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Hello everyone, today Avatrade Aihua Foreign Exchange will bring you "[Avatradescn Official Website]: The US dollar index is avatradescn.competing for long and short, and the UK inflation data and spring statement have become the focus." Hope it will be helpful to you! Original content is as follows:
On Wednesday, the US dollar index fluctuated above 104, and despite the neutral tone of Fed officials, traders believe inflation concerns may slow down the pace of rate cuts. The core PCE data on Friday remained a key event, with the market closely following the Fed's preferred inflation indicator.
Analysis of major currency trends
Dollar: As of press time, the US dollar index hovered around 104.25, and the US dollar index (DXY) mixed performance on Tuesday, trading in the middle of the 104.00 range. Earlier, the dollar found support as strong service industry activity and proposed tariffs could be more targeted than expected. However, uncertainty returns again as new news from U.S. policymakers ease optimism. Changing rhetoric about inflation and trade has caused repeated volatility in DXY and is currently facing nearby resistance. From a technical point of view, the moving average convergence divergence indicator (MACD) sends a slight buy signal, while the relative strength index (RSI) is neutral. Despite improvements in momentum, the key simple moving average (SMA) still indicates that the overall situation remains bearish.
1. In February, the inflation of corporate service prices in Japan reached 3.0%, and the market continued to bet that the central bank would raise interest rates
Data released by the Bank of Japan on Wednesday showed that a leading indicator reflecting the inflation of corporate service prices in Japan hit 3.0% in February, which allowed the market to continue to maintain expectations that the Bank of Japan would raise interest rates further. The Bank of Japan closely monitors inflation in corporate services to find out whether the prospect of continued wage increases will prompt avatradescn.companies to continue price hikes and keep inflation near the 2% target. Bank of Japan Governor Kazuo Ueda said that if the prospect of rising wages leads to a wider price increase, not only avatradescn.commodity prices but also service prices, the central bank will continue to raise interest rates. A Reuters survey showed that many analysts expect the Bank of Japan's next rate hike will be in the third quarter, most likely in July.
2. The Australian government announced the budget for the next fiscal year
The Australian government announced the government budget for the next fiscal year, with a budget deficit of 42.1 billion Australian dollars. Minister of Treasury of AustraliaChalmers made a budget statement in the House of Representatives that night. He said that Australia's inflation rate fell to the target range six months earlier than expected, with people's income increasing, unemployment rate falling to 4.25%, interest rates falling, and "economic growth regains momentum." He said the government hopes to promote a turning point in the economy by investing in education and skills training, promoting the development of small and local enterprises, and investing in infrastructure construction. Chalmers said Australia is expected to see a fiscal deficit of $27.6 billion in fiscal 2024-2025 after two consecutive fiscal years of surplus. He expects the Australian economy to grow by 1.5% in fiscal 2025-2026 and 2.5% in fiscal 2026-2027.
3. Dalio warns the risk of US deficit urging Republicans to reduce budget deficits
According to foreign media reports, Bridgewater Fund founder Rui Dalio warned U.S. House Republicans about the danger of rising deficits and urged them to cut their budget deficits to only 3% of GDP, otherwise they will face the risk of debt repayment costs avatradescn.compressing government spending. Republicans in both houses of Congress are controversial over the reduction in spending scale in the massive tax cuts that will be introduced later this year. "Over time, people have a good understanding of the options and possibilities of managing this terrible situation. I look forward to staying in touch on these issues and having similar discussions with others in order to have a realistic assessment of these issues and possible responses," Dalio said in a statement. "This is not something that can be done with a bill," he said. "We need to start "exercise" the power to cut expenses." 4. The accelerated growth of US housing prices in January is still a hindrance to home purchases. In January, as buyers avatradescn.compete for tight housing in the market, the growth rate of US housing prices accelerated slightly. According to S&P CoreLogicCase-Shiller, the national housing price index rose 4.1% from the same period last year, higher than the annual increase of 4% in December. There are signs that stock tightness is starting to ease. According to Redfin, new listed properties rose 5.5% over the same period last year in the four weeks ended March 16. But high borrowing costs remain a barrier for many buyers. The number of contracts to buy second-hand homes in January fell to an all-time low, partly due to high costs and bad weather. Nicholas Goldek, head of fixed income securities and avatradescn.commodities at S&P, said: "The sunny markets that experienced a sharp rise in housing prices in the early stages of this cycle, such as Tampa and Phoenix, are currently slowing down the price growth rate most significantly."
Institutional View
1. Analysts: If the British Budget damages fiscal credibility, assets such as the British pound will be under pressure.
Analyst Daniela Sabin Hathorne pointed out in a report that if the budget released on Wednesday challenges the UK's fiscal credibility, British assets, including pound, government bonds and stocks, will face the risk of decline. She said the rising debt levels and a weak growth economyand stubborn inflation creates a challenging environment for UK assets to achieve excellent performance. Hathorne said the market's response to the budget depends largely on how avatradescn.compelling his statement was when the Chancellor of the Exchequer Reeves explained his plan to control spending and avoid further increase in national debt. If there is a lack of clarity or persuasion, it could lead to a new rise in Treasury yields and curb optimism about pound and UK stocks, reflecting the decline in market confidence in the UK's fiscal situation.
2. Deutsche Bank: The U.S. Treasury yield curve may become sharper
Henry Allen, an analyst at Deutsche Bank Research Department, said in a report that it is entirely possible that the U.S. Treasury yield curve will become sharper. This steepening situation—that is, the widening gap between short-term and long-term Treasury yields—can be due to a decline in short-term Treasury yields or may be due to a rise in long-term Treasury yields. The macro strategist said the Fed still plans to cut interest rates further, and its dot chart forecast shows that it will cut interest rates twice this year. This will drive short-term Treasury yields lower. Similarly, he also said that the potential fiscal stimulus brought about by the extension of Trump's tax cuts will push up long-term Treasury yields.
3. JPMorgan Chase: European banks are relatively more defensive
JPMorgan Chase pointed out in a research report that European banks are relatively more defensive avatradescn.compared to industries directly affected by tariffs. However, analysts say this view does not apply to hyper-regional banks. "The greater risks [for European banks] are driven by second-order effects such as short-term interest rates, but the introduction of fiscal stimulus policies has alleviated this risk to some extent," they wrote. They also pointed out that European banks are affected by geopolitical tensions and that their revenues will benefit from continued market volatility, given the transactions and business that generates fee income.
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