Let's dive into the latest developments shaping the global economic landscape. Good news first: the threat of an unprecedented US debt crisis has receded, as US lawmakers passed a bill to raise the debt ceiling and avoid a catastrophic default. Phew! But don't pop the champagne just yet, because storm clouds are still looming. High inflation, rising interest rates, and sluggish growth are challenges that have yet to disappear.
Greatest sell-off of Australian Dollar
2021-09-08 • Updated
The Australian central bank claimed that it would indeed cut asset purchases in September as the bank initially planned and the markets expected. However, the next review of the quantitative easing program would be moved from November 2021 to February 2022.
What is important?
It signaled that the Reserve Bank of Australia (RBA) forecasted a slowdown in the economic recovery amid continuing lockdowns across the country. The RBA’s governor said that interest rates are likely to stay at the record lows of 0.10% until at least 2024. This would put the RBA behind the Bank of England and Federal Reserve, which are expected to hike rates earlier. If it is the case, the AUD will lose against the BOE and Fed.
The RBA’s decision pressed the Australian dollar down. However, it’s not the only factor that drove the Aussie down. The overall market sentiment has changed to risk-off today and triggered the sell-off of riskier assets including the Australian dollar.
AUD/USD has failed to cross the 38.2% Fibonacci level of 0.7450 and has broken below the support line of 0.7400. Thus, the way down to the 50-day moving average (the red line) of 0.7370 is open. The pair may stop ahead of this support level and even reverse up back up to 0.7400. However, if it manages to cross this moving average, the aussie may fall to the 23.6% Fibonacci level of 0.7320.
The Bank of England (BoE) has dramatically shifted its economic forecasts. They no longer expect a recession in the UK and have upgraded their growth projections. This year, the BoE predicts GDP growth of +0.25%, a significant improvement from previous expectations. Next year's forecast is even more optimistic, with a projected growth of 0.75%.
On Wednesday, the US dollar weakened in anticipation of the US CPI data, which could influence market exposure. A Bloomberg survey predicts a year-on-year read of 5.0% to the end of April. Market sentiment is affected by the US debt ceiling and issues with regional banks. While the major APAC equity indices are...
Are you aware of the recent crackdown by the SEC on major cryptocurrency exchanges, Binance US and Coinbase? Surprisingly, savvy Bitcoin traders seem unfazed, as options-based implied volatility metrics indicate. It appears that the lawsuits were anticipated and already factored into the market. Implied volatility reflects investors' expectations of price turbulence, but little evidence of heightened concern exists.
Let's dive into the recent debt ceiling saga in the US and its implications for the economy, deficit, and inflation. The good news is that a new debt deal is on the horizon, saving us from a potential default on June 5. Phew! This deal will impact the economy by providing stability and avoiding a financial catastrophe.
Get ready for some suspense as the Bank of Canada faces a tough decision on whether to raise interest rates or keep them on hold. The resilient Canadian economy and the goal of curbing inflation further are at the heart of this dilemma. While some money markets and economists predict another rate hike, others believe the central bank should exercise caution and wait, hinting at a possible increase later in the summer.