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Anticipated Federal Reserve Shop Talk to be Delivered Today

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Anticipated Federal Reserve Shop Talk to be Delivered Today

For what it’s worth, here is my prediction regarding what the Federal Reserve will do today. The Federal Funds Rate will remain unchanged in my opinion. The FOMC Statement may show that the vote actually was debated and not unanimous. The statement is likely to warn that inflation remains stubborn and potentially problematic, meaning the Federal Reserve continues to believe it may have to raise the Federal Funds Rate over the mid-term and again before the end of 2023.

The Forex market has seen the USD get weaker against many major currencies since late May. While financial institutions have seemingly positioned for no increase from the Federal Reserve today, this move has also likely been priced into Forex. Day traders need to understand institutional traders will not be betting on what took place the last three weeks, but are trying to anticipate what will happen into early July and beyond regarding their Forex positions.

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GBP/USD One Month Chart as of the 14th June 2023

Many financial institutions may still be betting the Fed will remain more dovish than the U.S central bank wants to admit, but this is a dangerous perception and could prove costly. Financial institutions are concerned about the Fed because they know the central bank has painted itself into a corner it may not be able to maneuver freely within. The battle to conquer inflation while trying to fuel economic growth is not an easy one. Mixed sentiment abounds regarding the U.S economy depending on who is asked.

Talk of a soft landing and a small recession continues to be heard, this while some analysts warn about a hard drop and darker days ahead. Folks, it is all about timelines and their interpretations, experts warning about brighter or darker days ahead have a tendency to be vague regarding exact moments in time. Everyone has an opinion, and people often have more than one.

In my opinion – my one opinion, the Fed is likely to say that it is not going to raise rates today, but may have to do so in the mid-term. If these were normal times and economic conditions were not suffering from huge spending running amok in Washington and the corporate banking sector wasn’t fragile, the Fed may actually have raised the Federal Funds Rate today to continue to battle inflation deliberately. However, a pause for the moment seems like the logical choice, this while ‘hoping’ inflation continues to diminish. And hope is a key word here. Everyone seems to be hoping. The question financial houses and traders need to decide after the FOMC Statement takes place today is how seriously do they consider the Fed’s remarks.

If they believe the Fed will have to continue to remain neutral regarding its mid and long-term interest rate policy, the USD may soften and incremental selling might be demonstrated. Human instinct tends to be optimistic, which means financial institutions and maybe even the Fed wants to believe inflation will ebb lower. If this happens the USD would weaken further. However, the Fed may have to sound more aggressive than people want, but that would damper the mood of financial institutions – so look for optimistic interpretations to abound with rose colored glasses, even if they are wrong in the long-term.

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Gold One Month Chart as of the 14th June 2023

For evidence of outside barometers, traders may want to look at Gold which has essentially traded between 1940.00 and 1975.00 with a few outliers since the last week in May. The price of Gold has seemingly situated within a consolidated framework the past few weeks. The precious metal may produce a strong move if the Fed shows more dovish behavior today, particularly if financial institutions show more optimism via behavioral sentiment in Forex – meaning if a weaker USD trend continues momentarily Gold could traverse higher.

My prediction and $1.00 USD may get you on a bus. As always caution will be needed if you are trading immediately before and after the U.S Federal Reserve’s rate decision. I advise using a seat belt today consisting of entry price, stop loss and take profit orders via solid risk management, but then again these cautious attitudes should always be practiced by day traders.

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Week Ahead: Inflation Followed by the U.S Federal Reserve

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Week Ahead: Inflation Followed by the U.S Federal Reserve

Monday, 12th of June, U.S Federal Budget Balance – hold down the laughter and snickers please as you wonder why you should care, this as the report shows monthly income versus spending from the month before. Yes, the U.S ‘Debt Ceiling’ bill was passed recently. Very few people are going to pay attention to Budget Balance report, except economists and traders who have ‘skin in the game’ via hedge funds as an example – that make long-term bets, and U.S politicians who want to hoot and holler…….while nothing really gets done to limit wasteful spending in Washington D.C.

Tuesday, 13th of June, U.S Consumer Price Index reports – yes, this inflation data will be important per the monthly numbers showing what consumers are spending. A slight uptick is expected with an outcome of plus 0.2% via the broad statistics – last month’s number showed a gain of 0.4%. The outcome of the broad and core CPI statistics will give the Federal Reserve a sounding board for what will take place on Wednesday via the Federal Funds Rate announcement. Stronger than expected inflation numbers could cause a rupture and nervousness. A weaker result would calm Forex and perhaps make the USD slightly weaker.

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EUR/USD One Month Chart as of 11th June 2023

Wednesday, 14th of June, U.S Producer Price Index – these numbers will be released early in the day and will be followed by the Federal Reserve five and half hours later. The inflation outcome via the PPI if stronger than anticipated would cause some caution before the Federal Reserve takes the stage.

Wednesday, 14th of June, U.S Federal Funds Rate, FOMC Statement and FOMC Press Conference – while many analysts seem convinced the Fed will not hike the interest rate this week, there are obviously no guarantees. The FOMC Statement will indicate the U.S central bank’s outlook. Traders who are intent on trading before the official interest rate announcement and statement are playing with fire. Speculators should keep in mind that other central banks have surprised folks with increases recently including Canada and Australia. A hike from the U.S Federal Reserve would surprise a lot of people and financial institutions, but stranger things have happened.

Thursday, 15th of June, New Zealand Gross Domestic Product – the growth numbers which will come out a handful of hours after the U.S Fed leaves the stage will be intriguing and provide NZD/USD traders more impetus into what will likely already be a volatile trading session taking place.

Thursday, 15th of June, China Industrial Production and Retail Sales – these two reports from the economic giant will be watched closely. China’s economy is struggling a bit, and weakness in the housing sector via values are starting to cause a reaction in domestic spending. Industrial Production numbers will give some insights regarding global demand. Economic problems in Europe and North America are certainly not helping matters in China because demand for goods are restrained and hurting the manufacturing sector.

Thursday, 15th of June, U.S Retail Sales – consumers in the U.S have been expected to start producing negative numbers via these statistics, will they begin to do it? A stronger number would be of interest to some, but after Wednesdays’ FOMC Statement and news that will be generated, it is questionable who will give full attention to this report and what affect it could have.

Thursday, 15th of June, E.U ECB Press Conference – this question and answer session could prove to be interesting depending on what the U.S Fed does the day before. Certainly the European Central Bank will give their opinions on monetary policy and economic circumstances in the European Union and abroad. The EUR/USD could be affected.

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USD/JPY One Month Chart as of 11th June 2023

Friday, 16th of June, Japan BoJ Policy Rate and Monetary Policy Statement – no major changes are expected from the Bank of Japan. This is the one central bank unwilling to change its attitude regarding monetary policy because of the whims of others. Perhaps if the U.S Federal Reserve surprised everyone on Wednesday with a hike, this could change the quiet rhetoric from the BoJ – but even that is doubtful. USD/JPY traders should pay attention to the BoJ Press Conference just in case.

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Risks Ahead: Tranquil Data Mixed with Loud Nervous Chatter

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Risks Ahead: Tranquil Data Mixed with Loud Nervous Chatter

Last Friday finished with stronger than expected Non-Farm Employment Change numbers, which essentially collided with dovish rhetoric via two U.S Federal Reserve FOMC members from the middle of the week; this while inflation clearly remains stubborn in the U.S.

All of which sets up this coming week for nervous trading results and until the 14th of June, when the Federal Reserve’s Federal Funds Rate pronouncements will be brought forth. Plenty of talk about interest rates will be heard in the days ahead and traders should expect to hear debates as the chatter grows louder.

Commodity traders may be interested in the outcome of the OPEC+ meetings taking place this weekend. The cartel’s decisions regarding oil production will affect not only prices of Crude Oil futures, but is a direct reflection regarding global demand, which also tells us about the organization’s viewpoints regarding global economic conditions.

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WTI Crude Oil Three Month Chart as of 4th of June 2023

Monday, the 5th of June, European Services PMI – Germany, France and Italy and will release their Purchasing Managers Index readings. The German outcome could prove interesting because the nation is suffering from recessionary pressures. The PMI results could affect the EUR/USD a bit. The U.K will also release their data too.

Monday, the 5th of June, U.S ISM Services PMI – this report will be of interest because some are expecting a better outcome compared to May’s results. A potentially strong reading could prove problematic and put more pressure on the Federal Reserve to raise interest rates next week.

Tuesday, the 6th of June, Australia RBA Rate Statement – the Reserve Bank of Australia surprised people with an increase of their Cash Rate last month. No increase is expected now, but the RBA’s rhetoric should be listened to as they comment about domestic and global economic conditions.

Wednesday, the 7th of June, Canada BoC Overnight Rate – Bank of Canada is expected to hold its borrowing costs in place, but inflation is still creeping into prices and the BoC’s Rate Statement may prove intriguing.

Thursday, the 8th of June, U.S Weekly Unemployment Claims – following in the footsteps of the stronger than expected jobs numbers last week, this report could get some media fanfare. However, it also may prove to be a lot of noise and have little real affect on market direction.

Friday, the 9th of June, China CPI and PPI – the inflation reports from China could prove interesting in wake of recent lackluster economic data from the nation. Last Thursday’s Caixin Manufacturing PMI results came in slightly better than expected, but data from China the week before was negative. The data from China gives investors and traders insights because of its importance as a global supplier of consumer products.

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USD/INR: Stubborn Higher Range and Risky Speculative Wagers

by with No Comment AMT MarketsFeatured HighlightsFinancial Institutions

USD/INR: Stubborn Higher Range and Risky Speculative Wagers

The USD/INR has remained within the higher level of its one month price range as behavioral sentiment remains difficult to gauge. As of this writing the USD/INR is near the 82.7200 ratio, but readers are urged to check this price against live market action as they read to compare conditions.

The Broad Forex Market is Nervous and so is the USD/INR

While many traders of the USD/INR who have been tempted to be sellers of the currency pair might be taking it personally that their perceived price targets have not been accomplished, they should note the broad Forex market has been difficult for most global speculators. The price action the USD/INR is experiencing currently comes from impetus due to nervous behavioral tendencies being generated from conflicting sentiment. The price range between 82.5000 and 82.8500 since the 18th of May has been rather persistent with momentary outliers.

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USD/INR Five Day Chart as of 30th May 2023

Fear of the U.S Federal Reserve remains rather strong in Forex, this has affected the USD/INR because of concerns the U.S central bank might increase the Federal Funds Rate on the 14th of June. Inflation remains durable and is showing few signs of vanishing. The higher consumer prices in the U.S are a thorn in the side of the Federal Reserve which is intent on trying to put a dent into rising prices. If U.S data continues to show inflation is pushing ahead a rate increase could happen, and the higher prices in the USD/INR likely reflect this has been priced into the currency pair.

Federal Reserve policy can certainly be debated and fingers pointed at their wrong conclusions and decisions made the past two years. The current circumstances for the Fed has put it in a very difficult position. The lack of a clear outlook for financial institutions is leading to a lot of risk adverse trading since the 9th of May. Also concerns about the U.S debt ceiling did not calm many nerves the past few weeks, although the crisis seemingly has found a compromise which is likely to be approved tomorrow in Washington.

High U.S Interest Rates and More Corporate Banking Woes as a Potential

Higher interest rates are hurting U.S corporate banking particularly in the mid and small sized sectors of the industry. If these banks continue to suffer, their problems will create a credit crunch for many in the U.S middle class, which could have a big effect on consumer spending.

Higher interest rates via the increasing Federal Funds Rate are hurting the corporate banking sector because it makes it harder to lend money, and some clients are taking their money out of deposits to seek better returns elsewhere – like Treasury Bonds. The increased interest rates in the U.S also hurt many global currencies like the USD/INR because global financial institutions sometimes seek the better paying U.S bonds, which are also seen as more trustworthy long-term investment vehicles.

Thus, while the Fed is projecting tough talk about the potential of raising interest rates in June, and warning the mid and long-term outlook is cause for concern as inflation shows its ugly head, financial institutions are demonstrating nervous behavioral sentiment. The strong rhetoric from the U.S Fed and its lack of clarity regarding real direction has left the USD/INR and many other major currency pairs in awkward choppy positions with highs being tested. Until U.S economic data shows inflation is under control and growth is slowing down substantially, the Fed may have to continue to be rather hawkish sounding, which will not help the USD/INR selloff strongly in the near-term. In other words traders considering selling should be conservative with the USD/INR and not be overly ambitious with their targets.

Today the CB Consumer Sentiment reading is coming from the U.S, a lackluster report with negative data would actually help the USD/INR. Also this coming Friday jobs statistics will be published. While many folks will watch the employment outcome from the Non-Farm Employment Change, the Average Hourly Earnings could be more important and provide insights regarding inflation which could prove crucial. A rise in wages is not the outcome the Federal Reserve wants to see.

Warning: Use Entry Price Orders when Trading the USD/INR when Possible

Traders should also note that short-term wagers on the USD/INR should be done with entry price orders to make sure they are not caught and hurt by the large spreads which might be offered by their brokers – the spread is the differential between the ‘bid and ask’ price. Frequently a trader will be given a price fill that leaves them feeling like they have been cheated. Speculators frequently try to target short-term price goals with quick hitting bets, but bad price fills make these types of wagers difficult to get a positive result – when only a handful of pips in either direction can hurt a trader because too much leverage is being used.

USD/INR traders who are buyers should understand they will most likely be given the sell price of the ‘bid and ask’ when seeking upwards direction, and sellers of the currency pair are likely to get the ‘buying’ price of the spread – thus making a chosen wager on direction further away and difficult to achieve profits. Using an entry order which pinpoints a chosen price to enter a trade is vital. A trader should not expect to get a price fill which is ‘geared’ towards their chosen direction. Also, spreads in the USD/INR are wider than many major currency pairs because the amount of volume in the Indian Rupee cash market tends to be thinner, leaving more room for the technological capabilities of Forex brokers to provide less than attractive pricing.

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Risk Friday: To Freeze or Reduce is not the Correct Question

by with No Comment AMT MarketsBusinessFeatured Highlights

Risk Friday: To Freeze or Reduce is not the Correct Question

The U.S debt ceiling debate in actuality, is a vote to legally increase the amount of debt the U.S government can spend. Approval of the debt ceiling vote will give a green light to the government to be a larger debtor without consequence. Other than eventually not being able to pay its bills in the future, what’s the problem some might ask. And let’s not consider potential downgrades from S&P, Fitch Ratings and others for the moment.

Here are the Problems Ahead for the U.S

U.S debt dominoes have grown heavy and are getting harder to stand back up, but those with the ability to spend simply do not care because they will never be held responsible. The U.S government seems to have forsaken capitalism and have entered the plundering stage, where the government believes it can ‘find’ enough revenues from higher taxes and the selling of long-term Treasury bonds while remaining the big man on campus.

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Gold Five Years Chart as of 26 May 2023

Higher taxes frequently stymie businesses and make it harder to hire employees because the expenses become too big. As an example for what the future could look like in the States turn your eyes to Chicago, where elected city leadership is considering implementing a ‘head tax’ in which businesses would need to pay a fee on each person it employs. The tax situation is getting so ridiculous in Chicago, that long time economic juggernauts like the Chicago Mercantile Exchange are grumbling and threatening to leave because of “ill-conceived” policies.

Likewise, the U.S government seemingly doesn’t understand that spending cannot be replenished by tax collection alone. Actual cuts to spending need to take place. It is called reducing the deficit. The naive will eventually be made to see the light painfully.

The Ramifications for the U.S could be Economically Untenable

U.S interest rates which have been raised the past year and a half, have affected mid and small sized banks and the amount of money the U.S government has to pay on maturing bonds because of higher borrowing costs. Fitch Ratings has recently whispered publicly they may be forced to downgrade U.S debt offerings, this if the U.S government doesn’t increase the amount of money it is legally allowed to owe. Pause for a second here, do you see the absurdity in this clown show? In other words a rating service company is OK with the debtor being allowed to ‘borrow’ more money from itself that it does not have – in order for that same debtor to be allowed to ‘promise’ it can repay its debt at a later time.

The U.S government keeps allowing debts to grow and creating entitlements as if this has no effect on inflation. Quantitative easing and stimulus packages initiated by the U.S government artificially kept the Gross Domestic Product figures looking positive and the equity markets happy for more than a handful of years. However, the proverbial ‘can’ has been kicked down the road so many times it is ready to disintegrate. The debt problem is simply being passed down to the children and grandchildren of the U.S, or so the current leadership seems to hope. But what if the debt problem explodes now? This generational problem is systematic globally, other governments practice equally bad or worse fiscal policy. Politicians do not like to walk around with empty hands.

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USD Index Five Years Chart as of 26 May 2023

The Clock is Ticking Loudly and Some Investors are Paying Attention

The clock is ticking in the U.S and unless they can prove expenses can be managed better, they are on a perilous road to becoming a regular nation among others, that is looked upon with scorn and derision because they cannot pay their debts. The dominance of the USD will be punished and shattered if they do not stop the nonsense. The dollar’s status as the reserve currency of the world has been slipping incrementally for a couple of decades and this will continue if the U.S government does not seize the problem and find solutions. A failure to show budgetary sanity and decrease expenditures will eventually cause something many U.S citizens do not want, relegation to the status of a ‘regular’ nation. The attitude of, “I remember when” could become a refrain heard in the U.S sooner rather than later.

The U.S is in a precarious place and sunshine in many respects is not on the horizon. Financial institutions supposedly believe the U.S debt ceiling will be taken care of in the coming days or weeks. However, a debt ceiling agreement is not the correct bandage for a broken leg, the problem is much larger. Debt should not be allowed to continuously grow. If the situation gets worse, some nations sitting on the geopolitical fence may shift their alliances depending on the ability of mutual relationships to help deliver economic stability.

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USD/INR: Narrow Price Range as Nervous Sentiment Exhibited

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

USD/INR: Narrow Price Range as Nervous Sentiment Exhibited

The USD/INR has delivered a rather narrow price range the past four days of trading as the currency pair awaits impetus from crucial U.S risk events.

The USD/INR is trading near the 82.7000 ratio as of this writing. While the currency pair over the past month has seen a rather incremental climb higher, the past handful of days has seen rather sideways price range emerge. Talk about Reserve Bank of India intervention has been discussed widely and this has caused speculative caution too. However, risk events from the U.S which will be delivered soon are also a catalyst for conservative trading in the USD/INR and broad Forex markets globally.

Trading Tip Regarding Bias that Forex Speculators should try to Avoid

A very important aspect for USD/INR traders to consider is that they should remove any bias they may feel personally regarding the Indian Rupee. Traders closely connected to the currency they are trading, particularly if they are citizens of the nation; tend to believe their national currency should always be stronger no matter the circumstances. This notion of bias does not always work out well for traders with a nationalist leaning.

The Indian Rupee is no different regarding its ability to maneuver against the USD like many other major currencies. While the Indian Rupee certainly has its own financial capabilities, the USD remains the dominant currency on the block and affects most outcomes. If a trader can remove their bias and love of their nation from their trading sentiment, this often makes it easier to have a more realistic viewpoint about potential price direction in the short-term and long-term. The Indian Rupee is an important global currency, one that will grow in stature, but traders should remember current circumstances too.

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USD/INR Five Day Chart as of 24th May 2023

U.S Debt Ceiling Concerns and the Upwards Drift of the USD/INR Causing Problems

Concerns are being voiced regarding the failure of U.S debt ceiling talks, the inability to not find an agreement in the U.S Congress is problematic. June 1st is supposedly the date the U.S government must reach a conclusion. The past week has seen signs from Democrats and Republicans acknowledging the importance of finding a settlement, but political rancor still is making a mess of the situation. Trading institutions are certainly not happy about the loud debate and could ‘punish’ financial assets more over the short-term until a debt ceiling compromise is reached.

The move higher in the USD/INR has likely caught many speculators by surprise the past month. However, the drift upwards has correlated to the broad Forex markets the past couple of weeks, this as the USD has turned stronger against many major currencies. The USD/INR essentially went from 82.1200 to its current price since the 15th of May. The Forex pair was trading near 81.6000 on the 4th of May. The temptation to sell the USD/INR the past couple of weeks has likely been strong as traders flirted with the notion technically that the currency would have to reignite its downwards path, but that clearly has not happened.

Today and the remainder of the week, the U.S has important risk events on the calendar. U.S Treasury Secretary Janet Yellen will be speaking and will certainly be asked to state her opinion on the debt ceiling talks. She will likely try to offer a neutral tone and not scare the financial markets. However, she can certainly be counted upon to say it is important to reach an agreement so the U.S can continue paying its financial obligations.

Perhaps more important than Treasury Yellen’s talk this afternoon, will be the U.S Federal Reserve’s FOMC Meeting Minutes publication later in the day. Financial institutions globally are nervous about the Fed’s interest rate outlook regarding its June Federal Funds Rate decision. Many analysts have predicted the U.S central bank will halt interest rate hikes and not increase on the 14th of June. Yet inflation data from the U.S remains problematic. Today’s FOMC Meeting Minutes text will provide insights regarding the Federal Reserve’s last meeting and give an inside look towards its leanings for a potential hike or pause.

USD/INR traders should also be aware that important Gross Domestic Product data will come tomorrow which will offer details regarding U.S growth. On Friday the U.S will release Core Personal Consumption Expenditure statistics and this will provide inflation results, and the outcome will certainly influence the U.S Federal Reserve’s June interest rate decision.

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FOMC Meeting Minutes and Key Growth Data Coming this Week

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

FOMC Meeting Minutes and Key Growth Data Coming this Week

Monday the 22nd of May, Japan Core Machinery Orders – which will likely have very little impact on the markets – not even the USD/JPY should react too much. Although it should be noted last month’s figure was negative and this month’s result is expecting a better outcome.

Monday the 22nd of May, E.U Consumer Confidence – forecast to produce a negative number, but this statistic doesn’t usually get much of a response in the financial markets unless there is a shocking result.

Tuesday the 23rd of May, E.U French and German Manufacturing and Services PMI, along with the broad E.U results – the manufacturing statistics from France and Germany are expected to come in slightly better than last month’s results but remain in negative territory.

Tuesday the 23rd of May, U.K Manufacturing and Services PMI – traders will watch these results after the bad GDP numbers from Britain almost two weeks ago.

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GBP/USD Three Month Chart as of 21st of May 2023

Tuesday the 23rd of May, U.S Flash Manufacturing and Services PMI – the reports could prove of interest and cause a bit of a tremor in the market, but unless there is a big surprise investors will remain cautious as they anticipate the next day’s potentially big risk events.

Wednesday the 24th of May, U.K Bank of England Governor Bailey – will be speaking at two events and could stir the GBP/USD with his comments on the British economy and inflation.

Wednesday the 24th of May, U.S Treasury Secretary Janet Yellen – will be speaking at a Wall Street Journal event, where she will be listened to for any comments on the ‘U.S debt ceiling” crisis. Yellen is a ‘trained’ speaker and she will try not to scare financial institutions who will have some leaders in attendance.

Wednesday the 24th of May, U.S FOMC Meeting Minutes – the report which will outline the U.S Federal Reserve’s thinking regarding its recent interest rate hike and what it might be considering regarding June could impact the marketplace. The report is published late in the day, but financial institutions will certainly wait for the publication and react. While the FOMC paper is sometimes considered ‘noise’, this report will be important because of the nervous sentiment which exists in markets like Forex and equity indices as they deal with a lack of clarity.

Thursday the 25th of May, U.S Preliminary Gross Domestic Product – the growth (or lack of growth) numbers from the States will be watched intently. A muted projected gain of 1.1% is anticipated by some analysts.

Thursday the 25th of May, U.S Preliminary GDP Price Index – this report will deliver insights regarding inflation in the U.S and should be given some attention by traders.

Friday the 26th of May, Core PCE Price Index – the inflation numbers should be watched. Any surprise above the anticipated 0.3% forecast could cause an affect in the financial markets.

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Economic Data that needs Attention this Week

by with No Comment Central BanksDataFeatured Highlights

Economic Data that needs Attention this Week

Tuesday 8th of May, U.S FOMC Member Speaks – N.Y Federal Reserve President John Williams will talk at the New York Economic Club. N.Y Fed is important regarding monetary policy particularly for financial institutions. Williams words should be given merit. Williams will also be likely listened to for any comments regarding U.S corporate banking health regarding mid-size and smaller institutions.

Wednesday 9th of May, U.S Consumer Price Index reports – three key inflation consumer price statistics will be published including monthly, annual and core monthly changes. The results will be important taking into consideration the manner the U.S Federal Reserve conducted its ‘sitting on the fence’ rhetoric last week, as if looking for an accuse to continue to raise interest rates if inflation remains stubborn or worse continues to climb.

Thursday 10th of May, U.K BoE Monetary Policy Summary and Official Bank Rate – which is expected to produce another increase of 0.25%.

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GBP/USD One Month Chart as of 7th of May 2023

Friday 11th of May, U.K Gross Domestic Product – growth numbers from the U.K are expected to demonstrate economic conditions remain challenging.

Friday 11th of May, U.S Preliminary University of Michigan Consumer Sentiment – a rise in consumer sentiment from this report could add to the confusion and ‘concern’ that financial institutions have regarding the U.S Federal Reserve’s short term monetary policy regarding the prospects for a June increase to the Federal Funds Rate. If the number is weaker than expected this could help ‘pause’ outlooks.

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Gut Feeling about Fed June Hike, Perhaps Wrong

by with No Comment AMT MarketsCentral BanksFeatured Highlights

Gut Feeling about Fed June Hike, Perhaps Wrong

I have a distinct feeling the U.S Federal Reserve is going to suggest via their FOMC Statement tomorrow that another increase of the Federal Funds Rate is likely going to happen in June. I could definitely be wrong, but my gut instinct is rumbling.

Inflation Remains a Sincere Problem Per the Fed’s Thinking

Wage data demonstrated last Friday via U.S Personal Income that inflation remains stronger than expected. Yesterday’s ISM Manufacturing Prices reading also spiked to 53.2 versus the expectation of only 49.4. The increases shown within these economic reports will not please the Federal Reserve.

While a hike tomorrow is nearly a certainty, the Forex market remains rather unimpressed with the potential for an increase on the 14th of June. Behavioral sentiment has shown a rather polite USD actually losing momentum the past few days. Caution has seeped into the USD today, but are financial institutions too relaxed regarding a potential hike by the Fed in June?

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USD/AUD 5 Day Chart as of the 2nd May 2023

Reserve Bank of Australia’s Hike Earlier Today Caught Many Folks Unready

The Reserve Bank of Australia’s hike today, may be another sign the U.S Fed will not only hike tomorrow, but in June as well. What are the chances the Federal Reserve hinted strongly to the RBA, that if they wanted to protect the value of the AUD that an increase would be justified in order to guard against the Fed’s rhetoric to come? The Australian hike caught a lot of financial houses and day traders unprepared as the USD/AUD spiked lower this morning, for proof of the surprise simply look at the gap created downward today on the five day chart of the currency pair.

The RBA hiked their Cash Rate by 0.25% from 3.60% to 3.85% while sighting stubborn inflation as a main cause. Nothing is certain, but if the Federal Reserve’s FOMC Statement is rather strong tomorrow and says it will still consider a June increase perhaps we should not be shocked. Central banks do share information with one another.

Early February’s Rhetoric from the Fed wasn’t Treated Seriously at First Glance

Coincidentally, the Fed’s increase in early February was two days before the Non-Farm Employment Change and Average Hourly Earnings were reported on the 3rd of February. On the 1st of February the Federal Reserve warned that inflation remained stubborn, but the market didn’t take their words too seriously as the USD traded rather politely following the anticipated interest rate hike.

However, the USD gained violently the day after when Fed officials began to reiterate the strong tone from Fed Chairman Jerome Powell from the day before. And then stronger than expected jobs numbers followed on Friday. Note, that the Non-Farm Employment Change and Average Hourly Earnings will be published this coming Friday.

The Federal Reserve remains in a difficult position, a hike tomorrow will bring the Federal Funds Rate up to 5.25%, a June hike may not be welcomed by the broad financial markets, particularly equities in the near-term, but people may want to consider the possibility of it happening. Day traders should brace for strong price velocity developing. Tomorrow’s Forex action will be violent for speculators who are not ready, and if the Fed suggests a potential hike to 5.50% in June perhaps we should not be stunned.

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Risk Events Pose Danger this Week

by with No Comment Central BanksDataFeatured Highlights

Risk Events Pose Danger this Week

Monday 1st of May, U.S ISM Manufacturing PMI – weaker than expected Advance GDP results last week make this report of keen interest for investors regarding U.S growth (or recessionary) prospects.

Tuesday 2nd of May, Australia RBA Cash Rate – Reserve Bank of Australia is expected to hold the line regarding borrowing.

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EUR/USD 1 Month Chart as of 30th April

Wednesday 3rd of May, U.S Federal Reserve FOMC Statement and Federal Funds Rate – U.S central bank expected to raise by another 0.25% making key lending mark 5.25%. This number has been digested into the broad markets, what investors want to know is the Fed’s June outlook. Federal Reserve outlook and FOMC Press Conference will move Forex and equities globally. Traders remains suspicious regarding another hike in June.

Thursday 4th of May, E.U ECB Main Refinancing Rate – European Central Bank expected to hike by another 0.25%. Anything different would be a surprise. ECB Press Conference should be rather tranquil.

Friday 5th of May, U.S Non-Farm Employment Change and Average Hourly Earnings – while jobs numbers are always of interest, it is the earnings statistics which should be watched and will give insight regarding inflation and potential actions about Fed’s June considerations.

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Forex, Interest Rates, the Fed and Conspiracy Politics

by with No Comment AMT MarketsAssetsFeatured Highlights

Forex, Interest Rates, the Fed and Conspiracy Politics

If you have been looking for road signs regarding what the U.S Federal Reserve is going to do next week and trying to get a feel for its rhetoric which will be delivered in the FOMC Statement on the 3rd of May, this week’s U.S data outcomes should be monitored. And as of now the data might be suggesting the Fed will remain aggressive in June.

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GBP/USD One Month Chart

A Fed Funds Rate hike is going to happen on the 3rd of May unless there is a financial catastrophe that suddenly emerges that is nearly cataclysmic. While First Republic Bank wobbling is certainly a problem (Mark Zuckerberg is supposedly a rather large client of the bank), if this entity fails completely it may not cause massive bedlam. The stock has dropped violently, so a collapse should not be a surprise. No, it will not be welcome, but it should not be an unexpected calamity.

The question is how much the U.S government will protect depositors? The large clients who are not insured above the standard 250k USD ratio will want the same benefits that clients of Silicon Valley Bank received in March. Should they be rewarded the same way? The American public may not like the idea of another bailout for the deep pocketed, but there may not be much they can do about it, except to vote the politicians out, but who do you exactly punish?

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First Republic Bank – One Month Chart as of 27th April 2023

What a collapse of First Republic Bank will do is hurt the corporate bond sector in banking again, because it is likely holders of these bonds will be put at the back of the line once again if the U.S government decides to protect big depositors of millions of dollars like Zuckerberg, before it protects bond holders.

U.S Data in Focus and the Allure of a Black Dress with Growth

But I digress, yesterday’s Core Durable Goods Orders statistics came in better than expected. Today Advance GDP will come from the U.S and if this number produces an increase instead of a downturn, the U.S Federal Reserve will have more ammunition to remain aggressive regarding interest rate hike rhetoric. An increase of 0.25% has been calculated into Forex for next week. The USD has done rather well recently, but what is of intrigue is the perception the USD is doing well after the financial markets have seemingly priced in a rate hike on the 3rd of May. Meaning, typically the USD would have started to ebb a bit lower after financial houses put their interest rate outlook into their Forex positions. Yesterday’s better than expected Core Durable Goods Orders leaves the door open for another hike on June the 14th to be precise.

While Core Durable Goods Orders isn’t a sexy statistic, GDP numbers frequently are, and if the growth numbers show up with a stunning black dress on with alluring ‘expansion’ it could send large speculators into a tizzy and make them believe the Fed could increase by another quarter of a point in June. The Fed during its FOMC Statement next week will certainly try to help financial institutions anticipate outlook. The Fed doesn’t need to hold the hand of investors, but it often treats them like children.

Financial houses had largely believed the Fed would hike in May and might raise in June. The notion that a June increase is certain would then put the focus back on the long-term again, and Forex could then break free of its rather consolidated incremental USD strength seen the past couple of weeks. Inflation remains a drum beat that is steady. And while today’s GDP numbers will be important. Tomorrow PCE inflation statistics will be the final nail in the coffin. If growth is stronger than expected today, and inflation numbers remain stubborn tomorrow, the Fed would certainly consider another June increase valid.

On the bright side for day traders is that the cautious choppy air which has circulated the past couple of weeks in Forex is almost done. While steady trends may not reappear for a while, at least near-term outlook will have more clarity by this time next week.

Big Institutions Have Long Term Outlooks and Treat Trading Conditions Differently

Long term outlook is another game as day traders should know and one they cannot easily participate. Long term investors have the money to specialize in assets which are not expecting profits today, but instead have a larger time frame for making money. Deep pockets, patience and the need for less leverage help financial institutions trade in a more stable manner, frequently putting the ‘odds’ in their favor.

The price of Crude Oil is actually behaving politely in recent trading, and its ability to find a mid 70.00’s USD price range is interesting and may help inflation move lower if it can be sustained. If supply of goods can adequately stabilize and global logistics costs come down, inflation could decrease. These factors are part of the long term perspective of financial institutions. Day traders may want to consider this because it could affect behavioral sentiment moving forward.

Higher interest rates from the Fed are causing other currencies to loss value and this has caused increased costs for international manufacturing companies located outside the U.S which frequently have to buy commodities in USD from their converted domestic currencies, this causes inflation. This is a factor not spoken about enough and traders need to consider this within their perspectives too.

The Fed and Perhaps a Conspiracy Theory

If the Fed actually starts to decrease its interest rates, it would help other currencies stabilize. And yes, if the Fed stops increasing interest rates it may actually help weaken global inflation. The Fed has caused import inflation to occur into the U.S. Are they aware of that? It is a good question. The likelihood is a yes, and it has been disregarded, but why? Perhaps there is another reason; does the U.S Fed and U.S government want to cause inflation globally to strike politically at some competitors? This is a different topic………kind of. Conspiracy theory.

While insight regarding the dialogues between the Federal Reserve and U.S government is certainly above my pay grade, one has to wonder about considerations regarding inflation and a stronger USD and its potential effect on China. The Fed increases may be a way of trying to inflict harm economically and in a subtle manner, but this cannot be proven. Perhaps the Fed is unaware of the global conflict being waged.

On another note, Gold remains near 2000.00 an ounce – almost steadily, displaying a certain amount of cautious behavior.

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Gold One Month Chart

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USDINR: 83/$ & Above is a Possibility

by with No Comment DataForexWorld

USDINR: 83/$ & Above is a Possibility

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The Indian Rupee continues to remain under pressure as volatility in the global market triggers capital outflows amid investors concerns over the stress levels in banks worldwide especially in the U.S and in Europe.

RBI Governor Das yesterday, said in a conference that India today has a well regulated and well supervised banking sector.

Not to forget, India has past issues with some private banks that have been lending to corporations that defaulted on their debt . Yes Bank and Lakshmi Villas Bank are some of these examples, and today these banks are well capitalized and their loan books are diversified as the RBI has tightened its grip on regulatory frameworks.

Also, the loan books of Indian banks are being more diversified, and Government Bonds portfolios are comprising only 18-22% of the total assets, meaning banks are not at greater risk than their western counterparts.

The central bank of India holds Forex reserves of over $560 billion USD and has been actively intervening in the Spot & Forward markets since 2022 as the U.S Federal Reserve started to raise rates to tackle higher inflation. Governor Das also cautioned, ”the worst of inflation is behind us,” but pointed out that with the Russia – Ukrainian war, along with monetary tightening by major central banks, that there is still stress for nations that have high external debt and more capital outflows, which can put pressure on their currencies and trigger imported inflation.

India also has sticker inflation of around 6.4% down from 6.52% in January, this while the RBI is expected to raise rates by 25 bps in the April monetary policy meeting . The Indian Rupee was among the worst-performing currencies among emerging Asian peers last year, counter weighed by a stronger dollar and outflows from local assets. 

As a net importer of oil from Russia which grew 4 times in 2022, and less exposure to external debt means headwinds from shocks will be minimal which will help the Indian Rupee. However, as growth slows down in the West, this means more capital outflows and a flight to safer assets possibly taking place.

The RBI stance is very different than a month ago, where it didn’t allow markets to take the Indian Rupee above 83/$, but now it’s significant that the central bank could let to the USD/INR depreciate above 83 to save foreign exchange reserves.

The RBI’s equation is very simple as the Federal Reserve reduced its rates to zero back in 2020 because of Covid19, more money chased speculative assets especially in the emerging markets. And the RBI accumulated a lot of Forex reserves. Now the tables have changed. In addition to this, India also is not keen to add its bonds to global indexes due to concerns over potential ensuing market volatility not supporting capital inflows, and thus perhaps damaging the Rupee.

With current account deficits widening to 4.4% of India GDP in Q2, this means India needs to work hard to achieve better capital flows, particularly as tensions on some important global banks continue to be demonstrated.