The US Dollar Index again increased above 104.00 in the last 24 hours and is growing in value against most currencies. The Dollar is performing best against the Euro, where the exchange rate has declined for six consecutive hours, measuring a 0.28% decline. This morning, The US Dollar Index has risen to 104.23, which is a 0.11%. No major news will be released throughout the day, influencing the currency market. Therefore, traders will primarily be focused on price action. The US will release its weekly Unemployment Claims data tomorrow, which can create some volatility.
Chinese Exports Plummet 7.5%
A concern for investors this morning is data coming from China, which is also deemed to be an indication of the current global economic conditions. The world’s largest exporting country saw its exports plunge by 7.5% last month. This is significantly lower than analysts were expecting and also lower than the previous months. According to analysts, the data indicates that global demand is subsiding, which can influence global assets. For example, this morning, the price of Crude Oil is down almost 1%, and the stock market is relatively flat.
Crude Oil 5-Minute Chart on June 7th
This morning, the OCED also advises markets that they will alter their predictions for 2023’s economic growth. According to the OCED, global economic growth will slow to 2.7% this year. The organisation advises that central banks should remain restrictive and fiscal support should be scaled back.
OPEC attempts to support prices by indicating production cuts from various group members. This includes the group’s prominent two members, Russia and Saudi Arabia. However, this will not significantly support prices while demand declines and monetary policies remain restrictive.
Cryptocurrencies - SEC Target Cryptocurrency Firms
The cryptocurrency market is also experiencing higher volatility after US regulators again targeted large cryptocurrency firms. The latest was Binance, and shortly afterwards, a lawsuit against Coinbase was also filed. According to the Securities Exchange Commission, Coinbase has, at least since 2019, made billions by operating as an intermediary in the cryptocurrency market while evading disclosure requirements meant to protect investors. The price experienced a sharp selloff earlier this week but a full correction yesterday. A positive for the market is that the global cryptocurrency market capitalisation has increased by almost 3% over the past 24 hours. Nonetheless, cryptocurrencies are likely to remain pressured while the Dollar appreciates.
EUR/USD - Inflation Data to Influence the Dollar’s Valuation
The price of the EUR/USD exchange rate declined to yesterday’s swing low. As a result, investors are monitoring whether the instrument will form a breakout or a double bottom. The support level 1.06625 has supported the exchange rate since late May 2023. However, analysts are also cautious that the Dollar has attempted to break through the story four times. This can indicate the level may weaken as the trader’s sentiment changes.
As always, when analysing an exchange rate, it is vital to analyse the instrument and each currency individually. This morning, the Dollar is mainly experiencing bullish price movement, whereas the Euro is seeing mixed price action. The exchange rate has seen a substantial decline and retracement in favour of the Euro. Nonetheless, the retracement remains lower than the previous swings. Therefore price action continues to indicate a downward price movement.
EUR/USD 15-Minute Chart on June 7th
The head of the central bank of the Netherlands, Mr. Knot, advises that price pressures in the Euro area may be more complicated to curb than initially thought. However, the current monetary policy is already showing signs of effectiveness. Generally, consumption within the region remains weak as households’ real incomes fall, while they spend most of their capital on higher electricity bills and loan repayments. As a result, this reduces the demand for goods. Most economists believe the European Central Bank will likely continue hiking interest rates, regardless of lower inflation data. However, most individuals are not pricing in more than two 25-basis point rate hikes. This would result in a lower Refinancing Rate than the Fed and Bank of England.
In the US Dollar, on the other hand, pricing may remain uncertain until the latest inflation data is made public. The Consumer Price Index will likely confirm whether a hike or a pause is likely to proceed at next Wednesday’s FOMC Meeting.
Summary:
- The Dollar is performing best against the Euro, where the exchange rate has been declining for six consecutive hours, measuring a 0.28% decline.
- The world’s largest exporting country saw its exports plunge by 7.5% last month.
- According to the OCED, global economic growth will slow to 2.7% in 2023.
- Most economists believe the ECB will likely continue hiking rates, regardless of lower inflation data. However, most individuals are pricing in at most two 25-basis point rate hikes in 2023.