Foreign exchange trading reminder: data shows that the US economy is resilient, the dollar is supported, Lagarde said the European Bank will continue to raise interest rates in July

On June 28, Beijing time, the Asian market morning, the US dollar index narrowly oscillated, and is currently trading around 102.47. The US dollar index fell back on Tuesday and finally closed down 0.26% at 102.51, after a series of economic data released showed that the US economy is still resilient and may not be close to recession, while the euro climbed after European Central Bank President Lagarde spoke. After the US consumer confidence index jumped, traders increased their bets on further interest rate hikes by the Bank of England, which intensified expectations that global monetary policy will need to remain tighter for a longer period of time.

On June 28, Beijing time, the Asian market morning, the dollar index fluctuated narrowly, and is currently trading around 102.47. The dollar index fell back on Tuesday and finally closed down 0.26% at 102.51, after a series of economic data released showed that the U.S. economy is still resilient and may not be close to recession, while the euro climbed after European Central Bank President Lagarde spoke.

Data showed that new orders for durable goods in the United States unexpectedly increased in May, but the April data was revised down, indicating that companies were still somewhat cautious about new capital investment, and then the dollar fell further. However, the decline in the dollar narrowed after the release of the US consumer confidence data. The World Enterprise Research released that the consumer confidence index rose to 109.7 in June from 102.5 the month before, the highest since January 2022. Other data such as new home sales in May and house prices in April also showed that the US housing market has weathered the Federal Reserve's rise in interest rates.

FXStreet.com senior analyst Joseph Trevisani said: "The problem is there's no sign of a recession coming, you don't see it in any of the statistics, you just have a historical paradigm that when the Fed raises rates at this rate and magnitude, there's a recession. This is the model everyone is looking at - you know, models don't always work."

Morgan Stanley said Tuesday that it now expects the Fed to raise its key interest rate by 25 basis points in July, compared with previous estimates of a pause, and raised its end point rate forecast to 5.375 percent.

The dollar rose as high as 144.47 against the yen on Tuesday before closing up 0.39 per cent at 144.07 as investors focused on possible intervention by the Bank of Japan, which last intervened against the yen when it was around 145.

Japanese Finance Minister Shunichi Suzuki said on Tuesday: "We will be watching closely with a strong sense of urgencyforeign exchange marketIf the trend becomes excessive, we will respond appropriately. "

The yen has been under pressure, the Bank of Japan has maintained loose monetary policy, and central banks around the world have embarked on a path of rapid interest rate hikes in response to stubbornly high inflation.

The euro rose to 1.0976 against the dollar earlier on Tuesday, its highest level since June 22, after remarks by European Central Bank officials hinting at the possibility of a rate hike, which helped propel the euro higher.

Eurozone inflation has entered a new phase that could linger for some time, European Central Bank President Christine Lagarde said on Tuesday. Inflation in the eurozone was too high and interest rates would continue to rise in July, she said, and the ECB was unlikely to announce that rates had peaked.

Other ECB policymakers do not expect clear evidence that inflation has slowed enough for the central bank to pause interest rate hikes.

Lee Hardman, FX analyst at Mitsubishi UFJ Financial Group, said in a note that the impact of the recent series of weak eurozone economic data on the euro is limited, as expectations for the European Central Bank to raise interest rates remain unchanged. Eurozone interest rate markets still expect the ECB to raise interest rates twice more this year, by 25 basis points each. The ECB has signalled that it will monitor core inflation and expects it to pick up somewhat in the summer, which supports market expectations for two rate hikes and keeps the euro trading at stronger levels, although the weak economic data increases downside risks to the euro.

On Tuesday, the pound closed up 0.31% against the dollar at 1.2748, with expectations of a rate hike by the Bank of England helping to boost the pound.

Traders upped their bets on further interest rate rises by the Bank of England following a jump in US consumer confidence, fuelling expectations that global monetary policy will need to remain tighter for longer, with one in five traders in money markets putting the Bank of England's interest rate at risk of peaking at 6.5 per cent.

You-Na Park-Heger, FX analyst at Commerzbank, said the pound is likely to fall as doubts grow about whether the Bank of England has raised interest rates sufficiently to have been able to control inflation. The Bank of England appears to be chasing inflation developments rather than fighting it with aggressive monetary policy, which is detrimental to the pound. The market expects the Bank of England to raise interest rates by a cumulative 100 basis points by the end of the year, but this is unlikely given the BoE's vacillating stance. In addition, inflationary pressures should ease in the coming months, or lead the Bank of England to end interest rate hikes. Heger expects the euro to rise above 0.90 against the pound in the coming quarters.

Wednesday's key data and events

Institutional Perspectives Summary

1. French Foreign Trade Bank: Strong European economic growth is expected to support the euro in the second half of the year.

Analysts at Natixis said that as the European Central Bank continues to implement restrictive policies, the interest rate gap between the United States and the euro zone will narrow, and the euro will appreciate against the dollar in the second half of the year. "The euro will be supported by the recovery of the European economy in the second half of the year, while the U.S. economy will enter a recession," they said. Natixis expects expectations of a U.S. interest rate cut to resurface as inflation continues to fall back and weigh on the dollar again. The bank expects the euro to gradually recover to 1.14 against the dollar in December 2023.

2. Erste Group: The euro is expected to rise to 1.11 against the dollar in the third quarter;

Erste Group analysts said in a report that the euro is expected to rise slightly to 1.11 against the dollar in the third quarter from its current level, and the pair has been fluctuating between 1.06-1 since the beginning of the year. Erste Group said that our current assessment of the market is that pressure on the dollar should increase once the US economic data clearly shows that the Federal Reserve's interest rate hike will end, at which point the support for the dollar has reached its limit. It is completely reasonable to sell the dollar when the support for the dollar has reached its limit. The US economic data has a decisive impact on the movement of the euro against the dollar.

3. Dutch international: The pound may continue to be supported by interest rate hike bets.

ING said Bank of England policymakers at the European Central Bank meeting in Sintra, Portugal, are unlikely to strongly disagree with market expectations of a sharp rise in interest rates, which should temporarily support the pound. ING analyst Francisco Pesole said in a note that the Sonia curve reflects interest rates peaking at 6.15% -6.20%, compared with 5.0% currently, with a 50 basis point hike possible in August. He said that future data may be against such aggressive action, but most Bank of England officials will not strongly suppress market expectations. The euro does not have much downside against the pound, but the rebound to 0.88 is likely to be very slow.

4. Deutsche Bank: The euro may rise this week due to strong inflation data.

The euro rallied on Tuesday and despite signs of economic weakness in the region, euro zone inflation data released on Friday are likely to show continued strong inflation, which should support the euro this week, Youna Park-Heger, a currency analyst at Commerzbank, said in a note. She said it is not the economy, but the development of inflation, that will be decisive for the ECB's monetary policy decisions. There are fears that core inflation will remain stubbornly high. Germany's weak IFO data on Monday followed a weak euro zone PMI reading on Friday. Park-Heger said economic growth was weaker than the ECB had forecast, which could cast doubt on a September rate hike, but that it was "premature" to bet on a pause.

5. HSBC: The pound is expected to be the best performing G10 currency in the second quarter.

Sterling looks set to end the second quarter as the strongest performer among the G10 currencies, according to HSBC Global Research, as higher-than-expected inflation data led to expectations that the Bank of England would have to continue raising interest rates. The euro rallied against the dollar in April but fell 3% in May, while the yen fell sharply against the dollar in May as the Bank of Japan persisted in easing policy, widening the US-Japan interest rate spread, HSBC said.