JPY: Countermovement expected

Erste Bank Research Team Erste Bank

USD: Firmer for now, sideways in medium-term

The EURUSD reacted sharply to the outcome of the latest meeting of the FOMC, the US Federal Reserve's monetary policy-making body. The monetary policy stance was left essentially unchanged. However, there were changes in the forecasts of the meeting participants, which are polled quarterly. According to this latest survey, a majority of respondents now expect a 0.5% higher policy rate by the end of 2023. Three months ago, the majority had assumed no rate hike by then. We see this advance in interest rate expectations and the resulting strengthening of the dollar as consistent with macroeconomic developments. In the short term, the market will probably test how much potential the dollar still has, which argues for further gains. In the medium term, we maintain our view that a EURUSD move just below 1.2 is the most likely scenario for the coming months.

JPY: Countermovement expected

After the FOMC meeting participants pushed forward expectations for interest rate hikes in the US to June 16, there was increased volatility in the financial markets. This environment triggered a strengthening of the yen against the euro. As soon as the situation has calmed down somewhat, we expect a countermovement in the coming weeks. From a fundamental perspective, the euro should also benefit from the ongoing dynamic recovery of the economy after the end of the restrictive measures. In case of setbacks in the fight against the pandemic or other geopolitical risks, the yen could temporarily strengthen against the euro at any time.

CHF: Franc should weaken

The franc strengthened to a level of 1.09 against the euro in June. A strong rise in inflation in the Eurozone and especially in the US strengthened the franc. We assume that the rise in inflation in both currency areas should be temporary. In this environment, we expect the franc to weaken again against the euro. However, concerns about higher global inflation rates over a longer period of time pose a risk to our forecast. This is because, in phases with globally rising inflation expectations, the franc, with its comparatively significantly lower inflation rates, is an attractive investment target to reduce expected losses in the purchasing power of capital. If political risks come to a head within the EU or at the global level, the franc could also strengthen strongly against the euro at any time.

Download The Full Forex News

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.