Beijing time on Friday (October 14) in early Asian trading, the US dollar index rose slightly and is currently trading around 112.48. The dollar fell in choppy trade against most currencies on Thursday after surging in early trade after a sizzling higher-than-expected U.S. inflation report, but some investors believed the market’s initial reaction to the data was overdone.
Data showed that U.S. consumer prices rose more than expected in September, and core inflation pressures continued to rise.Consolidates expectations for another 75bps rate hike at the Fed’s November policy meeting. The U.S. consumer price index (CPI) rose 0.4% last month after rising 0.1% in August. Economists polled had forecast the CPI would climb 0.2%. In the 12 months through September, U.S. CPI rose 8.2% after rising 8.3% in August.
USD/JPY briefly hit a 32-year peak of 147.67 after the data. It then pared gains and finally closed up 0.21 percent at 147.21.
EUR/USD also initially fell to a two-week low of 0.9631 before recovering to end up 0.77% at 0.9777. The U.S. dollar index closed down 0.71 percent at 112.46 on Thursday.
Greg Anderson, global head of FX strategy at BMO Capital Markets, said the current FX move “is a sign of market stress, panicking about a slight deviation in one data point. The dollar’s reversal is a shock. It’s a super jittery market. , a tiny flow can have an exaggerated impact.”
According to CME’s “Federal Reserve Watch”: The probability of the Fed raising interest rates by 50 basis points in November to the range of 3.50%-3.75% is 3.7%, the probability of raising interest rates by 75 basis points is 96.3%, and the probability of raising interest rates by 100 basis points is 0%; The probability of a cumulative rate hike of 100 basis points by December is 1.0%, the probability of a cumulative rate hike of 125 basis points is 27.6%, and the probability of a cumulative rate hike of 150 basis points is 71.5%
Brian Westbury, chief economist at FT Advisors, said: “Despite some improvement in the factors that are said to have pushed inflation up, inflation is still there – think energy prices and used car prices, which fell 1.1% in September. It’s because headline inflation is — and has always been — a monetary phenomenon. The problem is that the Fed thinks it can manage inflation by targeting short-term interest rates. We think the Fed needs to focus less on raising rates and more on keeping money supply growth under pressure Continued control.”
Traders generally remain focused on Japan’s intervention to support the struggling yen. Officials reiterated that they stand ready to take appropriate steps to counter excessive currency volatility, although it remains unclear whether they want to defend specific levels.
“I do think Treasury will order another round of intervention in the next few weeks. I think they will intervene somewhere at 148. Although that may only buy Treasury a couple of weeks,” Anderson said. “
Meanwhile, GBP/USD rose sharply on Thursday, closing up 2.04% at 1.1325,Therefore, it was previously reported that the British government may make changes in its fiscal plan。
Sky News reported on Thursday that the British government is discussing changes to the fiscal plan announced last month and examining which parts of the tax cut package might be dropped, leaving Prime Minister Truss facing yet another policy reversal.
Jeremy Stretch, currency analyst at CIBC Capital markets, said: “As speculation grows, the UK could see a 180-degree reversal on some or all of its fiscal measures and could also challenge Truss. Prime Minister’s leadership, we are currently witnessing another bear squeeze on GBP.
The euro rebounded against the dollar on Thursday, closing up 0.77% at 0.9777.
HSBC, a seller of EUR/USD, expects the pair to test 2022 lows again, as the recent rally is seen as a squeeze on premature hopes for a Fed policy change rather than a proxy for a change in trend.
The Russian-Ukrainian conflict, an uneven recovery from the pandemic, and drought across much of the continent have combined to create severe energy shortages, high inflation, supply disruptions, and enormous uncertainty about the future of the European economy.
Friday’s key data and outlook
Big things to watch on Friday: Kansas Fed President George on the U.S. economic outlook, Fed Governor Lisa Cook on the economic outlook.
1. Nomura Securities: The pound and the dollar will continue to fall, and may fall to 0.975 by the end of the year
①Nomura Securities foreign exchange strategist firmly believes that GBP/USD will continue to fall sharply, and will fall below parity to 0.975 by the end of the year;
② Nomura Securities said: “The main reasons why the pound should continue to fall is the declining global growth expectations, unfavorable risk sentiment, and the large current account deficit in the UK when it faces the risk of energy disruption in winter;”
③ He added that the decline in sterling is unlikely to reverse GBPUSD 1.1324-0.01% until UK growth rebounds
2. HSBC: EUR/USD forecast to fall to 0.9560
①HSBC has been betting that the euro will go lower for more than a year and doesn’t think the trend will reverse; the bank forecasts EUR/USD to fall to 0.9560, or more than 50 points from current levels, with a 2022 low of 0.9535 ;
② HSBC analyst Gern believes that tight energy supply and high prices are the main reasons for the recession of the euro zone economy. The European Central Bank raised interest rates and tightened the financing environment, which also cast a haze on the economic outlook
3. IMF: Japan intervened in the yen last month, but the impact will not last long
① Senior IMF official Panth said that Japan’s intervention in buying yen last month may be a “signal action” that will help smooth the market adjustment;
② He also said that, historically, the impact of such foreign exchange intervention would not last long
4. Kenny Polcari, managing partner of Case Capital Advisors: The Fed may be forced to raise interest rates by 75 basis points in December
①It’s not surprising that the market crashed after the inflation data was released, it’s clearly the Fed that put us in a situation where they should have been more aggressive a few months ago, but they didn’t, now they might Forced to raise rates by 75 basis points in December. Because oil prices have risen 22% this month, the November CPI and PPI will be higher;
②The Fed raised rates too late and it didn’t work because inflation is getting entrenched so I don’t think the Fed hikes are working now
5. BlackRock: Fed will almost certainly raise rates by 75 basis points in November
① BlackRock global fixed income chief investment officer Rick Rieder said that the U.S. CPI report released on Thursday means that the Federal Reserve will raise interest rates by 75 basis points at its November meeting. possibility;
②Rieder said that judging from the latest CPI data, the continuation of the overall trend may make the Fed more decisive; Rieder pointed out that the U.S. economy is slowing down, but the data has not yet caught up, a typical monetary policy lag effect.