- US Dollar outmatched by Asian currencies on Tuesday after PBoC announces more support packages.
- Except for some second-tier data points nothing at the moment that could halt the current decline in the US Dollar.
- The US Dollar Index continues its decline for a fourth consecutive day.
The US Dollar (USD) is off the lows with gains against some major currencies like Polish Zloty (USD/PLN) and New Zealand Dollar (USD/NZD) are providing a pushback against the Greenback’s losses in the Asian crosses. This unfortunately does not erease the current downtrend as the biggest descent comes on the back of the People’s Bank of China (PBoC) latest decision which is stepping up its stimulus and rescue packages for the construction sector. The support is being applauded in the region and has pushed Chinese stocks higher while Asian currencies are in demand against the Greenback.
Out of the economic data calendar no real big events that could trigger a sudden turnaround in the tone for the US Dollar. The National Federation of Independent Business (NFIB) already came out above expectations at 91.00. Interesting to see after the NFIB print, will be the Economic Optimism Index from the TechnoMetrica Institute of Policy and Politics (TIPP) in order to get confirmation if there really is an uptick or rather a decline in economic sentiment. That number is expected at 14:00 GMT.
Daily digest: US Dollar not ending its downtrend for now
- China will accelerate the roll-out of its policy to aid the property sector, the Chinese Yuan is rallying on the back of it.
- Small businesses are optimistic in the US as the NFIB Optimism index jumps over consensus to 91.00, from 89.4 for the month ot June.
- Comments from New York Fed president John Williams where he repeats that the Fed is focused on trimming inflation rate to its 2% target while a recession is not in his forecast.
- A similar index as the NFIB, but this time from the Economic Optimism Index from the TechnoMetrica Institute of Policy and Politics (TIPP), will be published at 14:00 GMT. Consensus here points to a jump as well from 41.7 previous to 45.3.
- The US Treasury is set to access the markets as well in order to allocate a 1-year and a 3-year bond auction.
- The Japanese Topix index was too late to enjoy the positive tone in Asia and closed at -0.31%, nearly flat for this Tuesday, while the Chinese Hang Seng soared higher and closed near 1% of gains. European equities are firm in the green and US equity futures are in the green after the US opening bell.
- The CME Group FedWatch Tool shows that markets are pricing in a 92.4% chance of a 25 basis points (bps) interest-rate hike on July 26. Chances of a second hike in November are down to 26.7%. It appears that markets are pricing out again the possibility of a second rate hike and presume that the Fed will hike in July for the last time. Markets expect US Fed Chairman Jerome Powell to announce that the pivotal level has been reached at the yearly Jackson-Hole Symposium between August 24 and 26 in Kansas.
- The benchmark 10-year US Treasury bond yield trades at 3.99% and is off the lows as traders are starting to sell some more US bonds again, jacking up the yields.
US Dollar Index technical analysis: Dollar remains in the red
The US Dollar is continuing its decline for a fourth straight day in a row as this time Asian currencies are overpowering the Greenback, while the NFIB upbeat number is just too little to make a significant difference. With the European trading nearing its end for today, the US Dollar is down nearly 0.30% against the Japanese Yen (USD/JPY), the South Korean Won (USD/KRW) and the Chinese Yuan (USD/CNY) from previous being down over 0.50%. Add to that substantial gains against the New Zealand Dollar (USD/NZD) and Polish Zloty (USD/PLN) being up over 0.50% and it paints a much less gloomy picture as earlier this Tuesday. The support and demand for Asian currencies comes from China, where the government will speed-up its promised support packages for the much battered construction sector. This boosted the belief for a speedy recovery in China and made the US Dollar Index (DXY) retreat for another day.
On the upside, look for 102.811 at the 55-day Simple Moving Average (SMA), that will have regained partially its importance after having been chopped up that much a few weeks ago. Only a few inches above the 55-day SMA, the 100-day SMA comes in at 102.96 and could create a firm area of resistance in between both moving averages. In case the DXY makes its way through that region, the high of July at 103.57 will be the level to watch for a further breakout.
On the downside, the only thing in the way to stop the DXY from hitting 101.00 is the psychological handle at 101.50. Once that level is breached, not many relevant levels to look for as it will become a quick decline to 101.00 and start testing the lows of May. Special notice for 100.75 as that level is a floor since February 2nd and could open the door for a slide below 100.00 one broken through it.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany’s economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany’s economy strengthens, it can bolster the Euro’s value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro’s strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the ‘Fiscal Compact’ following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond’s price, and it is therefore considered a more accurate reflection of return. A decline in the bund’s price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
Source: https://www.fxstreet.com/news/us-dollar-continues-its-decline-as-china-speeds-up-stimulus-202307110959