The U.S. dollar stands out versus other currencies

The USD stands out versus other currencies
  On Tuesday, the U.S. dollar index maintained a continuous upward trend. During today’s intraday it traded through an integer mark of 91 in one fell swoop. The highest mark in nearly 14 weeks. In just six trading days, the trend of the United States Index has completed a reversal of the trend from an unfavorable course. The underlying reason behind this is the shift in people’s attitude towards central banks raising interest rates.

When it comes to central banks, they can divide into two parts. One is the Fed, and the other is the central bank other than the Fed. This paper will use this as the main line to explain the reasons why people are expecting changes in interest rates and other factors affecting the US stock index. Factor.
  When it comes to central banks, they can divide into two parts. One is the Fed, and the other is the central bank other than the Fed. This paper will use this as the main line to explain the reasons why people are expecting changes in interest rates and other factors affecting the US stock index. Factor.

  American aspects

  Economic data boosted expectations for raising interest rates four times during the year

  Yesterday evening, the United States announced that the Markit manufacturing and service PMI for April was better than expected. Specifically, the initial value of manufacturing PMI was 56.5, the highest since September 2014; the initial rate of service PMI was 54.4 higher than the forecast and the last month’s final value.

  Besides, US home sales in March also saw the second consecutive month of growth, and a series of positive economic data undoubtedly played a role in fueling the US dollar index. The US dollar index rose nearly 0.59 %, The most significant single-day increase since April.

  When Observing the recent data, the U.S. retail sales data was significantly better than expected last week. The Beige Book mentioned that the U.S. economy remains healthy and is expected to continue to grow and that U.S. Fed officials are fully confident of strong economic growth. Exceeding expectations also expected. The robust US economic data is the first reason to support the recent strength of the US dollar index.

  The positive economic data undoubtedly boosted the market’s expectations of the Fed’s rate hike four times during the year. Earlier, the United States has added one interest rate in March this year. The current interest rate range is from 1.5% to 1.75%. During the year, the rate hike is four times, and the last range is from 2.25% to 2.5%. From the chart, we can see that there is only one short one. During the week, expectations for raising interest rates four times rose from 24.9% to 31.8%.

  U.S. Treasury yield close to 3% psychological level

  In addition to the expected change in the Federal Reserve’s rate hike, US Treasury yields are another factor supporting the US index. Judging from the data, the yield on the 10-year US Treasury bond also recorded a continuous rise and approached a crucial psychological threshold of 3%. The increase in US Treasury yields has forced it to continue to expand its bond yields with the eurozone. The difference between the yields of the Treasury bonds of the same period in Germany briefly touched the highest level in 29 years, and funds are usually borrowed from low-interest-raising currencies to purchase high-interest-rate investments. The currency to make interest rates, which makes the dollar further strengthened.

When it comes to central banks, they can divide into two parts. One is the Fed, and the other is the central bank other than the Fed. This paper will use this as the main line to explain the reasons why people are expecting changes in interest rates and other factors affecting the US stock index.
  CFTC short position run

  The chart below shows the CFTC USD position data as of the week of April 10th.

When it comes to central banks, they can divide into two parts. One is the Fed, and the other is the central bank other than the Fed. This paper will use this as the main line to explain the reasons why people are expecting changes in interest rates and other factors affecting the US stock index.
  From the previous data, it appears that speculative net short positions held by speculators increased by 620 contracts to 1,805 contracts, indicating that investors’ willingness to bearish on the dollar before two weeks warmed up. However, the recent skyrocketing trend of the US dollar has caused a short-run squeeze to stop the loss, which has aggravated the pattern of a stronger US dollar.

  U.S. internal political stability

  On the 23rd of the local time yesterday, the US Senate Foreign Relations Committee voted through the appointment of the State Secretary of Pompeo. Earlier, due to the congressman’s belief that Pompeo’s lack of experience in foreign affairs and his attitude towards international affairs such as North Korea’s nuclear and Iranian nuclear affairs were too drastic and conservative, he encountered greater resistance from members of the Democratic Party in the nomination and appointment of the Congress. Now, Pompeo’s appointment will be submitted to the Senate for a total vote, and no surprise, Pompeo will be passed in the Republican Senate majority. It is worth noting that as one of Trump ‘s most trusted advisors, he is undoubtedly a sure-hearted solution to the stability of the US political situation.

  Also, the turmoil of the “Russia gate” incident has also resolved, because recently the White House spokesman Saunders said that Trump has no intention to dismiss special prosecutor Miller.

  Global Central Banks

 

  On Friday European Central Bank President Mario Draghi said the euro growth area might have peaked. At the same time, it also shows the concern that trade protectionism has had some negative impact on global economic indicators. He also stressed that the current monetary policy still has uncertainty and needs patience.

  Draghi will hold a press conference this Thursday (April 26), according to its recent remarks will not announce the European Central Bank’s changes in QE policy. The Bloomberg survey also showed that only 36% of economists surveyed expected the European Central Bank to announce the end of QE in June, which is less than half of the survey conducted last month.

  Also, today at 16:00 Beijing time, it will be announced that the German IFO business climate index in April may not be as good as expected. As the economic locomotive of the eurozone, Germany’s economic impact on the entire eurozone is self-evident. And just this Monday (April 24th), the German Central Bank has made it clear that the slowdown in economic growth in the first quarter was due to unexpectedly weak manufacturing performance, so the future trend of the euro is still worrisome.

  Carney speaks through the British recession

  On Friday (April 20th), Governor Carney spoke, revealing three significant concerns about the Bank of England’s current interest rate hike. First, the recent British data made the Bank of England eye-catching. The inflation rate was only 2.5%, a record low. Although it can be attributed to the weather and the unique “soft-economy start” in the UK, at least inflation does not support the British short-term rate hike. The second is about the progress of Brexit. At present, “soft Brexit” and “hard Brexit” still have obvious differences within the parliament. The political uncertainty also makes monetary policy more cautious. Third, he also mentioned that “the market need not pay too much attention to the time point of interest rate increase,” implying that the probability of a recent rate hike has become smaller. Through the above three points, the Bank of England released a clear dovish signal.

  NAFTA negotiations are difficult

  At the beginning of last week, the US dollar against the Canadian dollar was still a process of continued weakness and low innovation. This was mainly based on people’s expectations that the preliminary North American Free Trade Agreement framework could be reached in May, which would benefit the Canadian dollar. However, Trump tweeted that the United States has linked Mexico’s border controls with the North American Free Trade Agreement and Mexico must prevent illegal immigrants from entering the United States. This, in turn, made the North American Free Trade Agreement casts a shadow.

  Japan

  Before this, former Prime Minister Junichiro Koizumi stated that Abe might step down in June and Japan’s political situation had a problem. Once Abe stepped down to promote Abe’s economics, negative interest rate policies may cause uncertainty. This caused the yen ’s Weakness. Also, just yesterday Bank of Japan Governor Haruhiko Kuroda also stated that Japan must adhere to its strong easing policy and will not deliberately devalue the currency.

  International situation

  Judging from the overall international situation, the United States has eased its relations with various countries. As for the situation in the Middle East, Trump has made it clear that the United States will withdraw its troops from Syria as soon as possible, which proves that this Syrian incident has not sustained.

  In addition to the events in Syria, the situation in the Korean Peninsula has also eased. Kim Jong-un has said that North Korea has no nuclear weapons, and he is focused on economic reports to calm the situation.

  Russia, the United States Treasury Department said that if Russia Oleg Deripaska gives up Ross control Aluminum United Company, the US will ease sanctions; also, the United States has extended the deadline for companies Rusal and gradually stop the transaction, This means that this suspension of sanctions against RUSAL.

  Lastly, regarding Sino-U.S. trade relations, U.S. Finance Minister Mukuchin also said on Saturday that he is considering going to China to negotiate trade issues and is “cautiously optimistic” about the possibility of an agreement between the two countries in resolving the dispute in the future.

  Therefore, as a whole, the attitude of the Middle East, the situation on the Korean Peninsula, sanctions against Russia, and trade friction with China have all eased. This will create a robust environment for the rise of the U.S. dollar index.

  technical analysis

 

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