The past week has presented a robust landscape for core FX views, bolstered by events such as Le Pen’s defeat and a strong US employment report. This report indicated solid job growth coupled with stable wage increases, reinforcing the likelihood of gradual interest rate hikes by the Federal Reserve. This positive risk environment, combined with declining oil prices, has significantly weakened the Japanese Yen (JPY) and the Swiss Franc (CHF). For individuals looking to understand currency values, especially when considering conversions like 90 Eur In Usd, these market dynamics are crucial.
While the Euro (EUR) hasn’t seen further gains recently due to profit-taking, the long-term outlook remains positive. However, a strategic shift from a long EUR position to USD is anticipated ahead of the Federal Open Market Committee (FOMC) meeting. The election of French President Macron, a proponent of a Eurozone Finance Ministry, signals potential future strengthening of the EUR. Should Schultz succeed Merkel in the German elections, this vision could become a reality. Even under Merkel’s leadership, the escalating Target2 imbalances suggest that fiscal transfers are increasingly necessary to maintain the Eurozone’s integrity, particularly as the European Central Bank (ECB) begins to reduce its stimulus measures, a move hinted at by German Finance Minister Schäuble. Notably, German Target2 balances surged to €829 billion in March, marking a €220 billion year-over-year increase.
Lower oil prices have intensified focus on the upcoming OPEC meeting on May 25th. An extension of the recent oil production cuts appears inevitable, with suggestions pointing towards a 9-month extension rather than 6. However, the effectiveness of these cuts is being undermined by the resurgence of US shale oil production and the return of Libyan and Iraqi oil to the market. Extending the cuts may not fundamentally alter this dynamic.
Looking ahead, this week’s key economic indicators include US retail sales and inflation data (Friday, with potential for stronger figures), the Bank of England (BoE) meeting (Thursday) where another Monetary Policy Committee (MPC) member might join the call for a rate hike (hawkish), and the Reserve Bank of New Zealand (RBNZ) meeting (Wednesday), which is expected to bring forward its forecast for the first rate hike to late 2018 (mildly hawkish). For anyone tracking currency conversions, such as monitoring the value of 90 EUR in USD, these events can trigger significant fluctuations in exchange rates.
Alt text: Chart showing over 90% probability of June Fed rate hike, influencing USD value.
USD: Solidifying Gains with Economic Data
A robust Non-Farm Payroll (NFP) report has solidified expectations for a June 14th rate hike, now priced in with over a 90% probability, as depicted in the chart above. While Average Hourly Earnings data remains moderate, other wage indicators suggest underlying strength. Overall, these factors reinforce the outlook for rate hikes in June and September, followed by the commencement of the Federal Reserve’s balance sheet reduction in December. The upcoming US retail sales and Consumer Price Index (CPI) releases are pivotal. Considering the positive impact of Easter (falling in April 2017 and March 2016) on April data, there’s an upside risk for both headline figures on Friday. Strong data could further bolster the positive momentum for the USD. For those interested in conversions like 90 EUR in USD, a stronger USD means that the equivalent value in USD for 90 EUR might decrease slightly if the EUR/USD rate shifts.
GBP (BoE): Hawkish Stance Emerging Amidst Brexit Uncertainty
At the last Bank of England (BoE) meeting, Forbes voted in favor of a rate hike. Saunders’ recent speech highlighted expectations for inflation to reach 3% this year and GDP growth to surpass BoE forecasts: http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech977.pdf. Consequently, it is anticipated that Saunders will join Forbes, resulting in a 7-2 vote to maintain rates unchanged. The Quarterly Inflation Report is also due for release. Official forecasts may not be as aggressive as Saunders’ predictions, but inflation will likely be revised upwards towards 3%. Amidst a shaky start to Brexit negotiations, a German Finance Ministry report has proposed that the UK pay a fee for access to the single market: http://uk.reuters.com/article/uk-britain-eu-germany-idUKKBN1820CK. While Germany stands to lose the most from a hard Brexit, this suggests that the EU Commission may not have complete control over the Brexit process. For individuals monitoring currency pairs like EUR/GBP and subsequently how this impacts 90 EUR in USD, Brexit developments and BoE policy shifts are key factors.
Alt text: Graph illustrating the drop in credit impulse affecting Chinese economic growth and potentially global markets.
NZD (RBNZ): Anticipating a Shift in Rate Hike Forecasts
The Reserve Bank of New Zealand (RBNZ) is currently maintaining a neutral stance, but the release of the Monetary Policy Statement will be crucial. Significant revisions are expected, with growth likely falling below and inflation exceeding the RBNZ’s February forecasts. Previously, growth was projected to peak at 4% in 2017, whereas a slowdown to 2½% appears more probable. Meanwhile, inflation has already surpassed 2%, two years ahead of schedule. Interest rate markets are pricing in a rate hike within the next year, while the RBNZ’s current forecast anticipates no rate movement until late 2019. Higher inflation and a weaker NZD should prompt the RBNZ to advance its predicted first rate hike to late 2018. This adjustment would likely be perceived as positive for the NZD, even if the neutral bias is retained. For those converting currencies or considering the impact on pairs like NZD/USD, and indirectly 90 EUR in USD, RBNZ policy updates are important.
CNH: China’s Economic Rebalancing and Global Commodity Demand
With the People’s Bank of China (PBoC) maintaining a stable Chinese Yuan (CNY), attention on the Chinese economy has somewhat diminished. However, the conclusion of fiscal stimulus and rising interest rates have impacted the stock market, and Chinese Purchasing Managers’ Index (PMI) data indicate slower growth. The chart above, from a former PIMCO colleague, highlights the decline in credit impulse, which is expected to further contribute to slower Chinese growth. Despite this, stricter capital controls and stronger growth in other regions suggest that this slowdown is unlikely to destabilize risk appetite or lead to a significantly weaker CNH. Nevertheless, President Trump’s policies underscore the urgency of reorienting the Chinese economy towards services. It is anticipated that Chinese demand for commodities will remain subdued, a key element in the thesis for Australian Dollar (AUD) underperformance. This global economic context, while seemingly distant from a simple conversion of 90 EUR in USD, indirectly influences all currency valuations through interconnected market dynamics.
Alt text: Graph showing German Target2 balances rising significantly, indicating Eurozone financial imbalances.
Alt text: Chart depicting US Dollar Index performance and potential upward trend based on economic indicators.
Alt text: Graph illustrating UK inflation rate exceeding targets, pressuring Bank of England policy decisions.
Alt text: Image of euro and dollar banknotes symbolizing EUR/USD currency exchange and global finance.
In conclusion, the global FX market is currently shaped by a confluence of factors, from central bank policies and economic data releases to geopolitical developments and commodity price fluctuations. Understanding these dynamics is crucial for anyone involved in international finance or simply needing to convert currencies like 90 EUR to USD. This week’s data and central bank meetings are poised to introduce further volatility and opportunities in the currency markets.
