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05.07.202309:48 Forex Analysis & Reviews: Uncertainty prolongs sideways market

Markets came to a standstill due to the full-scale military conflict in Ukraine, a worldwide decline in production, persistently high inflation, and a strong shift of capital from Europe to Asia and the US. All these, along with the tight monetary policies of global central banks, create extremely unclear and difficult-to-predict situation.

In fact, the US government debt market remained eerily quiet over the past six months after the sharpest increase in yields since the beginning of the COVID-19 pandemic. A similar pattern could be seen in stock markets, as after a robust rebound of indices at the beginning of this year amid expectations that a global recession will not occur and that China and the US will withstand, a dampening of upward trends and pronounced sideways dynamics occurred since the spring. The same picture could also be seen in commodity markets, while the forex market stood still.

The ICE dollar index moved in a very narrow range between 100.00 and 105.00 points for the seventh month in a row, similar to the pattern in the first half of 2021.

Most likely, uncertainty will ease only when the Federal Reserve announces whether the cycle of rate hikes end this year or not. Other global central banks will follow this decision.

If the Fed does not raise rates and inflation in the US continues to gradually decrease, markets will noticeably revive by the fall, especially when the summer vacation period ends. However, this does not mean that market players will not buy risky assets while waiting for positive developments. On the contrary, they will become more active, which will inevitably result in the formation of new upward trends in the stock and commodity markets.

As for the dynamics of dollar, due to the subsequent cessation of rate hikes by global central banks following the Fed, its rate relative to a basket of major currencies may stabilize after some sharp swings up and down.

Forecasts for today:

Exchange Rates 05.07.2023 analysis

Exchange Rates 05.07.2023 analysis

EUR/USD

The pair trades within the range of 1.0845-1.0970. It may remain in this area until the US publishes its latest employment data this week, where a positive data will push the quote to

1.0970.

GBP/USD

The pair trades above 1.2680. Further buying pressure will push the quote from 1.2600 to 1.2835, unless market players bring pound down ahead of the release of the latest US employment data.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Pati Gani,
Analytical expert of InstaSpot
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