Forex Opinion & Analysis

US Dollar Seeks Recovery as China’s Stimulus Measures Lift Market Sentiment

 

GBP/USD
+0.01%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

AUD/USD
+0.16%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

EUR/GBP
+0.01%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

XAU/USD
+0.09%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

DX
-0.04%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

Gold
-0.08%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

CL
+0.06%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

SSEC
+1.16%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:


Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:


 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

  • Dollar tries to recover as Fedspeak favors further cuts
  • China announces new measures, positive initial market reaction
  • Aussie benefits from another hawkish RBA meeting
  • Gold, oil and pound rallies continue

Debate for the Next Fed Cut Intensifies

US stocks remain in a positive mood as Fed speakers continue to advocate for further rate cuts, despite the fact that the US data confirm the strength of the US economy. Although the first Fed rate cut was almost unanimously approved, there seems to be a lack of cohesion regarding the size of the next step.

The doves are in favor of further aggressive cuts, but the hawks are supporting a more measured approach, with one eye on the US election. Interestingly, Fed board member Bowman, the lone dissenter at last week’s Fed meeting, will be on the wires later today, ahead of the important consumer confidence indicator.

On Monday, the US dollar managed to recoup a small part of its recent losses by taking advantage of the abysmal preliminary PMI surveys in the euro area and the negative news flow from Germany. Oddly, the market continues to price in 75 bps of Fed easing in 2024, but only 50 bps of rate cuts by the ECB. This looks surprising considering the economic outlook of these two regions.Daily Performance

China Announces Further Support Measures

An array of new measures has been announced by the PBoC and the Chinese administration. Following Monday’s strong cash injection of around $33bn, the reserve requirement ratio will be cut by 50 bps and the 7-day repo will drop to 1.5% from 1.7%.

In addition, the MLF rate, which is the rate at which banks borrow from the PBoC for up to 1 year, will be lowered by 0.3% and the LPR, the 5-year benchmark for mortgage rates, will drop by 0.25%. Further measures were also announced in a desperate attempt by the Chinese authorities to turn the tide in the housing sector.

The interesting factor is that the PBoC did not announce the implementation date of the new measures, as they probably wish to evaluate the market reaction. Chinese stocks have reacted positively to the news with the Shanghai Composite Index rising around 4%, led by property sector stocks. However, the initial market moves might be misleading, as the market will be anxiously looking for a rebound in house prices in order to accept the effectiveness of the new measures.

RBA Remains Hawkish

In the meantime, the Reserve Bank of Australia maintained its relatively hawkish stance, as it continues to be displeased about the inflation outlook and the elevated underlying inflation. Taking into account the positive news flow from China and the possibility of a strong pickup in economic activity there, expectations for an RBA rate cut by year-end could be further dented.

AUD/USD reacted positively to the headlines, and it tested the December 28, 2023 high of 0.6870, but it is gradually surrendering part of its gains as RBA Governor Bullock commented that they did not consider a rate hike at the meeting.

Gold, Oil, and Pound Benefit

Amidst these conditions, gold, oil and the pound continue to record gains. Both gold and oil are taking advantage of the dollar’s recent weakness and the latest developments in the Middle East, where Israel is rumored to be preparing for a ground operation in Lebanon.

Similarly, earlier today the EUR/GBP pair reached the lowest level since April 2022, and GBP/USD traded at a new 30-month high.

Understandably, some profit has since taken place, supported by BoE Governor Bailey’s comment at a regional newspaper that rates will come down gradually.Economic Calendar

Source

Related Articles

Leave a Reply

Back to top button