Bank of England Expects the Economy To Grow at the Fastest Rate

Bank of England Expects the Economy To Grow at the Fastest Rate

The Bank of England voted unanimously today to keep the Bank rate at 0.1 percent, which is a record low. The central bank, on the other hand, voted 8-1 to keep the asset purchase program at 895 billion pounds, with 875 billion pounds in government bonds.

Asset purchases will be slowed so that the project can be completed by the end of the year, according to policymakers. It arrives earlier than anticipated. The staff updated the unemployment rate forecast lower and upgraded GDP growth figures in terms of the economy. On Thursday, the Bank of England revealed that it now expects the UK Gross Domestic Product to grow by 7.5 percent in 2021, up from 5% in its February forecast.

The GBP/USD pair bounced 85 pips after the Bank of England issued its monetary policy statement, correcting a fall to 1.3855. The MPC of the Bank of England voted unanimously to keep the benchmark interest rate at 0.10 percent and the Asset Purchase Facility at £875 billion, as anticipated. The decision was anticipated, but the lack of clarity on future tapering plans weighed heavily on the British pound.
GBP/USD Recovers From Recent Low, Supported by Weaker US Dollar
The GBP/USD fell to a low of 1.3860, where it gained support and surged to 1.3900. While the market is still in the red for the day, the downward trend is easing as the US dollar continues to weaken across the board.

The pound was one of the worst performers in Thursday’s markets, which were influenced by the Bank of England session. The central bank kept its monetary policy intact, as predicted, and announced a reduction in weekly purchases that “should not be perceived as a shift in monetary policy stance.”

The dollar’s depreciation is expected to last at least another three months. The dollar index (DXY) – calculated against a basket of six major currencies – dropped more than 2% in April, its worst result in four months, after rising nearly 4% in the first quarter, its best start in years.

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Canadian Dollar in Tandem With Commodity Currencies, While Euro Declines

Canadian Dollar in Tandem With Commodity Currencies, While Euro Declines

During the US session, commodity currencies continue to trade as the stronger ones. The prolonged rally in oil prices has aided the Canadian dollar in particular. Better-than-expected employment data continue to benefit the New Zealand Dollar. Overall, the sentiment is upbeat, with European stocks rebounding and US futures pointing to a recovery. The euro is currently the most vulnerable currency, followed by the Swiss franc and the yen.

The USD/CAD resumed the decline and dropped below 1.2265, hitting at 1.2251, the lowest intraday level since January 2018; daily, it could post the lowest close since September 2017.

The slide in USD/CAD took place amid a broad-based increase in crude oil prices. The barrel of West Texas Intermediate (WTI) traded at its highest level since early March at $66.70 today, rising 0.7% daily.

On a year-to-date basis, the loonie remains the best performing currency reflecting the positive outlook. According to preliminary readings for Crude Oil futures from CME Group, open interest extended the uptrend on Tuesday, this time by around 25.5K contracts. In the same line, volume reversed the previous drop and gained around 301.1K contracts.
Euro Declines With More Risk Expected
Scholz (candidate for Chancellor) announced that economic assistance would be extended; he also stated that he wanted an investment offensive and to make private companies more accountable for public infrastructure investment. The French government has threatened to cut off power to Jersey due to an ongoing dispute over post-Brexit fishing rights.

The EU has announced that it would halt its attempts to ratify the China-EU investment treaty. Following early-week rejection just below the 1.2080 resistance mark, the euro currency is struggling to advance against the US dollar on Wednesday. On the lower time frame, a broad head and shoulders pattern has recently emerged for the EURUSD pair. The bearish price trend is currently being activated by sustained weakness below the 1.1990 price area.

The EURUSD pair is only bullish when it is trading above the 1.2080 marks, with main resistance at 1.2115 and 1.2150. Only while trading below the 1.2080 level is the EURUSD pair bearish; main support is found at the 1.1980 and 1.1940 levels. In the short term, the risk is weighted to the downside, with a break of the outlined support levels possibly confirming a bearish extension.

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Dollar, Yen Increases Consolidation and Trades Stronger As DXY Resumes Upside Run

Dollar, Yen Increases Consolidation and Trades Stronger As DXY Resumes Upside Run

The dollar and the yen are significantly recovering today amid ongoing consolidated trading, fueled by mixed sentiment. Major global trading yields are falling, with US 10-year bond yields below 1.6. The New Zealand dollar is ahead of the Australian dollar’s decline, followed by the pound sterling.

Markets began the week with a moderate tone of risk aversion, with the dollar and yen rising and stocks falling. Fed’s Powell reaffirmed his commitment to supporting the economy amid mounting inflation concerns. Virus problems remain prevalent.

Japanese markets are closed for Greenery Day, focusing on risk catalysts. USD/JPY is making an intraday high of 109.17 while pulling back to 109.15, up 0.07% on the day. Despite the endorsement of the general weakness of the US dollar the previous day, a pair of risk barometers are trying to spiral out of control at the end of the Japanese holidays.

The NZD/JPY was also deflected by the 79.19 resistance and declined noticeably. The focus is again on support at 77.94. A break there should indicate that the consolidation pattern from 79.19 has started another decline. Then there will be a deeper fall to support at 76.64 and below. However, a rebound from the current level will retain the advantage on the side of the upside breakout. The breakout of 79.19 will resume the stronger uptrend.
US Dollar Index Considers Risk Patterns and Data
The index resumes gains after a moderate daily pullback recorded at the beginning of the week, and again reaches 91.00 and above, while flirting with weekly highs and 20-day SMA.

At the same time, the narrative of the US economic recovery seems to have re-emerged among investors and continues to maintain better dollar sentiment, despite the fact that US yields continue to trade in a secondary theme. DXY is softening Monday’s downturn and regaining advantage amid improving sentiment around the dollar.

Further recovery is likely in the near future. However, if the temporary resistance at the 50-day SMA near 91.70 is eliminated, it should open the door for the next visit to the critical 200-day SMA, today at 91.95. Above the latter, bearish pressures are expected to soften somewhat and the outlook may start to shift towards more constructive ones.

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New Thai Cryptocurrency Law to Mandate Physical Presence for Account Opening

New Thai Cryptocurrency Law to Mandate Physical Presence for Account Opening

The government of Thailand has imposed a new cryptocurrency law, which would require new users to be physically present for registration on exchanges. The Thai Anti-Money Laundering Office (AMLO) noted that the new law will take effect starting from July and that verification of identities will be done using dip-chip machines.

Presently, crypto account opening on exchanges is done entirely online. All new users have to do is comply with the regulations set by the Thai Securities and Exchange Commission (SEC) for know-your-customer (KYC) requirements and suitability tests.

Subsequently, the KYC documents must be authorized by relevant government agencies, and fake documents will get promptly rejected.

Poramin Insom, co-founder and director of crypto trading platform Satang Corp., explained that:

“Digital asset exchanges have a duty to report any transaction worth over 1.8 million baht [$58,000] under the money laundering law, and must set up a database for inspections by regulators.”

The Anti-Money Laundering Act came into law in 1999 and mandates financial businesses and legal professionals, like investment advisers and real estate brokerages, to file all transactions that meet the requirement of the law. The entities are also required to keep documentation and transaction data from as far as 5-10 years as evidence.

Thai Gold Shops Already Use Dip-Chip Verification for Customers
Meanwhile, more than 6,000 gold shops across Thailand will require customers to present their ID cards when purchasing or selling gold worth over 100,000 baht ($3,200) in cash.

Thanarat Pasawongse, the chief executive of Hua Seng Heng, asserted that most large gold shops have been using dip-chip machines to verify the identity of customers for over four years because of the convenience it allows.

That said, customers are required to present a valid ID for cash transactions over 100,000 baht ($3,200). Also, a report should get filed with AMLO for transactions over 2 million baht ($64,000), and businesses must report suspicious transactions to the authority.

 

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Markets Rally on Risk-On Outlook, Dollar Weakens Slightly As Euro Rebounds

Markets Rally on Risk-On Outlook, Dollar Weakens Slightly As Euro Rebounds

The US dollar started May with slight gains against major currencies but declined against commodity currencies. The ISM Manufacturing PMI is seen as the first hint of nonfarm payrolls, and EZ numbers are also interesting despite the weekend in Europe.

Markets seem to have returned to moderate risk in Europe, ignoring the sell-off in Asia. US futures also opened with some stability as record gains may resume this week. Foreign exchange markets are relatively heterogeneous. The yen is stabilizing during the American session after the previous sell-off. The dollar is also weakening at the moment. The Swiss franc is the weakest, followed by the yen. Sterling is the strongest, followed by the Australian.

Strong data on the gross domestic product, personal income, and personal spending in the US last week supports the dollar’s bid against the euro, pound, yen, and Canadian dollar as WTI crude fell to around $63. The dollar remains in demand despite the decline in Treasury yields, with the yield on 10-year bonds falling to 1.63%.

US ISM Manufacturing PMI is set to surpass a record 64.7 in April, indicating strong manufacturing activity. The publication serves as a hint at Friday’s important non-farm employment report.
Euro Bounces Back Supported by Strong German Retail Sales
EUR/USD is recovering slightly today, but the overall outlook has not changed. The consolidation pattern from 1.2149 may continue. Although the euro remains in positive territory. In the North American session, the EUR/USD pair is trading near the 1.2050 zones, gaining 0.43% over the day.

Germany, the eurozone’s largest economy, was impressed by its March retail sales report, which broke consensus. The 7.7% rise, following a 1.2% rise, easily beat the 2.9% forecast. This was the highest increase in 10 months and indicates an increase in consumer demand.

The eurozone manufacturing PMI closed at 62.9 in April, up from 62.5 in March, the highest since the record began in 1997. Markit noted significant growth in sales and new orders. But delivery times have increased at an unmatched rate, which has contributed to the rapid rise in prices. Looking at some countries, the Netherlands (67.2), Austria (64.7), and Italy (60.7) were all at all-time highs. Germany (66.2), France (58.9), and Spain (57.7) were also strong.

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After a Strong Week, the Canadian Dollar May Keep Rising, Intermediate Stability Stays Unclear

After a Strong Week, the Canadian Dollar May Keep Rising, Intermediate Stability Stays Unclear

Last week, the Canadian Dollar was the strongest due to several factors. With some short-term resistance broken, a rally like this is likely to continue shortly. The Swiss Franc finished as the second most valuable currency. Although the dollar was under pressure for the majority of the week, it made a significant comeback on Friday to end the week in a mixed bag.

On the other hand, rising global treasury yields pushed the Yen lower, making it the worst-performing currency. However, a late selloff in the Euro and Sterling suggests that the Yen might stabilize and consolidate in the coming week. However, the Yen’s outlook will remain bearish in general.

The USD/CAD fell below 1.2450, settling at 1.2382, its lowest level since March 18. The Canadian dollar is stronger, outperforming the US dollar in the prior week. After reporting mixed results over the previous five days, the loonie gained traction during the week. It appears to be eventually responding to the Bank of Canada’s announcement of tapering of its purchasing program last week.
The Strengthening of the Canadian Dollar Is Expected To Continue in the Short Term
The rally in the Canadian dollar finally took off last week, thanks to several interconnected factors. The economic recovery has been aided by recent increases in commodity prices, which have ranged from copper to lumber to oil. Like the globe, except a few countries like India, moves closer to the end of the pandemic, commodity demand and price pressure will remain high.

The Bank of Canada’s economic outlook has strengthened as a result of recent events, allowing them to taper asset purchases at their most recent meeting. There are rumors that the Bank of Canada will begin to taper at a faster rate than anticipated. The more positive outlook boosted Canadian bond prices, which boosted Loonie even more.

As virus control measures were re-imposed in parts of the world in April, jobs in Canada possibly fell. Another round of job cuts in the retail and hospitality sectors is expected to result in an 85k decline. Even so, that would only account for around 15% of the massive 562k work gains in February and March, which occurred during a slowdown in virus spread between the second and third waves. The unemployment rate is expected to rise to 7.7%, according to our forecast.

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Coinbase Acquires Data Analytics Company; Allows Crypto Purchases Through PayPal

Coinbase Acquires Data Analytics Company; Allows Crypto Purchases Through PayPal

Coinbase, the largest cryptocurrency in the US, has announced that users can now buy digital assets on the platform via debit cards and bank accounts linked to PayPal and Venmo. However, this service only allows a limited amount of crypto purchases for now.

Normally, ACH and wire transfers take a long while to process. However, with a PayPal account, users can start carrying out transactions on Coinbase instantly. The user does not have to provide a bank account linked to Coinbase.

To purchase cryptocurrency using PayPal, it has to be selected as the payment method. Subsequently, you have to add a debit card to a bank account linked to the PayPal account and make a purchase, and is applicable only for $25,000 a day.

The PayPal crypto purchase option on Coinbase is only available to a few countries, including the US, Canada, the EU, and the UK.

Coinbase Acquires Skew
Meanwhile, Coinbase has just announced the acquisition of data analytics platform Skew, which would allow the company to deliver real-time actionable data analytics to institutions and traders.

 

This acquisition will help the company cater to more than 7,000 financial institutions and boost its prime offering. That said, Coinbase’s acquisition is subject to traditional closing conditions and is expected to close in the second quarter.

Skew, a London-based company was founded in 2018 and serves over 100 customers, including One River Asset Management and Susquehanna International Group.

Earlier this month, Coinbase became a publicly listed enterprise, with its share price hitting a peak of $430. At press time, COIN is trading at $294.77.

 

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US Dollar Recovers on Positive PCE Inflation As EURO Declines Owing to Mixed GDP Data

US Dollar Recovers on Positive PCE Inflation As EURO Declines Owing to Mixed GDP Data

After much stronger than expected PCE inflation results, the dollar recovered early in the American session. But, at the moment, the Canadian dollar is slightly more resilient, as shown by GDP figures. The yen is also recovering, thanks to mild risk aversion and small yield declines in Germany and Japan. The European majors, on the other hand, are currently weaker. The Eurozone’s GDP data is mixed, which does not bode well for the currency.

Technically, attention will now again be focused on some of the dollar’s minor resistance levels to see if it is poised for a stronger bounce when markets return in May. In March, personal income in the United States increased by 21.1% mom, or by $ 4.21 trillion, which is above expectations of 20.0% mom. Expenses rose by 4.2% mom, or by $ 616 billion, which is above expectations of 3.8% MoM. Headline inflation PCE sharply accelerated to 2.3% YoY, compared to 1.5% YoY, well above expectations in 1, 6% YoY Core inflation PCE also jumped to 1.8% YoY from 1.4% YoY, above expectations of 1.8% YoY.

Eurozone GDP fell -0.6% QoQ in the first quarter, better than expected -0.8% QoQ. EU GDP contracted by -0.4% QoQ Eurozone GDP fell by -1.8% y/y annually, while the EU contracted by -1.7% q/q. Among the EU member states for which data for the first quarter of 2021 are available, the largest decline compared to the previous quarter was recorded in Portugal (-3.3%), followed by Latvia (-2.6%) and Germany (- 1.7%), and Lithuania. (+ 1.8%) and Sweden (+ 1.1%) recorded the highest growth. Annual growth rates were negative for all countries except France (+ 1.5%) and Lithuania (+ 1.0%).

Amidst Japan and China Data, Asian Markets Remain in Moderate Risk-Off Mode
Despite the strength of the US dollar, financial markets in Asia are trading with moderate risk today. The release of positive economic data from Japan and China did nothing to boost trust. India’s record number of coronavirus infections has alarmed the country as a whole. In terms of foreign exchange markets, the yen and dollar are expected to be the weakest, while the Canadian and New Zealand dollars will be the most strong.

Industrial production in Japan rose 2.2% m/m in March, much better than expectations of a decline of 2.0% m/m. According to a survey by the Ministry of Economy, Trade, and Industry, production is expected to grow by another 8.4% in April and then up 4.3% in May. The unemployment rate fell to 2.6% from 2.9%, better than expected at 2.9%. Housing start-ups rose 1.5% y/y, compared with your expectations of -7.4%.

Consumer confidence fell to 34.7 from 36.1, above expectations of 34.0. In Tokyo, the core CPI fell to 0.0% YoY from 0.3% YoY, falling short of expectations of 0.3% YoY.

The official NBS Manufacturing PMI in China fell to 51.1 in April from 51.9, below the 51.4 forecasts. The NBS non-manufacturing PMI fell to 54.9 from 56.3, below its 52.6 forecasts. “Some companies interviewed report that problems such as chip shortages, international logistics problems, container shortages, and rising freight rates are still serious,” said NBS statistician Zhao Qinghe. The Caixin Manufacturing PMI rose to 51.9 from 50.6, above expectations of 50.9.

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After Resolving FOMC Uncertainty, the Dollar Bear Market Continues, Modest Recovery on CAD

After Resolving FOMC Uncertainty, the Dollar Bear Market Continues, Modest Recovery on CAD

The dollar sell-off resumed after the FOMC risk was eliminated. The Fed has just reaffirmed its position that it is far from considering getting out of stimulus. Although the yen is still weaker over the week due to a strong rebound in the yields. Not far from the euro, the dollar is in third place in terms of its weak position. On the other hand, the Canadian dollar is the leader in terms of profitability, outstripping the growth of other commodity currencies.

The Bank of Canada announced that it will cut back on bond purchases and expects conditions for rate hikes to come sooner. The combination of the less dovish Bank of Canada and fiscal stimulus should be positive for the Canadian dollar in the short term.

The Bank of Canada left its interest rate unchanged at 0.25% while announcing that it would cut weekly net purchases of Canadian government bonds to a target level of C$3 billion per week. The Bank of Canada also raised its economic outlook, including an upward revision of its 2021 GDP growth forecast to 6.5%.

In terms of fiscal policy, the Canadian federal government is committed to stimulating the economy, even though the domestic economy will rebound significantly in 2H21. The recently released federal budget for 2021 included new spending measures totaling C$101.4 billion over the next three years.
Canadian Dollar Gains From Higher Oil Prices
USD/CAD touched its lowest level in more than three years at 1.2278 on Thursday and looks to be having a hard time making a convincing rebound. Earlier at the meeting, data from the US Bureau of Economic Analysis showed that the US economy grew by 6.4% annually in the first quarter of 2021 (first estimate).

This value turned out to be better than market expectations of 6.1%. In addition, the weekly number of applications for unemployment benefits fell to 553,000 from 566,000.

US Treasury yields continued to rise following the data, allowing the US dollar to gain strength against its competitors. So far, the yield on 10-year US Treasuries is up nearly 4% and the US dollar index is up 0.1% to 90.68.

However, the sharp rise in crude oil prices is helping Canadian commodities find demand and limiting the upside potential for USD/CAD. Currently, a barrel of West Texas Intermediate (WTI) oil is trading at its highest level since mid-March at $65.30, rising 2.6% daily.

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Dollar in a State of Recovery, Fed’s Policy Outlook May Increase Yields Again

Dollar in a State of Recovery, Fed’s Policy Outlook May Increase Yields Again

The decline in Treasury yields was the key reason for the US dollar’s weakness for much of April. Strong US economic growth in the coming quarters, market expectations of a federal fund rate hike, and the Fed’s QE cutback strategy may increase the Treasury yields and help the dollar once more. Given the potential for monetary policy divergence, we expect minimal growth in the EURUSD pair.

The latest data suggests a stronger-than-expected recovery in the US. In addition to more non-farm jobs and higher retail sales, consumer confidence jumped to its highest level in 14 months. The Conference Board’s consumer confidence index rose to 121.7 in April from 109 in March. Meanwhile, the index of the current situation rose over the month by +29.5 points to 139.6, while the index of expectations rose by +1.5 points to 109.8.

“Consumers were more optimistic about their income prospects, possibly due to improved labor market conditions and the recent round of incentive reviews.” Meanwhile, “holiday intentions have grown significantly, likely due to accelerated vaccine introduction and further easing of restrictions on the pandemic.” In addition, property prices jumped by a record 12.2% y/y in February.
Federal Reserve – Most Recent Monetary Policy Statement
The central bank kept rates unchanged, as predicted, and vowed to keep quantitative easing going until “further substantial progress” on jobs and inflation is made. Chief Powell clarified that it was too soon to consider a reduction.

US stocks closed in the red, although the S&P posted a daily record high. Losses were uneven, with the DJIA having the worst results. US government bond yields rose early in the day but closed with moderate losses. The yield on 10-year US Treasuries peaked at 1.66%, ending the day at 1.60%.

The EU Parliament finally voted in favor of the Brexit trade and security deal, receiving 660 votes in favor and just 5 against. The ratified deal provides the basis for London’s new relationship with the 27-member union, despite continuing tensions between the two sides. The UK has not fully complied with some of the agreements, while the gloomy mood is also due to the delay in the supply of the AstraZeneca vaccine to the Union.

EUR/USD hit a fresh April high of 1.2134, holding nearby. GBP/USD rate exceeded 1.3950. Commodity-pegged currencies also rallied, with USD/CAD now approaching the 1.2300 thresholds.

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Author : Azeez Mustapha

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Azeez Mustapha is an experienced author, trader, markets analyst, signals strategist, and funds-manager.