CFD Markets Analysis: News and forecasts for 7 липня 2024

23:51

Japan Trade Balance - BOP Basis declined to ¥-1108.9B in May from previous ¥-661.5B

23:50

Japan Current Account n.s.a. above expectations (¥2450B) in May: Actual (¥2849.9B)

23:50

Japan Bank Lending (YoY) came in at 3.2%, above expectations (3.1%) in June

23:30

Japan Labor Cash Earnings (YoY) came in at 1.9%, below expectations (2.1%) in May

23:29

AUD/USD holds below 0.6750 on US Dollar recovery AUDUSD

AUD/USD trades on a weaker note around 0.6745 in Monday’s early Asian session.
US NFP rose 206K in June versus 218,000 prior, better than the estimated.
The AUD strength holds amid stronger Australian economic data.

The AUD/USD pair edges lower to 0.6745, snapping the four-day winning streak during the early Asian session on Monday. The renewed US Dollar (USD) demand amid the cautious mood weighs on the pair. In the absence of any top-tier data releases from Australia and the US on Monday, the USD price dynamic will be the main driver for the AUD/USD pair.

US employment growth slowed in May, according to the US Bureau of Labour Statistics (BLS) on Friday. Nonfarm Payrolls (NFP) in the US increased 206K in June, followed by the 218,000 rise (revised from 272,000) recorded in May. This figure came in above the market expectation of 190,000.

Meanwhile, the Unemployment Rate ticked higher to 4.1% in June from 4% in May. The wage inflation, as measured by the change in the Average Hourly Earnings, dropped to 3.9% YoY in June from 4.1% in the previous reading, in line with market expectations.

The recent employment data have raised the chance of rate cuts from the US Federal Reserve (Fed) in September, with the markets pricing 77% odds, up from 70% before the report. The expectation of a Fed rate cut is likely to exert some selling pressure on the Greenback in the near term and might cap the downside for the pair.

On the Aussie front, the elevated inflation in Australia, along with a stronger Retail Sales and Services PMI, prompted the Reserve Bank of Australia (RBA) to remain hawkish. This, in turn, might continue to underpin the Australian Dollar (AUD) against the USD.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

22:38

French election 2024: Left-wing coalition leads exit poll

In a shock result, polls indicated the left-wing New Popular Front (NFP), led by Jean-Luc Mélenchon, seems to be on track to win the most seats in the second voting round of the French parliamentary elections on Sunday, per the Economist.

Based on early results, the NFP had secured at least 174 seats, followed by President Emmanuel Macron’s centrist Ensemble alliance at 146 seats. This would still be far short of the 289 seats needed to control the lower house.

Meanwhile, Le Pen’s party was pushed into third place, winning 142 seats. However, this was a significant rise over the previous assembly.

Market reaction

The Euro (EUR) attracts some sellers after exit polls suggested the final round of the French parliamentary elections pointed to a hung parliament. At the press time, the EUR/USD pair is down 0.13% on the day to trade at 1.0824.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

07:59

China Foreign Exchange Reserves (MoM) declined to $3.222T in June from previous $3.232T

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