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Why the New FOMC Decision Matters

Yesterday, the Federal Open Market Committee (FOMC), the Federal Reserve’s policy-making body, implemented yet another 75 basis point interest rate hike. While this move was perfectly in line with market forecasts, Chair Powell’s comments following the subsequent press conference, in which he discussed the FOMC’s new set of economic projections, were significant. He continued to emphasize the Fed’s commitment to bringing year-over-year inflation back down to 2%, even at the expense of short-term economic growth, offering little in the way of dovishness. These events may become key fundamental catalysts for further bullish USD price action and stock selloffs, hence why the new FOMC decision matters.

Top Pairs to Trade

Because the Federal Reserve has re-upped its commitment to contractionary monetary policy, which is favorable for the US Dollar’s value in the forex market, USD bulls have ever more reason for fundamentals to be on their side. The following pairs are among the EdgeFinder’s top recommendations for USD bulls, as can be seen with their respective ratings and biases/signals. The first three pairs have either broken through or just touched support, with potential breakouts to the downside seeming plausible. The fourth pair, USD/JPY, sold off today before finding some support, while even more buying pressure seems likely in light of the Bank of Japan's decision yesterday to continue their ultraloose monetary policy.

1) EUR/USD (Receives a -7, or ‘Strong Sell’ Signal)

Why the New FOMC Decision Matters
Why the New FOMC Decision Matters

2) GBP/USD (Receives a -6, or ‘Strong Sell’ Signal)

Why the New FOMC Decision Matters
Why the New FOMC Decision Matters

3) AUD/USD (Receives a -4, or ‘Sell’ Signal)

Why the New FOMC Decision Matters
Why the New FOMC Decision Matters

4) USD/JPY (Receives a 4, or ‘Buy’ Signal)

Why the New FOMC Decision Matters
Why the New FOMC Decision Matters
4 Pairs to Watch Next Week

As the trading week comes to a close, and forex traders are given another weekend of respite to mentally rest and/or backtest, it is worth considering where to pick back up on Monday. While there are many criteria to consider when selecting pairs to watch closely, in this article we will list several such pairs based on scheduled economic data releases and compelling EdgeFinder analysis. Based on these two categories, here are 4 pairs to watch next week.

1) GBP/CAD (Receives a -7, or ‘Strong Sell’ Signal)

4 Pairs to Watch Next Week
4 Pairs to Watch Next Week

On Tuesday, September 20th, Statistics Canada will be releasing a variety of month-over-month and year over year CPI data for August. On Thursday, September 22nd, the Bank of England (BoE) is forecast to hike the Official Bank Rate by 50 basis points, issuing a corresponding monetary policy summary as well. The Bank of Canada has been far more hawkish as of late than the BoE, so unless there are any bullish surprises, this pair seems likely to continue its bearish trend.

2) GBP/CHF (Receives a -7, or ‘Strong Sell’ Signal)

4 Pairs to Watch Next Week
4 Pairs to Watch Next Week

Along with the aforementioned BoE upcoming monetary policy decision, the Swiss National Bank (SNB) will also be deciding on a new policy rate on Thursday, September 22nd. The SNB is expected to implement a rate hike of 75 basis points, doing away with the precedent of negative interest rates. These expectations have seen this pair fall to historically significant lows, as can be glimpsed on the 1-week timeframe above.

3) GBP/USD (Receives a -6, or ‘Strong Sell’ Signal)

4 Pairs to Watch Next Week
4 Pairs to Watch Next Week

This pair presents another opportunity to sell GBP, since the Federal Reserve will be adjusting the Federal Funds Rate on Wednesday September 21st, as well as issuing accompanying economic projections and a related statement. Fed Chair Jerome Powell currently shows no signs of relenting from hawkishness as a 75 basis point rate hike is forecast. With support being tested, we will see whether the BoE or the Fed could present a catalyst for a breakout to the downside.

4) USD/JPY (Receives a 4, or ‘Buy’ Signal)

4 Pairs to Watch Next Week
4 Pairs to Watch Next Week

Along with the upcoming Federal Reserve decision, the Bank of Japan (BoJ) will also make a monetary policy decision this week. If the BoJ continues to keep their Policy Rate below-zero, further abstaining from rate hikes as currently forecast, this could usher in even more bullish momentum for this pair. Depending on how the Fed’s move meets or contrasts with market expectations, USD/JPY could yet again touch, or break out above, trendline resistance.

USD Still Strong from Inflation

This morning, at 8:30 am Eastern Time, the United States’ Bureau of Labor Statistics revealed that inflation had once again beaten expectations. Market forecasts had anticipated a 0.1% decrease in month-over-month CPI in August, whereas a 0.1% increase was the result. However, even bigger news was month-over-month Core CPI coming in hot at 0.6%, double the 0.3% increase that had been forecast.

With annual core inflation in the US currently sitting at 6.3%, sharp declines in volatile energy prices are still not enough to bring the country’s inflation train to a screeching halt. This gives the Federal Reserve further incentive to continue raising interest rates, which manifested in a surge of buying pressure for USD this morning as the US Dollar Index jumps 1% intraday. With even a technical recession and a rising unemployment rate unsuccessful in completely mitigating economic overheating, USD bulls may have fundamentals on their side for the near future.

Three Great Major Pairs

The following major pairs are ranked favorably for USD bulls by the EdgeFinder, A1 Trading’s software tool that provides supplemental analysis. Based on criteria ranging from fundamentals to trader sentiment, those who are bullish on USD may want to watch these pairs for potential opportunities to go long on the Greenback:

1) EUR/USD (Receives a -5, or ‘Sell’ Signal)

USD Still Strong from Inflation

2) GBP/USD (Receives a -5, or ‘Sell’ Signal)

USD Still Strong from Inflation

3) USD/JPY (Receives a 4, or ‘Buy’ Signal)

USD Still Strong from Inflation
3 Ways to Sell JPY

The Japanese Yen has continued to plummet in value in the forex market, recently hitting a low not seen in twenty-four years. It appears as if the Bank of Japan (BoJ) will not budge on monetary policy as negative interest rates continue to be the norm for the foreseeable future, despite vocal concerns from Japan’s government. As the BoJ’s relentless dovishness continues to set it apart from increasingly hawkish central bank contemporaries, many traders resume shorting the Yen. Let's discuss 3 ways to sell JPY.

How Long Can the BoJ Hold Out?

While much of the developed world is focused on frantically quelling high inflation rates through contractionary monetary policy tools like rate hikes and quantitative tightening, Japan is not. Rather, the BoJ is in the unique situation of perpetually trying to stimulate Japan’s economy to prevent deflation and create growth. Considering that the BoJ has been striving for at least 2% annual inflation for years, and has only just hit 2.6%, the likelihood of an immediate rate hike seems slim. This situation makes JPY a relatively safe currency to bet against from the standpoint of fundamentals, since the BoJ has little incentive to become aggressive.

Three Potential Pairs to Trade

According to the EdgeFinder, A1 Trading’s market scanner that offers supplemental analysis, the three following JPY pairs are potentially the most promising to buy for Yen bears. Considering that the host countries of all three base currencies are dealing with severe inflation threats, and have become significantly more hawkish in response, these fundamentals contrast well with JPY’s. Here are the pairs, along with their respective EdgeFinder ratings:

1) USD/JPY (Earns a 4, or ‘Buy’ Rating)

3 Ways to Sell JPY

2) CAD/JPY (Earns a 4, or ‘Buy’ Rating)

3 Ways to Sell JPY

3) EUR/JPY (Earns a 3, or ‘Buy’ Rating)

3 Ways to Sell JPY
Get Ready: Big 3 Tomorrow

On September 2nd, tomorrow morning, at 8:30 am Eastern Time, the Bureau of Labor Statistics is scheduled to release another crucial round of US labor market data for last month. The public will learn 1) how average hourly earnings, i.e., labor prices, have changed month-over-month, 2) how many non-farm payrolls (NFP) were added, and 3) what the new national unemployment rate is. These three bits of information will likely cause a great deal of volatility among major pairs.

How Is This Significant?

These metrics offer traders key insight into how hot the US labor market still is, which plays into overall inflation because of its reciprocal relationship with consumer demand. If these numbers beat market forecasts, then the Federal Reserve will be even more incentivized to hike the federal funds rate to slow the economy, which is bullish for USD. However, if the data fail to meet forecasts, this would be bearish for USD accordingly. Current expectations are: 1) average hourly earnings to increase by 0.4%, 2) 295,000 net new hires across non-farm industries, and 3) a static unemployment rate, remaining at 3.5%.

Possible Pairs to Trade

According to the EdgeFinder, A1 Trading’s market scanner that offers supplemental analysis for traders, the following are currently three of the most promising major pairs to trade for USD bulls. Whether you plan on entering a position before tomorrow’s big news, or wait until the data is revealed, these three pairs are worth watching.

1) EUR/USD (Earns a -7, or ‘Strong Sell’ Rating)

Get Ready: Big 3 Tomorrow

2) GBP/USD (Earns a -7, or ‘Strong Sell’ Rating)

Get Ready: Big 3 Tomorrow

3) USD/JPY (Earns a 4, or ‘Buy’ Rating)

Get Ready: Big 3 Tomorrow
How To Trade GBP Post-Rate Hike

Consideration #1: A Hawkish Bank of England

The morning of Thursday, August 4, the Bank of England (BoE), the United Kingdom’s central bank, enacted a substantial interest rate hike: 50 basis points (bp), bringing the base rate up to 1.75%. The size of this hike is the BoE's largest since 1995, which had last occurred before it had even gained its current institutional independence from the British government. This hawkish development is timely, considering annual inflation in the UK is currently at 9.4%, the highest rate since 1982.

Consideration #2: Context is Key

However, this increased comfort with contractionary monetary policy from the BoE can also reasonably be interpreted as too little, too late. With the highest rate of inflation in the G7, it would be fitting for the BoE to likewise lead by example when it comes to tightening measures. Rather, their first 50 bp rate hike follows the Federal Reserve’s 75 bp hikes, and the Bank of Canada’s full 100 bp rate hike, not even exceeding market forecasts. This hike seems more akin to treading water than rising to the occasion, reminding us that historic doesn’t necessarily mean adequate.

My GBP Bias: Bearish

Despite the BoE’s historically hawkish move, this does not appear to signal a meaningful newfound commitment to subduing high inflation. Thus, I personally do not interpret the narrative surrounding GBP fundamentals to have changed, at least in any significant sense. Considering the lukewarm rate hikes, persistence of high inflation, and the plausibility of eventual stagflation in the UK, I will be looking for opportunities to short GBP against stronger currencies.

Best Pairs to Trade

According to the EdgeFinder, an A1 Trading tool for supplemental analysis, here are two of the most potentially promising pairs to trade for GBP bears: 1) GBP/USD, which earns a -4 ‘sell’ signal, and 2) GBP/JPY, which earns a -3 ‘sell’ signal.

4 Reasons to Buy CHF

USDCHF continues embarking on yet another climb this week after previously finding support at the 0.95 zone, as depicted on the 1 Day timeframe above. This is the third time this has happened since April of this year, each prior occurrence connecting with the 1.00 resistance zone, followed by price action reversal. The odds of it testing the 1.00 resistance zone yet again seem reasonable, especially when considering how most (74.36%) institutional traders are currently shorting CHF according to last week’s COT data. What, then, makes the Swiss Franc enticing to buy? The truth is, there is a lot for CHF bulls to be excited about long-term; let’s discuss 4 reasons to buy CHF.

Safe Haven Reputation

The European and worldwide economic crises that unfolded over the past decade and a half have cemented CHF’s status as a safe haven currency. This is due to many factors, including Switzerland's remarkable economic conditions (that we will discuss shortly), robust trade relations with the EU, and a promising currency valuation in contrast to the debt crises that have plagued various other European countries, according to Forbes (read more here).

The buying pressure resulting from the Swiss Franc’s safe haven reputation is so present that is has proven itself to be a pervasive thorn in the side of the Swiss National Bank (SNB), Switzerland’s central bank, for years. The SNB has gone above and beyond to stave off undesired CHF appreciation by many means, including zero/negative interest rates, pegging CHF against EUR until 2015, and frequently intervening in foreign exchange markets as a CHF bear, for the sake of trade convenience.

Expanding Economy

The Swiss economy claims certain particularly coveted features that set it apart from many other developed counterparts. While the country benefits from economic highlights such as stable GDP growth, an impressive 2% unemployment rate, and mild-to-modest inflation (in part due to monetary stimulus), the nuances of Switzerland’s economic performance are far more unique than this data alone reflects. For one, Switzerland’s economy boasts a median income and GDP per capita among the highest in the world, boosted by substantial trade surpluses due to plentiful exports to the EU, its primary trading partner. On top of this, other factors that set it apart include a huge services sector, an unusually highly skilled labor force, a powerful pharmaceutical industry (which accounts for a large chunk of exports), and agricultural protectionism.

While Switzerland’s reliance on European, particularly German, demand can be perceived as a liability, especially nowadays as Russian tensions and hyperinflation in the eurozone could possibly curb demand for Swiss products, it nonetheless remains a long-term perk. The EU’s economy remains powerful even facing threats of stagflation, and the European Central Bank (ECB) has recently proven cautiously open to rate hikes. Also, annual inflation in the eurozone is currently more than twice as hot as in Switzerland, and wages for European workers aren’t static, leaving some breathing room for CHF to continue rising against EUR without negative trade consequences.

Higher Interest Rates

A recent variable that has thus far created more CHF bullishness is the SNB’s shocking decision in June to implement a surprise 50 basis point interest rate hike to combat rising Swiss inflation. While the SNB’s target interest rate remains below zero at -0.25%, this was nonetheless an unexpected pivot from years of expansionary precedent. That Switzerland’s 3.4% year-over-year inflation would prompt a contractionary response that aggressive is certainly bullish for CHF, since it attests to a distinctively hawkish change of tune from the SNB.

Less FX Intervention

Another crucial abandonment of precedent from the SNB is a recent departure from its years-long strategic devaluation of CHF against other currencies. As mentioned previously, the SNB has regularly weakened the Swiss Franc via foreign exchange markets, selling CHF to purchase other currencies, such as EUR, in order to optimize export affordability for Switzerland’s trade partners. This standard appears to have changed within the past several weeks, as many analysts are interpreting the SNB to have abandoned this mode of CHF intervention altogether in favor of tackling inflation concerns, allowing buying pressure for the Swiss Franc to potentially advance unchecked. This is shockingly bullish for CHF and may have long-term bearish implications for EUR as well (read more here).

Best Pairs to Trade

While CHF bulls have much to be enthused about in terms of fundamentals, shorting USDCHF could be interpreted as playing with fire. They are both respected safe haven currencies, and the Swiss Franc has no history as the world’s reserve currency. Rather, minor pairs may prove to be far safer bets for conservative traders. For example, shorting EURCHF has potential due to the SNB no longer providing artificial support for the pair, which has just plummeted to its lowest levels since 2015. CHFJPY is likewise at its highest level since 2015. While Japan is comparable to Switzerland in terms of being a flourishing export economy with low unemployment, ultraloose monetary policy, and a safe haven reputation for JPY, the Bank of Japan has not revealed a firm pivot towards hawkishness just yet, which is bullish for CHFJPY.

Key Takeaways

Why Traders Are Selling JPY

Many retail traders are likely starting their morning off in disappointing fashion as USDJPY continues to climb higher while they short the pair, betting on an elusive JPY comeback. Up 0.37% at the time of writing today, or over 50 pips intraday, the pair has reached 136.65 as the Yen selloff continues, reaching levels not seen since 1998. Many other JPY pairs have followed suit as the Yen displays shocking weakness, with the latest COT data revealing 72.45% of institutional traders shorting JPY. While analysts disagree about how long the selloff will last, or what the implications will be for Japan’s economy, retail traders must first acknowledge that this selloff is happening for concrete reasons. Let’s discuss why traders are selling JPY.

Bank of Japan Dovishness

The Bank of Japan (BoJ), Japan’s central bank, is continuing to take extreme measures in an urgent attempt to stimulate Japan’s economy via expansionary monetary policy. This dovish agenda, which was somewhat revamped and unveiled in 2016, includes features such as negative short-term interest rates, as well as a program called Quantitative and Qualitative Easing with Yield Curve Control. This is a robust asset purchasing program with a special focus on keeping 10-year Japanese Government Bond (JGB) yields at approximately 0%. This sheer degree of monetary stimulus helps establish the BoJ as a, if not the, pioneer of contemporary dovishness.

As of June 20th, 2022, the BoJ’s balance sheet has swelled to over ¥742 trillion, or over $5.4 trillion, comfortably larger than Japan’s GDP itself. By contrast, the Federal Reserve’s gargantuan balance sheet, nearly $9 trillion, is less than half of US GDP. Likewise, Japan’s public debt is estimated to currently exceed 260% of GDP, which is utterly unique in the developed world. These are some of the consequences of ultraloose monetary policy and ambitious fiscal policy, and would contribute to making it difficult for Japan to raise interest rates. These are strong, clear-cut bearish fundamental indications for JPY.

No Economic Overheating

It would be reasonable to ask: wouldn’t this degree of ultraloose monetary policy lead to rampant hyperinflation, forcing future rate hikes, which would be bullish for JPY? In many cases, yes. In fact, building towards increased inflation is certainly the goal of the BoJ’s agenda. However, hyperinflation appears to only be a distant concern for Japan because they have been contending with deflation for decades. As many analysts have observed, economic factors such as comparatively slow population and nominal wage growth have concomitantly fostered conditions for sluggish demand, causing unusually low inflation.

The BoJ has thus maintained a years-long goal of hitting a consistent 2% or higher year-over-year inflation rate, which has typically proved evasive. While Japan’s annual inflation rate did finally reach, then remain at 2.5% in April and May of this year, considering how long they have sought these numbers, the BoJ will likely continue its dovishness to ensure deflation is behind them. This casts a uniquely bearish light on JPY, because unlike the COVID-era dovish Federal Reserve, the BoJ likely won’t pump the brakes on stimulus anytime soon.

A Global Change of Tune

Japan’s current economic circumstances are so uncommon relative to other developed countries that this has exacerbated the BoJ’s divergence from most other central banks in terms of monetary policy. While Japan is finally starting to see CPI grow as the fruit of monetary and fiscal stimulus, most other countries’ central banks are rolling the dice on recession by tightening monetary policy to stamp out stagflation risks.

For example, in the US, annual inflation clocks in at 8.6%, with the Federal Reserve opting for a 1.75% target interest rate; in the UK, annual inflation has reached a staggering 9.1%, with the Bank of England choosing a 1.25% target interest rate. Even Switzerland and the EU, which also boast negative target interest rates, have proved open to rate hikes. By contrast, Japan’s target interest rate remains at -0.1% while annual inflation only just surpassed 2%.

The hyperinflation problem is so prevalent in much of the developed world, yet so different than the problem(s) the BoJ must face, that most central banks will probably settle on further respective rate hikes before the BoJ has to follow suit. Thus, the increased hawkishness of most other central banks is additionally bearish for JPY, since demand for other currencies is steadily growing, but not for the Yen. While some analysts anticipate the BoJ being forced to combat the Yen’s devaluation soon, there currently seems to be little evidence that this is around the corner.

Best JPY Pairs to Trade

According to the EdgeFinder, an A1 Trading tool that generates helpful buy or sell signals by compiling elements of fundamental, technical, and sentiment analysis, here are the most promising JPY pairs to trade: 1) CADJPY, which receives a score of 5, a ‘Buy’ signal. Some factors that contribute to this bullishness include institutional positions, trend reading, and interest rate divergence. 2) EURJPY, which receives a score of 4, another ‘Buy’ signal. Factors that contribute to this bullishness are nearly identical to those for CADJPY. 3) CHFJPY, which receives a score of 4, another ‘Buy’ signal. Some factors that contribute to this bullishness include unemployment data, trend reading, and GDP growth. It is also worth noting that these three scores are currently the strongest ‘Buy’ signals that the EdgeFinder displays.

Key Takeaways

This morning saw demand for USD rapidly pick up steam as US inflation data came in hotter than expected. Month-over-month CPI had been forecast to rise by 0.7% in May; at 8:30 am Eastern Time, the Bureau of Labor Statistics revealed that it had increased by 1%, or 8.6% year-over-year, a forty-year high. Likewise, Core CPI (which excludes food and energy prices) was forecast to rise by 0.5% month-over-month, instead hitting 0.6%. On this news, the DXY is up 0.8% and has risen over the 104 level intraday, as EURUSD is down 1% and the S&P 500 is down nearly 3%. With this context in mind, let’s discuss 3 ways to capitalize on inflation now.

Trade Major Pairs

3 Ways to Capitalize on Inflation Now

This CPI news is a huge fundamental catalyst for USD pairs since it verifies that the US economy is indeed still overheating, validating further interest rate hikes by the Federal Reserve. This is very bullish for USD, which makes buying the USD against other currencies even more appealing. If traders are searching for optimal USD pairs to take positions in, a good place to start is by locating pairs where analysis leans in USD’s favor to the greatest degree possible.

Some such options include a) shorting GBPUSD and EURUSD, which receive -7 (‘strong sell’) and -5 (‘sell’) signals, respectively, from the EdgeFinder, and b) going long on USDJPY, which receives a 4 (‘buy’) EdgeFinder signal. Because USD experienced so much buying pressure this morning, conservative traders may want to find an opportune point of entry by conducting technical analysis, e.g., waiting for a pullback and retest of key support/resistance.

Buy XAUUSD

3 Ways to Capitalize on Inflation Now

Though admittedly a controversial opinion, I am waiting for an optimal point of entry to purchase gold against USD. XAUUSD experienced quite the selloff this morning before a startling recovery, jumping from a low of 1825 to hovering around 1855 at the time of writing this. This jump was seemingly prompted by finding support around the 1830 level, a clear zone of support on a 1-hour timeframe.

I interpret fundamentals being bullish for XAUUSD due to demand for the precious metal in several different industries and its historical status as a safe haven investment in times of economic crisis. There have been periods where gold’s rise in value does not correlate with USD depreciating in value, which is helpful to consider in cases like these. According to the latest COT data, institutional traders are similarly long on both USD (76%) and gold (73.56%). I am planning to purchase XAUUSD if price action retests the trendline depicted on the 1-day timeframe above, though this opportunity may not come if demand continues to grow quickly.

Invest in the Stock Market

3 Ways to Capitalize on Inflation Now

Though it may seem strange in the face of persisting hyperinflation and potential for recession, economic downturns and stock selloffs do present myriad buying opportunities for long-term investors. If you are not planning on retiring for decades, you can utilize dips in the stock market and indices to build wealth over time, assuming you are willing to sacrifice immediate results. For example, when the Dow plummets over 600 points like it has today, investors can seize these events as opportunities for cheap purchases that will yield returns years down the road.

If your investment portfolio keeps crashing in the meantime, this does not have to be discouraging since they are merely unrealized losses; they will likely grow in value through the decades if you are invested in index ETFs and other trustworthy funds. Any further selloffs present even more opportunities for regular, small purchases. (However, investing in individual stocks is a completely different story, and I personally believe that even the most skilled retail investors are not sufficiently equipped to handle the inherent risks involved.)

Key Takeaways

Important Economic News Today

Most weekdays offer the release of a flurry of economic data that can influence price action in the financial markets. Due to the surplus of information available, it can be difficult to parse and locate which indicators are most helpful in terms of fundamental and sentiment analysis. Here, we explore a selection of important economic news today, which can be helpful for identifying fundamental catalysts, prepare for future volatility, and devise trade setups.

Japan: Economy Watchers Sentiment

Released by Japan’s Cabinet Office at 1 a.m. Eastern Time, this indicator gauges economic sentiment in terms of consumer spending by surveying a few thousand service workers in Japan’s economy. Anything over a score of 50 indicates economic optimism; the forecast had been 51.9, but the actual report was 54. This would usually indicate strength for JPY, as it could help push the Bank of Japan towards tightening monetary policy. However, considering their willingness to continue extreme dovishness, I interpret this as a bearish signal for JPY, since the BOJ may feel further emboldened by economic optimism to extend low interest rates.

Euro Area: Final Employment Change & Revised GDP (both q/q)

Released at 5 a.m. Eastern Time, both metrics of economic health were better than previously expected: employment was forecast to increase by 0.5% and ended up increasing by 0.6%, while GDP growth also clocked in at 0.6%, double the percentage expected. These especially contribute to a bullish case for the EUR, since the Euro Area is clearly dealing with an overheated economy, and the European Central Bank seems primed to potentially act and pivot into gradual hawkishness. We will be hearing from the ECB tomorrow.

United States: Final Wholesale Inventories (m/m) & Crude Oil Inventories

Released at 10 and 10:30 a.m. Eastern Time, respectively, these two indicators may showcase some signs of a slowing US economy. According to the Census Bureau, there was a 2.2% increase in the value of goods in stock for wholesalers, where only 2.1% was expected. This reveals supply of such goods outpacing demand in an unexpected fashion. Likewise, according to the Energy Information Administration, the number of barrels of crude oil held in inventory by commercial firms increased by 2 million, whereas a change of -2.6 million had been expected. With crude oil already at staggering price levels, this indication of slowing demand has further implications throughout the US economy, perhaps as a proxy for consumer spending elsewhere. This is bearish news for USD.

China: USD-Denominated Trade Balance

Tentatively due today, the CGAC will be releasing data on China’s trade balance, which is frequently a surplus to some degree. While China is forecast to have net exported $58 billion, it could exceed expectations like prior months, despite China’s recent zero-COVID policy measures which limited economic activity. Not only do these growing margins signal CNY strength and continued economic growth for China, they also ostensibly indicate lower growth expectations for trade partners and economic competitors, such as the US, due to corresponding trade deficits. This information will come on the heels of lowered global economic growth forecasts from the World Bank and the OECD.

Key Takeaways

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