4 Global Market Updates- 27 February, 2023

In this article, we have covered the highlights of global market news about the AUD/USD, GBP/USD, USD/CAD and NZD/USD.

AUD/USD: Weak near-term forecast continues, according to UOB

According to UOB Group economists Lee Sue Ann and Quek Ser Leang, the short-term outlook for AUD/USD indicate that the slide might continue to the 0.6680 zone.

24-hour perspective: “We emphasized last Friday that despite the sluggish downward pace, we continue to see an opportunity for AUD to hit 0.6775 before a more prolonged comeback is expected.” While our prediction that the Australian dollar would decline was accurate, instead of challenging the level of 0.6775, the Australian dollar plunged to a low of 0.6719 and closed at 0.6726 (-1.20%). While more AUD weakening is possible, any fall today is unlikely to jeopardize the primary support around 0.6680 because of the highly oversold circumstances. A breakthrough of 0.6785 (minor resistance is at 0.6760) on the upside would suggest that the AUD’s weakness has steadied.

For the next three weeks: “Our most recent commentary was from last Thursday (February 23, spot at 0.6810), in which we said that the Australian dollar “is expected to decline further to 0.6775, potentially 0.6730.” Our prediction came true when the Australian dollar plunged to a low of 0.6719 on Friday. The following levels to monitor in AUD are 0.6680 and 0.6630, as the outlook in that currency remains poor. Overall, a break of 0.6820 (a strong resistance level formerly at 0.6890) would signal the conclusion of the AUD downturn that began more than a week ago.

GBP/USD: UOB expects more declines below 1.1870

According to UOB Group economists Lee Sue Ann and Quek Ser Leang, a break below the 1.1870 barrier are predicted to cause the GBP/USD to continue losing ground.

“We warned last Friday that GBP “is expected to push lower,” but we maintained the belief that “the support around 1.1950 is unlikely to come under assault.” 24-hour view The expected decrease came sooner than we anticipated, with the pound breaking through 1.1945 and falling to 1.1928. While there has been a drop, the downward momentum has hardly changed. Yet, the pound is expected to lose ground even if a persistent slide below 1.1915 seems improbable (the next support is at 1.1870). Resistance is found at 1.1975, then 1.2000.

For the next three weeks: “On Friday (February 24, spot at 1.2020), we said that ‘downward momentum is showing signs of growth, but GBP needs to breach the main support around 1.1950 before a protracted slide is possible. The fact that the GBP broke through 1.1950 in NY trading and fell as low as 1.1928 surprised us somewhat. While the price actions indicate the danger for the pound is to the downside, it has to break through further significant support around 1.1870 before it can continue to fall. The downside risk remains as long as 1.2050 (a “strong resistance” level that was at 1.2105 last Friday) is not crossed.

USD/CAD maintains small advances over the 1.3600 level and is headed for more appreciation.

After a Monday intraday slump to levels below 1.3600, the USD/CAD pair draws some buying and reaches a new daily high in the early European session. The pair’s current price is about 1.3625, although it is still below the high point reached on Friday, which was the highest level since January 6.

On the opening day of a new week, Crude Oil prices encounter additional supply, which is expected to weaken the commodity-linked Loonie and strengthen the USD/CAD pair. The likelihood of weaker Russian exports is overshadowed by concerns that the economy would develop more slowly and gasoline consumption would decline due to fast-increasing borrowing costs. This, in turn, makes it difficult for oil prices to continue their two-day-old upward trend after their previous Thursday’s almost three-week low.

Aside from this, speculations that the Bank of Canada (BoC) would halt the cycle of tightening monetary policy weighing on the home currency are supported by weaker Canadian consumer inflation data reported last week. In contrast, in the midst of persistently rising inflation, the Federal Reserve is anticipated to maintain its hawkish posture. This maintains the safe-haven US Dollar stuck at a multi-week high, giving the USD/CAD pair a boost and a milder risk tone.

NZD/USD falls near 0.6100 on concerns about weak New Zealand consumption and increasing Fed rates.

With depressed New Zealand (NZ) fundamentals conflicting with the US Dollar demand, NZD/USD bears maintain control at the lowest levels since November 2022, down 0.5 percent at 0.6130 early Monday.

Despite this, NZ Retail Sales for the fourth quarter (Q4) came in at -0.6% QoQ, lower than the 1.5% forecast and 0.4% previous.

On the other side, Paul Conway, chief economist of the Reserve Bank of New Zealand (RBNZ), stated: “As interest rates increase, I anticipate consumption to slow.”

Strong US inflation-related statistics and Fed officials’ support for higher rates combined to push the Fed fund futures over 5.30%, compared to the 5.10% the US central bank had anticipated in December. These factors combine with the most recent Western sanctions against Russia to heighten market concerns about rising geopolitical conflict, supporting demand for haven assets like the US Dollar.

Please click here for the Market News Updates from 24 February, 2023.