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Daily Forex News By XtreamForex

NZ business sentiment is less dire, RBNZ hint at rate cycle high

Business outlook is now -37.6, up 25.9 points higher than the June low. Business outlook rose for a third month and at its fastest m/m pace since December 2020. Activity outlook rose from-4 to -1.8. Import intentions expanded for a second month. A large improvement for profit expectations, even though it remains negative overall. Credit conditions highest since mid-2021. All sectors see improved activity vs 1-year ago. Pricing intentions are still high, but inflation expectations dipped below 6% for the first time in six months.

Business sentiment may not be going from strength to strength, but to see pessimism lose its grip after multi-year lows certainly a step in the right direction. Besides, investors tend to look at the rate of change over the absolute level of such indicators, and right now it looks very likely that business sentiment hit its low in June.

The inflation and higher rates are having a negative effect on business sentiment. At 3%, RBNZ has one of the highest cash rates among the major economies and second place to the BOC and Fed at 3.25%. It’s likely we’ll see another 25bp hike but it’s also possible we could be nearing the terminal rate. Governor Orr said in August that the next rate move is not obvious and earlier today he said, whilst there’s still work to do regarding rates, the tightening cycle was already very mature. So against that backdrop, we suspect a 25bp hike on October the 5th, and may even see a pause-and will look for such clues in the October statement and minutes.

Read More : Daily & Weekly Analysis On Xtreamforex
Recession Fears: The Ukraine war is affecting markets

The Ukraine ware is affecting markets around the world and generating extreme volatility. Worries over inflation in Europe have been brewing even before Russia war with Ukraine in February. While some considered it was temporary, others warned that it was a sign of a deeper crisis. Now, six months since the start of the war in Ukraine, is a recession inevitable in Europe?

The impacts of the conflict will likely vary depending on geographical location. Europe, and countries such as the Baltic states and Poland, are likely to experience more difficulties than countries that depend less on Russia for energy. Western Europe, in particular Germany, also has no easy alternative energy source to replace natural gas from Russia. After Moscow decided to temporarily suspend its gas supply to Germany, gas prices climbed to 295 Euro per Megawatt-hour. Recent data showed that business activity in Germany and France contracted in August due to falling demand and rising prices.
The Euro hit a new 20-year low against the USD, making it more expensive to buy energy on international markets, which is paid with the USD. Bundesbank, Germany’s central bank, forecast that inflation, which is at 7.5%, will hit double figures in autumn.

In the US there are already signs of improvement as inflation fell in July from 9.1% to 8.5% due to drop in gas prices. However, Europe continues to pay for its dependence on gas and inflation in Europe is already greater than the figure in the US. Falling food prices and fall in oil prices have not been enough to counteract the increase in gas prices in Europe. But some analysts argue that a recession could help deal with inflation, as long as it is not a prolonged recession.

Read More : Daily & Weekly Analysis On Xtreamforex
Oil Prices Mixed as Markets Digest OPEC+ Supply Cut

OPEC meeting tomorrow to determine what should be done about the amount of crude oil that is supplies to the market. Two weeks ago, the talk looked like to be whether the countries should do anything at all. However, as the price of oil continues to fall, along with weaker manufacturing data and growing fears of a recession, worries of a lack of demand had set in. Rumors started circulating that OPEC would cut supply by 500,000 bpd to 1,000,000 bpd. Over the weekend, the rumors were that OPEC would cut up to 1,500,000 bpd. Russia is said to be leading the way for the supply cuts, as western countries would then need to look to alternative sources for energy. Earlier today, OPEC canceled the Joint Technical Committee meeting scheduled for 4th October.

WTI Crude Oil has been moving aggressively lower since June 14th when oil traded as high as 123.66. The price is moving in a downward sloping channel with brief false breaks above and below the channel. On September 26th, WTI made near-term low of 76.28. Today, Crude Oil has bounced to the top trendline of the channel, up 5%, as traders speculate on the amount of oil OPEC will cut today.

Read More : Daily & Weekly Analysis On Xtreamforex
U.S. Dollar Index Overview

The USD was the most strongest currency yesterday, supported by rising US yields and softer import/export data. And whilst the prices paid component of the ISM services PMI softened to a 20-month of 68.8, it remains historically high relative to its long-term average of 59.8- which suggests the aggressive Fed tightening is yet to make an impact on the inflationary forces of the robust services sector.

The main economic event for the dollar this week is tomorrow’s NFP report. There was some excitement that it may come in soft due to the notable fall in job openings, but ADP employment came in slight above expectations at 280k yesterday. But it is all to easy to get caught in the noise of individual data prints, so best to take a wider broader view of underlying trends.

Read More : Daily & Weekly Analysis On Xtreamforex
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