4 Global Market Updates- 8 February, 2023

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

EUR/GBP: A break below 0.89 is unlikely to start a protracted downturn – ING

EUR/GBP is circling the 0.89 level of support. The ING economists, though, are skeptical that the couple would continue to lose money.

Avoid making too much of a weaker EUR/GBP. “EUR/GBP is pushing through the 0.8900 support, although we doubt this is the beginning of a lengthy downturn in the pair,” the statement said.

“The ECB and the Bank of England are working together to fight back against dovish rate speculation, and we don’t see a major cause for the two currencies to diverge much shortly.”

AUD/USD is now expected to have some consolidation – UOB

Markets Strategist Quek Ser Leang and Economist Lee Sue Ann of the UOB Group forecast that the AUD/USD pair would move within the 0.6865-0.7055 band during the following weeks.

“We noticed yesterday that negative pressure has partly subsided and that AUD is unlikely to weaken further,” said the 24-hour outlook. We anticipated the AUD to move in the range of 0.6865 to 0.6930. While the Australian dollar did not decline any lower, it significantly recovered to 0.6989 before closing the day at 0.6960 (+1.12%) instead of trading in a range. The sudden increase has been exaggerated, although there is still an opportunity for AUD to test 0.7000 before settling. The significant resistance at 0.7055 is not seen to be in danger. Support may be found at 0.6890, then 0.6925.

Following a steep decline in the Australian dollar, we predicted on Monday (06 February, spot at 0.6820) that, despite the possibility of further decline, the 0.6825 level is anticipated to provide strong support. However, AUD did not quite touch 0.6825 (Monday’s low was 0.6856), and yesterday it made a solid comeback to reach a high of 0.6989. The breaking of our 0.6980 “strong resistance” level shows that the downward pressure has subsided. The Australian dollar (AUD) looks to have entered a period of stabilization and will probably trade between 0.6865 and 0.7055 for the time being.

NZD/USD trades with moderate gains in the face of a lower USD but lacks bullish confidence.

On Wednesday, the NZD/USD pair failed to generate real momentum and traded in a constrained range above the 0.6300 level during the early European session.

The risk-averse Kiwi is perceived as negatively impacted by a broad softening of the global markets, although a slight US Dollar decline supports the NZD/USD pair. The market attitude is still shaky despite worries about economic headwinds brought by increasing borrowing rates, the COVID-19 outbreak in China, and the ongoing Russia-Ukraine conflict. Aside from this, investors’ desire for riskier assets is restrained by worries about the deteriorating US-China ties.

Conversely, the USD is hurt by predictions of a quick break in the Fed’s policy-tightening cycle later this year. In reality, Fed Chair Jerome Powell maintained that the disinflation process was already underway on Tuesday and made no hawkish comments. The US Treasury bond yields have just taken a new step down, which supports the idea that interest rates may not climb much higher and puts some downward pressure on the dollar.

However, bullish traders should exercise some care before concluding that the current fall from the highest level since June 2022 has peaked. This is because there is no significant purchasing demand. The path of least resistance for the NZD/USD pair is indicated by the post-NFP drop below the 0.6400 level. In the absence of relevant market-moving data from the US, a subsequent move higher might be seen as a selling opportunity and is thus more likely to stay confined.

USD/IDR: China’s reopening should strengthen the Rupiah – ING

In January, the Indonesian Rupiah gained significantly. According to ING economists, the rebound in China will continue to strengthen IDR.

Dovish BI put a stop to the IDR surge. “Bank Indonesia (BI) increased policy rates by 25 basis points to reduce core inflation, which is still high. To counteract increasing IDR appreciation, Governor Perry Warjiyo signaled that the cycle of rate increases was coming to a stop.

China’s resurgence and assistance for Indonesia’s commodities exports may support the IDR this year.

Please click here for the Market News Updates from 7 February, 2023.