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欧元已“高举白旗”!今晚美联储若放鹰 美元真要全面爆发了?

The Euro has already "waved the white flag"! If the Fed is hawkish tonight, will the US dollar really explode across the board?

cls.cn ·  Jun 12 13:30

After two major bearish events of the European Central Bank's interest rate cut and the rise of far-right parties in the European Parliament elections this month, the Euro, which has the largest weight in the US Dollar Index, has almost raised the "white flag"... If on this "Super Wednesday", the Federal Reserve takes a hawkish stance, the strong position of the US dollar may be completely unshakable in the short term.

Cailian Press, June 12th News (Editor Xiaoxiang) Earlier this year, the "super peso" (Mexican peso) that led the foreign exchange market is now full of wounds after the Mexican general election; and the euro, which has the largest weight in the composition of the US dollar index, has almost raised the "white flag" after two bearish events this month, including the European Central Bank's interest rate cut and the rise of extreme right-wing parties in the European Parliament. ...

This series of recent changes in the foreign exchange market has actually reflected a rather severe situation: if the Fed takes a hawkish stance again on Super Wednesday when the US CPI and the Fed’s interest rate decision are released, the strong situation of the US dollar may be completely unshakable in a short period of time. There may even be further bullish possibilities for the US dollar!

On Tuesday, the ICE US Dollar Index, which measures the strength of the US dollar against six major currencies, once reached 105.46, the highest level in almost a month.

The Bloomberg US dollar spot index that covers more currencies has risen for the fourth consecutive trading day on Tuesday. During this period, the index has cumulatively climbed by 1.1%, with a high probability of launching an impact on the year’s high again—it is currently only about 0.4% lower than the peak reached on April 19 this year.

Some foreign exchange traders are now worried that tonight's two crucial battles may further boost the soaring of the US dollar longs.

Patrick Locke, the foreign exchange strategist for JPMorgan Securities LLC in New York, said in an interview that if Powell does not intervene, Wednesday will be a real opportunity for the US dollar to continue its recent upward trend. He said," We have reason to expect that CPI and the Fed's interest rate decision will be biased towards a bullish US dollar, thus helping the US dollar to win three consecutive victories."

He referred to the fact that the news of the three consecutive victories also includes last Friday's non-farm employment data, which was higher than expected.

Locke said that Wednesday is a rare example where "key macro data" is released on the same day that the FOMC releases the interest rate dot chart. He also mentioned a phenomenon that favors the US dollar—the performance of the US dollar is often better than that of ordinary meetings without dot chart during the quarterly interest rate meeting with dot chart.

For Nathan Thooft, senior investment portfolio manager at Boston-based Manulife Asset Management, the final interest rate cut of Fed’s monetary policy may be more important than the timing of the first interest rate cut. Thooft expects the US dollar to temporarily maintain its current strength.

Locke said:" The real test tonight will be whether there will be two rate cuts this year, or more upward revisions (to rate forecasts) in the longer term."

In recent weeks, market traders and economists' expectations for the number of Fed interest rate cuts this year have been wavering between one and two times. The Fed had expected to cut interest rates three times in the dot plot released in March.

Is it hard for non-US currencies to resist the strong dollar?

If the Fed really acts hawkish tonight, then given the unfavorable situation of non-US currencies, many insiders predict that the strength of the US dollar may continue for months.

(Major non-US currencies fell against the US dollar this year)

Brent Donnelly, president of Spectra FX Solutions LLC and senior foreign exchange trader, wrote in a report that the first round of French parliamentary elections will be held on June 30, and no one would want to hold European assets before the vote. The euro and peripheral European bonds are likely to continue to be under pressure.

Before that, people were caught off guard by being too complacent about the Mexican general election. Mexican President-elect Claudia Sheinbaum said that the reform proposal for the country's judicial system will be one of the first issues discussed in Congress, which has made investors panic and worry that this will weaken the checks and balances on the ruling party.

Donnelly said that traders may "overreact to news from Europe now after reacting insufficiently to news from Mexico before", which may hit the euro exchange rate and be pro-US dollar.

Mark McCormick, Global Head of Forex and Emerging Market Strategy at TD Bank, said on Tuesday:" In my opinion, the US dollar will be the best option to cope with market volatility. There really aren't any more safe havens. The US dollar is the only destination! "

The translation is provided by third-party software.


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