USD hits 1-month low, euro and gold rise sharply
Lagarde’s comments imply the ECB will raise its deposit rate by at least 50 basis points and fuel investors’ hopes that eurozone interest rates will rise further this summer to stave off record-high inflation. continent – in part because of soaring energy prices due to the conflict between Russia and Ukraine, as well as a side effect from massive economic stimulus measures during the COVID-19 pandemic.
“If Ms. Lagarde is indeed in favor of zero interest rates in the third quarter, that would mean two rate hikes in the next four months,” said London-based Equiti Group macro strategist Stuart Cole. , said.
The euro at the end of May 24 in Vietnam time increased by 0.39% compared to the previous session, to $ 1.0732. The coin has recently rebounded strongly, having gained a total of 3.7% in the past 7 trading sessions after falling to its lowest level since January 2017 earlier this month – at $1.0349.
The market has been able to identify most of the interest rate hikes by the US Federal Reserve (Fed) in the near term, while the attitude of the ECB has only been revealed recently. That’s why the dollar depreciates while the euro rises.
The dollar index – which compares the dollar to a basket of major US partner currencies – ended May 24 in Vietnam time down 0.362% to 101.77, its lowest level since April 26.
Minutes of the Fed’s May policy meeting will be released on Wednesday (May 25).
Marshall Gittler, Head of Investment Research at BDSwiss Holding said.
“That divergence in expectations could push EUR/USD up even further over the next few sessions as the market has only recently begun to revalue the difference.”
The position and volatility of the euro.
The greenback continued to weaken after data showed US business activity slowed in May as higher prices dampened demand in the services sector, while raw material supplies became constrained. Due to China’s blockade against COVID-19 and the war in Ukraine, production activities at factories have been hindered.
S&P Global said the US Output Costs Composite PMI, which tracks the manufacturing and service sectors, showed growth in May at the slowest pace in four months.
The pound fell sharply against the dollar after PMI data showed momentum in the UK’s private sector this month was much slower than expected, raising fears of a recession, as pressure Inflation has not stopped increasing. The British pound in the last session fell 0.56% to 1.2515 USD.
The Australian dollar – which is sensitive to risk factors – fell 0.43% to $0.7080, while the New Zealand dollar fell 0.41% to $0.6441, a day before the Bank Reserve New Zealand is expected to raise its base rate by half a point.
However, sentiment in financial markets as a whole remains volatile, meaning any change can be fleeting, as traders will quickly flee from one asset class to another. at the first signs of weakness.
The money market volatility index currently stands at 9.46%, not far from a two-year high of above 10.5%, reached earlier this month.
Meanwhile, the rally of the Russian ruble has not stopped as it soared to a high not seen since March 2018 against the US dollar as Russian exporters sell foreign currencies to pay for their debts. taxes and the government loosened capital controls a bit.
The ruble has gained about 30% against the dollar this year despite the full-blown economic crisis in Russia, becoming the world’s best performing currency.
The Russian ruble ended May 24th rose sharply by 0.7% against the USD, to 57.44 RUB on the Moscow Exchange, in one session reaching 56.61, an unprecedented level in the past 4 years. Against the euro, the ruble rose 0.9% to 59.57 RUB, hovering near a seven-year high.
In Asia, China’s yuan turned lower as Chinese investors continued to grapple with the COVID-19 outbreak, prompting many investment banks to cut their growth prospects for the economy. second largest in the world.
Beijing has ramped up quarantine efforts to end a months-long COVID-19 outbreak, while new signs of frustration emerged in Shanghai as some residents described restrictions as inadequate. evenly as the city prepares to lift the blockade order from next June.
Chinese Vice Premier Sun Chunlan visited Beijing and called for more radical measures to prevent virus transmission and comply with the national “Zero COVID” policy.
“In times of severe economic stalemate, the People’s Bank of China (PBOC) is unlikely to allow a strong yuan amid slowing exports,” said Stephen Innes, a manager at SPI Asset Management. .
“Also, the longer the lockdown lasts, the shallower the V-shaped recovery will be, leading to a drop in GDP growth in 2022.”
The yuan on the Chinese domestic market on May 24 decreased by 101 pips from the previous session, to 6.6589 CNY.
Asian currency rates.
In the digital currency market, Bitcoin dropped from above $30,000 to close to $29,000, continuing to fluctuate with the trend of risk assets.
Gold prices rose for a fifth session in a row to a two-week high as the dollar and US Treasury yields fell and demand for riskier assets slowed.
Spot gold price at the end of May 24 in Vietnam time increased 0.8% to 1,867.41 USD/ounce, previously touching the highest level since May 9, at 1,868.69 USD; June gold futures also rose 1% to $1,867.00.
David Meger, director of metals trading at High Ridge Futures, said the weakening dollar and falling US Treasury yields from recent highs have created a supportive environment for gold.
“Gold traders are increasingly skeptical about the Fed’s willingness to engage in a war on inflation that risks a recession, and growing concerns about the economic outlook are breathing life into the future. into the gold market,” TD Securities analysts said.
References: Refinitiv, Coindesk
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