Article by: ETO Markets
This Tuesday, the Reserve Bank of Australia (RBA) announced its decision to keep the interest rate unchanged at 4.35%. In a press conference, Governor Michele Bullock clarified the RBA's stance, confirming discussions about potential rate hikes while ruling out any consideration of rate cuts at this time. She emphasized the RBA's ongoing concerns about inflation, indicating that the threshold for policy easing remains very high.
Hawkish remarks from the Federal Reserve (Fed) have supported the US Dollar Index (a measure of the dollar's value against a basket of major currencies). Cleveland Federal Reserve Bank President Loretta Mester stated that they prefer to see "sustained good inflation data" before making a firm decision. Meanwhile, Minneapolis Fed President Neel Kashkari mentioned that a rate cut in December might be a "reasonable forecast." According to the FedWatch tool, the probability of a rate cut in the September 18 decision is currently at 67%, which conflicts with the Fed's indication of only one rate cut in 2024. If US economic data continues to bolster hopes for a rate cut in September, the dollar may face challenges.
The weak US retail data released on Tuesday strengthened market expectations for a Federal Reserve rate cut in September, weakening the dollar against other currencies. Additionally, precious metals benefited from this, reversing three consecutive weeks of declines. However, trading volume decreased due to a public holiday in the US on Wednesday, as traders awaited the US employment data on Thursday and the PMI (Purchasing Managers' Index) on Friday to help gauge the Fed's future moves.
The UK's CPI growth met the expected value of 2%, down 0.3% from the previous month. However, this data is not sufficient to support a rate cut by the Bank of England (BoE). Therefore, at the monetary policy meeting to be held later today, the market predicts that the UK keeps interest rates unchanged.
On the weekly chart, the GBP/USD has shown long upper wicks for three consecutive weeks, indicating the end of the uptrend. Although it rebounded after touching last week's low of … , the 20-day simple moving average at … is limiting the pound's rise. On the other hand, the fact that the GBP/USD price remains firmly above the 50-SMA provides confidence for pound buyers.
During the Asian trading session on Thursday, the USD/CHF saw a slight increase. Weak US economic data prompted traders to increase bets on a Federal Reserve rate cut in September, limiting the extent of this rebound. The Swiss National Bank (SNB) announced an interest rate decision on Thursday, cutting rates from 1.50% to 1.25%, with the potential for another cut in September.
Despite the relative strength index (RSI) nearing oversold levels at 30, indicating potential buying interest, multiple moving averages turning downward on the daily chart suggest that the downtrend is far from over. The 200-day simple moving average at … has capped the upside for USD/CHF. It may need to find support around … USD to continue lower.
