USD is strongest and GBP is weakest at the start of the NA session


Strongest to weakest major currencies

The “day after” can lead to hangovers and US markets are having a bit of a headache after yesterday’s FOMC decision. Chairman Powell’s comments, which took 75 basis points off the Fed (at least for now), drove stocks higher, yields lower and the dollar lower. Today the USD is once again the strongest of the majors (helped by the falling GBP – more on that), US equities are higher and yields are higher.

Meanwhile in the UK, the bank of england

bank of england

The Bank of England (BoE) acts as the UK’s central bank and is one of the main drivers of monetary policy in Europe. As one of the oldest central banks in the world and established in 1694, the BoE is owned by the British government. Its central mandate is to maintain and target interest rates while using other tools to help stimulate or contract the economy. Additionally, the BoE is responsible for the production of UK banknotes as well as overseeing the major bank payment systems. The bank not only helps create monetary and financial stability in the UK, but also has a huge influence over the country’s currency, the British pound. How does the Bank of England (BoE) affect Forex traders? The BoE is one of the most watched central banks by forex traders, along with the US Federal Reserve and the European Central Bank (ECB). FX traders are regularly on the lookout for all central bank updates given their potential to affect the Pound and many other currency pairs. The euro, for example, is strongly correlated to the pound. Additionally, the bank also has a variety of monetary policy tools that could impact the pound. One of the most common of these has been quantitative easing (QE), among others, which can increase or decrease the value of the pound. Beyond foreign exchange, the BoE helps fight domestic inflation, by changing interest rates to stimulate the economy. Many investors are familiar with the BoE interest rate because this metric is key to a variety of economic barometers.

The Bank of England (BoE) acts as the UK’s central bank and is one of the main drivers of monetary policy in Europe. As one of the oldest central banks in the world and established in 1694, the BoE is owned by the British government. Its central mandate is to maintain and target interest rates while using other tools to help stimulate or contract the economy. Additionally, the BoE is responsible for the production of UK banknotes as well as overseeing the major bank payment systems. The bank not only helps create monetary and financial stability in the UK, but also has a huge influence over the country’s currency, the British pound. How does the Bank of England (BoE) affect Forex traders? The BoE is one of the most watched central banks by forex traders, along with the US Federal Reserve and the European Central Bank (ECB). FX traders are regularly on the lookout for all central bank updates given their potential to affect the Pound and many other currency pairs. The euro, for example, is strongly correlated to the pound. Additionally, the bank also has a variety of monetary policy tools that could impact the pound. One of the most common of these has been quantitative easing (QE), among others, which can increase or decrease the value of the pound. Beyond foreign exchange, the BoE helps fight domestic inflation, by changing interest rates to stimulate the economy. Many investors are familiar with the BoE interest rate because this metric is key to a variety of economic barometers.
Read this term raised rates by 25 basis points as expected, but painted a picture of inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term and weak growth that is dragging the GBP down. This morning’s snapshot has GBPUSD down -1.74% on the day, erasing yesterday’s gains and moving towards a fresh 2022 low (and a low dating back to July 2020). The pair is trading above and below 1.2400 with the low reaching 1.2378. The former low was at 1.24103 from last week. So far, the correction from the low has been able to stay just below this level, keeping the bears fully in check.

Crude oil is higher. Gold is higher, bitcoin is almost unchanged.

Weekly jobless claims are expected at 180K unchanged from last week. Non-farm productivity in the United States for the 1st quarter is expected at -5.1% (vs. 6.6%) with unit labor costs up 10.1%.

A look at other markets in the morning snapshot shows:

  • Spot gold is up $18.50 or 0.98% at $1,900
  • Spot Silver is up $0.04 or 0.19% $23.01
  • Crude Oil is trading up $1.52 or 1.3% at $109.30. OPEC is said to be increasing production, but in reality it is lower due to Russian oil
  • Bitcoin is trading lower from $160 to $39,527.82

In the premarket for US equities, futures contracts imply low levels. Recalling yesterday, the S&P and NASDAQ closed just off their falling 100-hour moving averages (and 4296.19 and 12945.91 respectively). Today’s lower open will likely take the price towards those levels.

  • The Dow Industrial Average is down -137 points. Yesterday the index rose by 932.27 points
  • The S&P is down -22.37 points after yesterday’s rise of 124.69 points
  • The NASDAQ index is down -85 points after rising 401.1 points yesterday

In European equity markets, major indices hold strong gains after the late US post-FOMC surge:

  • German DAX, +1.6%
  • CAC France, +1.9%
  • UK FTSE 100 +1.5%
  • Spanish ibex +1.1%
  • Italian FTSE MIB +1.3%

In the US debt market, yields are higher:

  • 2 years 2.610%, +3.4 basis points
  • 5 years 2.922%, +2.9 basis points
  • 10 years 2.932%, +1 basis point
  • 30 years 3.013%, unchanged

In the European debt market, benchmark 10-year yields are significantly lower, helped by the dovish BOE.

Europe

10-year European benchmark yields


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