Australian exchange foreign exchange trading reminder: the dollar rebounded to regain the 100 mark, British inflation cooled, and the pound fell to a new low of more than a week

AohuiForex 7-20 News - The overnight dollar index rose 0.33%, regaining the 100 round number mark, once setting a new high for the week to 100.54, closing near 100.28, after data showed that British inflation fell more than economists expected in June, causing the pound to fall sharply against other major currencies.

At the beginning of the Asian market on Thursday (July 20), the US dollar index fluctuated narrowly. It is currently trading around 100.27, holding most of the overnight gains. The overnight US dollar index rose 0.33%, regaining the 100 integer mark, once hitting a new high this week to 100.54 and closing near 100.28. The pound fell sharply against other major currencies after previously released data showed that British inflation fell more than economists expected in June. This trading day needs to focus on the changes in the number of initial jobless claims in the United States and the annualized total of existing home sales in the United States in June. Pay attention to the Australian employment data and the preliminary value of the Eurozone Consumer Confidence Index in July.Wednesday's data showed that inflation in the UK stood at 7.9% in June, the lowest in more than a year, which will ease some of the pressure on the Bank of England to continue to raise interest rates sharply.Economists polled by Reuters had mostly forecast that UK inflation would fall to 8.2 per cent in the 12 months to June, from 8.7 per cent in May.

"This is the first time in five months that we've seen an unexpected downturn in inflation, following the opposite trend," said Joe Manimbo, senior market analyst at Convera. "This raises some doubts about the Bank of England raising interest rates sharply again next month."

Before Wednesday's data, traders saw a roughly 60% chance that the Bank of England would raise interest rates by 50 basis points on August 3. After the data, they saw a 60% chance of a 25 basis point hike.

Mr. Manimbo added: "The dollar is getting a respite because it is the inflation data that really determines the course; the dollar was hit by cooling inflation last week and now it is the pound's turn."

Sterling, which on Thursday hit its highest level since April 2022 at $1.3144, fell 0.74 per cent to $1.2938 after trading as low as $1.2868, its lowest level since July 11.

EUR/GBPWednesday rose 0.51% to 0.8656, having touched 0.8700 at one point during the session, a new high since May 26.

Sterling has also suffered profit-taking after its recent gains. "Sterling is overbought after its gains in recent weeks," said Kenneth Broux, head of foreign exchange and rates at Socie ́ te ́ Ge ́ ne ́ rale (601166) corporate research.

The dollar index rose 0.32% to 100.28 on Wednesday. The euro fell 0.27% to 1.1197 against the dollar on Wednesday.

The dollar tumbled last week as data showing a slowdown in U.S. consumer and producer price inflation in June boosted expectations that the Federal Reserve will stop raising interest rates after its July 25-26 meeting, which is still widely expected to announce a 25 basis point rate hike.

Fed funds futures traders expect the Fed to raise interest rates by a further 32 basis points, with the benchmark rate expected to peak at 5.40 percent in November.

U.S. data released on Wednesday showed that the start of new single-family homes in the United States fell in June, but building permits rose to the highest level in 12 months, and new home construction was supported at a time when there was a severe shortage of second-hand homes for sale.

The European Central Bank is also expected to raise interest rates by 25 basis points next week.

European Central Bank Governing Council and Greek Central Bank President Stonaras said on Wednesday that another 25 basis points of interest rate hikes by the European Central Bank should be enough, and further tightening could hurt the economy.

The dollar continued its rebound against the yen on WednesdayBank of Japan Governor Ueda Kazuo's remarks that he would not adjust policy for the time being continued to weigh on the yen's weakness; the dollar hit near the 140 mark against the yen and closed up 0.57% at 139.61.

Thursday Forward

institutional perspective

Analysts predict that the UK corporate credit crisis may intensify

Robert Russell, a partner at DLA Piper, the law firm, said in a report that the UK corporate sector was likely to face a growing credit crunch as more companies issued profit warnings and inflation waned. "The era of good credit is over," he said. Mr. Russell believes the growing number of profit warnings in the UK is just a sign of greater trouble for the corporate sector. The latest figures from the Insolvency Service show a rise in the number of bankruptcies across all industries.

National Insight Group: Despite the recent decline in inflation, the inflation outlook remains bleak

Economists at Dun & Bradstreet's National Insights Group, a US financial analysis firm, said in a report that central banks were gradually coming to terms with the difficulty of containing inflation after more than a year of synchronised tightening. Trends continue to suggest that pessimism on inflation is more realistic: inflation is above target in most developed markets, core inflation remains stubbornly high and the current decline is partly due to base effects. "In short, lower inflation simply means that prices are still rising, just not at the same pace as last year," the economists said, adding that the upside was only that monetary tightening had the desired effect of peaking headline inflation, albeit with varying success.

National Insight Group: Differences in central bank policies persist, and they are expected to widen further

Economists at Dun & Bradstreet's National Insights Group said in a report that while the global economy was operating on a "slowdown script" written by central bankers over the past year, policy responses varied markedly across regions. While interest rates are nearing their peaks in most economies, the Bank of Canada and the Reserve Bank of Australia have recently resumed raising rates after a brief pause, the Federal Reserve skipped a rate hike in June, the European Central Bank has insisted on gradual rate rises, the Bank of England has accelerated rate rises due to overheating inflation data, and the Bank of Japan has kept rates at negative levels. "We expect further divergence in monetary policy over the next two quarters," the economists said.

Mitsubishi UFJ: It is understandable that the dollar has regained lost ground against the yen

The latest remarks by Kazuo Ueda, governor of the Bank of Japan, have helped trigger a new rally in the dollar against the yen. Economists at MUFJ said Mr. Ueda acknowledged that market functioning has improved, but at this critical juncture, the decision to adjust the YCC will be based more on fundamentals than market function. The market's reaction to Mr. Ueda's remarks suggests that speculation about a YCC adjustment next week has lessened. But we believe that the BoJ's economic forecasts, released next week, will justify a YCC adjustment. And when yields are not under upward pressure and have not yet threatened the upper half per cent band, it is an ideal time to adjust the YCC. Friday's Japanese CPI data will remain key, which could once again trigger a new round of speculative pricing in the market. But against the backdrop of improving risk appetite and optimism about a soft landing, the dollar has understandably regained some ground against the yen.

Scotiabank: The dollar is more likely to trade sideways between 3125-1.3225

Economists at Scotiabank said the lower closing price of the dollar on Tuesday could tilt short-term technical indicators slightly in favor of the Canadian dollar, with the dollar stalling at a low of 1.32, highlighting the dollar's limited gains after Friday's sharp rally. The technical momentum of the dollar remains bearish and it is difficult to make further progress. It remains to be seen whether the Canadian dollar will strengthen against the dollar; it is more likely to trade sideways between 3125-1.3225.

Institutions: The European Central Bank's interest rate hike after July is not a foregone conclusion, more depends on the balance of data

Jussi Hiljanen, SEB's chief dollar and euro rates strategist, said in a note that the ECB is widely expected to raise interest rates by 25 basis points in July, but any future action remains uncertain, meaning there are upside risks to SEB's expectations of a peak ECB deposit rate of 3.75%. He said the ECB is likely to reiterate its data-dependent approach, but unlike the June meeting, the ECB will not give clear rate guidance. Mr. Hiljanen pointed out that before the September meeting, there would be two important data releases, namely consumer and producer price indices and purchasing managers' indices, "so the choice of whether to raise policy rates in September is not a matter of DingTalk on the board and depends more on the balance of more data points than just inflation data."