application is expected to be submitted to NATO headquarters this week.

Finnish President ninisto and Finnish Prime Minister Marin announced on the 15th local time that the Finnish President and the government's Ministerial Committee on foreign and security policy approved Finland's application to join NATO, AFP reported.

Ninisto and Marin said, "this is a historic day, and a new era is beginning.".

According to Sky News, ninisto said that after the outbreak of the conflict between Russia and Ukraine, joining NATO will maximize Finland's national defense security.

It is said that the Finnish parliament will meet on the 16th to consider Finland's application to join NATO.

Finnish Foreign Minister havesto previously said that the paper application for NATO membership would be formally submitted to the NATO headquarters in Brussels on the 18th.

According to Swedish television, at about 5 p.m. local time on May 15, Sweden's ruling Social Democratic Party announced that the Party committee of the Social Democratic Party had officially decided to support Sweden's entry into NATO.

The Swedish Social Democratic Party made the above decision at the internal meeting of the Party committee held on the same day. The Social Democratic Party said in its press release, "the Party committee of the Social Democratic Party has officially decided today to strive for Sweden's application to join NATO.

”The statement also said that if the application is approved by NATO, the Social Democrats will strive to ensure that "Sweden's unilateral opposition to the deployment of nuclear weapons and permanent bases on Swedish territory" can be retained.

It is reported that after the Social Democratic Party announced its official decision to join NATO, the Swedish Parliament will hold a parliamentary debate on Monday. It is expected that the government will make a decision on the NATO application at a special session after the parliamentary debate, and then submit the application for membership.

Monday outlook

Institutional Perspective

Goldman Sachs predicts that the weakness of the euro will increase inflationary pressure in the euro zone because energy imports are mostly denominated in dollars

Goldman Sachs Group said that large fluctuations between the euro and the US dollar usually do not affect consumers, but due to the high share of energy imports denominated in US dollars,

This situation may change soon.

Analysts led by Jari stehn, chief European economist of Goldman Sachs, wrote in a report last Friday that if the decline trajectory of the euro against the dollar continues, it may lead to an increase in overall inflation in Europe of up to 0.5 percentage points per year in the next two years. This will increase the pressure on the European Central Bank to raise interest rates more quickly.

Analysts wrote, "although our results confirm that in the longer term, extensive trade weighted exchange rate fluctuations have a systematic impact on consumer inflation through the pricing chain, the current weakness of the euro against the dollar may still play a role, because energy is currently the largest factor driving import inflation, and the vast majority of energy imported into the euro zone is denominated in dollars."

The euro has fallen by more than 8% against the US dollar this year, close to the lowest level in more than five years and not far from parity. Meanwhile, energy prices soared at a time when Russia's invasion of Ukraine raised supply concerns.

For Europe, these developments are a coincidence: traders expect European inflation to exceed that of the United States for the first time in more than a decade.

The report said, "our transmission forecast supports our view that the current weakness of the euro will enable the staff of the European Central Bank in June to predict the high and medium-term inflation outlook of the middle note. Compared with the current 'gradual' interest rate increase path, we expect this will strengthen the reason for the European central bank to accelerate the normalization of policy."

Bank of America: large scale capital flight occurred in various asset classes

Bank of America strategists said that funds are flowing out of all asset classes, and this large-scale flight of funds is accelerating as investors withdraw from stocks such as apple.

In the report, the strategist led by Michael Hartnett quoted EPFR Global's data, saying that as of the week of May 11, capital outflows had occurred in stocks, bonds, cash and gold, and technology stocks had the largest outflows this year, reaching $1.1 billion, second only to $2.6 billion in financial stocks.

Hartnett said, "the definition of true surrender is that investors sell what they like," citing Apple stocks, large technology stocks, dollars and private equity as examples. He said that the collapse of cryptocurrencies and speculative technology stocks can now be comparable to the bursting of the Internet foam and the global financial crisis.

After the crash caused by the pandemic in 2020, apple is one of the major stocks that led the major indexes of Wall Street to new highs, but the stock has fallen into a bear market, falling nearly 10% this week alone. This is a sudden change from six weeks ago when the company's share price was close to a record high.

As investors are worried that the hawkish central bank's superposition of high inflation may trigger an economic recession, the Nasdaq 100 index, dominated by technology stocks, is bound to fall for the sixth consecutive week, setting the longest consecutive decline record since November 2012.

The benchmark S & P 500 index is also on the brink of a bear market, falling 20% from a record high. Although Bank of America strategists said they expected a rebound in the short term, they still believed that there was room for further decline in the stock market.

Hartnett wrote, "fear and aversion indicate that the stock market is likely to have a short-term bear market rebound, but we believe that it has not yet reached the ultimate low." risk aversion continued to hit all asset classes this week.

Stock market capital outflows $6.2 billion, with a small amount of capital flowing into the U.S. stock market, but the scale of outflows from European and emerging market stock markets is dwarfed. A total of US $11.4 billion flowed out of the bond market, US $19.7 billion flowed out of cash products, and US $1.8 billion flowed out of gold.

The outflow of funds purchasing investment grade, junk grade or emerging market bonds reached US $19.3 billion, the largest since April 2020. High rated bond funds topped the list with us $11.6 billion in divestment.

At the same time, safe U.S. Treasury bonds recorded the largest capital inflow since March 2020.

JPMorgan Chase expects that as the impact of the situation in Russia and Ukraine puts pressure on Europe and the rise in U.S. interest rates boosts the dollar, the euro will test parity against the dollar for the first time in 20 years.

Analyst Paul meggyesi cut his one-year forecast for the euro from 1.08 to 1.02. He said parity was expected to be tested. The euro is currently around 1.04 against the dollar. The market finally began to accept that the impact of the Ukrainian crisis on the economy of the euro zone was disproportionate and posed a threat to this currency, which is exactly what we have believed since the war. In the end, the European Central Bank could do little to offset the negative impact of the stagflation impact on the euro.

Wells Fargo Bank (nyse:wfc): the Canadian dollar can remain strong

Erik Nelson, foreign exchange strategist at Wells Fargo, said that the Bank of Canada is one of the "strongest" central banks and may be tougher than the Federal Reserve. Therefore, the combination of hawkish central banks and high oil prices means that the Canadian dollar can remain strong.

ANZ: the yen is expected to rebound

Because the decline of the US stock market pushed the yield of US Treasury bonds lower, thus eliminating the main driving force for the strengthening of the US dollar. Meanwhile, Barclays securities Japan said that the unilateral decline of the yen had ended.

The analysis estimated that the dollar against the yen may return to about 125.